Taxable Income and Tax Calculation for Shaleen and Clayton Miller

by | Aug 9, 2023 | Accounting

Case 2
It is March of 2021 and Clayton and Shaleen Miller have come to discuss their tax situation with you. They predict that Clayton will not have to pay taxes for the 2020 year, which they believe will allow Shaleen to claim the non-refundable tax credit of ‘spouse credit’. They have provided you with the following information, including the statements from their companies (Exhibits I and II) which they have prepared themselves but are not sure if they are correct. Shaleen is the sole shareholder Windy Co.

Shaleen, Clayton, and family
• Shaleen and Clayton have been married for ten years. They are both 39 years old, and they have three children under the age of five. The children attended daycare four mornings a week during 2020 while their parents worked. The total cost of the daycare for all three children was $2,300. Shaleen and Clayton receive the monthly Canada child benefit for each child.

Shaleen
• Shaleen earns a pre-tax salary of $65,000 per year from Windy.
• Shaleen received the following benefits from Windy in 2020:
• Private health and dental care: $400
• Life insurance: $500
• $2,000 worth of products at cost
• Registered pension plan (RPP) contributions: $3,000.
• Windy also deducted $3,000 from Shaleen’s salary for the RPP.
• Shaleen contributed $2,000 to an RRSP for the 2020 taxation year (which is within the allowable limit).
Clayton
• Clayton began part-time employment at Fitness Inc. in 2020, and earned a gross salary of $15,000, and did not have any employment income in 2019.
• Clayton received free use of the owner’s cottage for two weeks in May, which is typically rented out for $500 per week.
• Clayton began a small home-based proprietorship – “Clayton’s Consulting” in 2019- which generated $250 a month in pre-tax profits in 2020. The business operates from a 200 square foot room in the family’s 2000 square foot home, and is used exclusively for the business.
• Clayton did not file a tax return in 2019 since no taxes were owing.
• Clayton contributed $4,000 to a TFSA in 2020.
• More on Clayton Consulting in Exhibit 1 below:
Exhibit I – Clayton’s Consulting
Note 1: All of the administrative expenses are compliant with the rules of the Income Tax Act.
Note 2: Work space expenses represent ten percent of Clayton and Shaleen’s housing costs. The total housing costs include utilities of $2,400, mortgage interest of $8,400, property taxes of $2,500, and home insurance of $1,200. (The business has met the conditions necessary to allow for the deduction of home-based business expenses.)
Required:
A. Prepare detailed calculations (in accordance with the statutory formula of S.3 of the Income Tax Act) to determine the taxable income & Tax for both Shaleen and Clayton for 2020 (40 marks).
B. Determine if Shaleen will be able to claim the non-refundable ‘spouse credit’ for the 2020 taxation year? (10 marks)

 

Sample solution

Dante Alighieri played a critical role in the literature world through his poem Divine Comedy that was written in the 14th century. The poem contains Inferno, Purgatorio, and Paradiso. The Inferno is a description of the nine circles of torment that are found on the earth. It depicts the realms of the people that have gone against the spiritual values and who, instead, have chosen bestial appetite, violence, or fraud and malice. The nine circles of hell are limbo, lust, gluttony, greed and wrath. Others are heresy, violence, fraud, and treachery. The purpose of this paper is to examine the Dante’s Inferno in the perspective of its portrayal of God’s image and the justification of hell. 

In this epic poem, God is portrayed as a super being guilty of multiple weaknesses including being egotistic, unjust, and hypocritical. Dante, in this poem, depicts God as being more human than divine by challenging God’s omnipotence. Additionally, the manner in which Dante describes Hell is in full contradiction to the morals of God as written in the Bible. When god arranges Hell to flatter Himself, He commits egotism, a sin that is common among human beings (Cheney, 2016). The weakness is depicted in Limbo and on the Gate of Hell where, for instance, God sends those who do not worship Him to Hell. This implies that failure to worship Him is a sin.


This question has been answered

God is also depicted as lacking justice in His actions thus removing the godly image. The injustice is portrayed by the manner in which the sodomites and opportunists are treated. The opportunists are subjected to banner chasing in their lives after death followed by being stung by insects and maggots. They are known to having done neither good nor bad during their lifetimes and, therefore, justice could have demanded that they be granted a neutral punishment having lived a neutral life. The sodomites are also punished unfairly by God when Brunetto Lattini is condemned to hell despite being a good leader (Babor, T. F., McGovern, T., & Robaina, K. (2017). While he commited sodomy, God chooses to ignore all the other good deeds that Brunetto did.

Finally, God is also portrayed as being hypocritical in His actions, a sin that further diminishes His godliness and makes Him more human. A case in point is when God condemns the sin of egotism and goes ahead to commit it repeatedly. Proverbs 29:23 states that “arrogance will bring your downfall, but if you are humble, you will be respected.” When Slattery condemns Dante’s human state as being weak, doubtful, and limited, he is proving God’s hypocrisy because He is also human (Verdicchio, 2015). The actions of God in Hell as portrayed by Dante are inconsistent with the Biblical literature. Both Dante and God are prone to making mistakes, something common among human beings thus making God more human.

To wrap it up, Dante portrays God is more human since He commits the same sins that humans commit: egotism, hypocrisy, and injustice. Hell is justified as being a destination for victims of the mistakes committed by God. The Hell is presented as being a totally different place as compared to what is written about it in the Bible. As a result, reading through the text gives an image of God who is prone to the very mistakes common to humans thus ripping Him off His lofty status of divine and, instead, making Him a mere human. Whether or not Dante did it intentionally is subject to debate but one thing is clear in the poem: the misconstrued notion of God is revealed to future generations.

 

References

Babor, T. F., McGovern, T., & Robaina, K. (2017). Dante’s inferno: Seven deadly sins in scientific publishing and how to avoid them. Addiction Science: A Guide for the Perplexed, 267.

Cheney, L. D. G. (2016). Illustrations for Dante’s Inferno: A Comparative Study of Sandro Botticelli, Giovanni Stradano, and Federico Zuccaro. Cultural and Religious Studies, 4(8), 487.

Verdicchio, M. (2015). Irony and Desire in Dante’s” Inferno” 27. Italica, 285-297.

Sample Answer

Sample Answer

 

Taxable Income and Tax Calculation for Shaleen and Clayton Miller
A. Taxable Income and Tax Calculation for Shaleen and Clayton for 2020:

Shaleen’s Income and Deductions:

Pre-tax salary from Windy Co.: $65,000
Private health and dental care benefits: $400
Life insurance benefits: $500
Cost of products received from Windy Co.: $2,000
Registered pension plan (RPP) contributions made by Windy Co.: $3,000
RPP contributions deducted from Shaleen’s salary: $3,000
RRSP contributions: $2,000
Calculation:

Total income: $65,000
Deductible expenses:
Private health and dental care benefits: $400
Life insurance benefits: $500
Cost of products received from Windy Co.: $2,000
RPP contributions made by Windy Co.: $3,000
RPP contributions deducted from salary: $3,000
RRSP contributions: $2,000
Taxable income for Shaleen: $65,000 – ($400 + $500 + $2,000 + $3,000 + $3,000 + $2,000) = $54,100

Clayton’s Income and Deductions:

Gross salary from Fitness Inc.: $15,000
Value of cottage received for personal use: $500 (not taxable as it is within the reasonable limits)
Profits from Clayton’s Consulting: $250/month x 12 months = $3,000
TFSA contributions: $4,000
Calculation:

Total income: $15,000 + $3,000 + $4,000 = $22,000
Deductible expenses:
Work space expenses (10% of housing costs):
Housing costs: Utilities ($2,400) + Mortgage interest ($8,400) + Property taxes ($2,500) + Home insurance ($1,200) = $14,500
Work space expenses: 10% of $14,500 = $1,450
Taxable income for Clayton: $22,000 – $1,450 = $20,550

Childcare Expenses:

Total cost of daycare for all three children: $2,300
Canada Child Benefit: Shaleen and Clayton receive the monthly Canada child benefit for each child.

Based on the above calculations, the taxable income for Shaleen is $54,100 and for Clayton is $20,550.

B. Eligibility for Non-refundable Spouse Credit: To determine if Shaleen will be able to claim the non-refundable ‘spouse credit’ for the 2020 taxation year, we need to consider Clayton’s income and whether he needs to pay taxes.

Since Clayton’s taxable income is below the basic personal amount threshold ($13,229 in 2020), he will not have to pay taxes. This means that Shaleen can claim the non-refundable spouse credit for the 2020 taxation year.

In conclusion, Shaleen’s taxable income for 2020 is $54,100 and Clayton’s taxable income is $20,550. Shaleen will be able to claim the non-refundable ‘spouse credit’ for the 2020 taxation year.

 

 

This question has been answered.

Get Answer