BADM 285

Winter 2019
Final Assignment

Due Date: April 16, 2019, noon electronically via Blackboard

Value: 15% of final grade

Group Information:
Maximum of 4 members per group (MIN 3). Students are responsible for joining their own groups. Upon
submission of your group members’ names, the instructor will assign a group name/number and you will
have access to the electronic files.
INDIVIDUAL ASSIGNMENTS WILL NOT BE ACCEPTED.

Note if a group indicates a member has not participated in the assignment, that student will receive a grade
of zero on the assignment. In the event of a dispute, a log should be maintained by each group member
indicating dates and work performed so it can be submitted to the instructor.

Assignment Completion:
There are six (6) distinct parts to the assignment.

• It is strongly recommended that ALL group members complete ALL parts of the assignment in order to
receive full marks and to be prepared for the final exam
• I recommend establishing due dates for each Part and then compare group member responses. Spend
your time discussing the differences and come to a consensus. If a group member does not have their
response prepared by the due date, document it and move onto the next Part.

Submission Instructions:
Preference is Excel file format. Google Sheets do not upload properly into Blackboard. Submissions not
properly formatted in Excel will lose significant marks for formatting and organization.

File Naming: Each group must name their Excel file as follows – Group X (where X stands for the group
number assigned to the group in the Assignment folder)

One student in each group will submit one Excel file via the Blackboard Assignment Dropbox.

I also recommend that you submit a day earlier than the deadline. If you have any problems, you should email
me immediately. Note that the Assignment Dropbox will close automatically at noon. If you are unable to
upload your files due to the Dropbox being closed, you will receive a grade of zero on the assignment.
Technical difficulties will not be accepted as a reason for an extension.

NO EXTENSIONS WILL BE GRANTED & LATE ASSIGNMENTS WILL NOT BE ACCEPTED.

Feedback:
Once your submission has been graded, a file indicating your results will be provided.

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Formatting Recommendations:

Please note that marks will be deducted from the assignment at the discretion of the instructor for spelling
and grammatical errors, poor formatting/presentation and unprofessional group member conduct.

A rubric will be used to assess formatting, organization, explanations, schedules and calculations. Additional
marks will be assessed for correct values.

Your response should be able to be provided to a client or manager without modification and in a manner
which they can understand. Perform and detail all your calculations in the supporting schedules (this would be
the notes you have been using from prior questions.)

Please include a title page listing all group members (this must be done in Excel).
• Clearly present all requirements of the assignment by section in the required order
• Schedules should be used and formatted to enhance communication
• Schedules should be logically organized and easy to follow
• Numbers should be formatted to the dollar (no pennies showing)
• Formulas should be used to reference other schedules (Excel) so that changes automatically flow
through the document (e.g. linking Employment Income by a formula into Net Income for Tax
Purposes)
• Proper grammar, spelling, punctuation and word usage must be used in all submissions
• Abbreviations should not be used unless it is a commonly used abbreviation (e.g. yr. for year is okay,
NITP is not and should be written out)
• Use spell checkers prior to submitting your work to find any errors

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 BADM 285 – Winter 2019
Final Assignment – Client Information
2018 T1 Tax Returns

Annalise Keats is the owner of Sharp, a proprietorship which retails high end knives as well as offering knife
sharpening services to restaurants. Its’ income statement, as well as notes Annalise has prepared, are
attached (Exhibit A). In 2018, Sharp reported $83,000 business income for tax purposes.

Annalise is a divorced mother of 3 sons: 20 year old Wes, 16 year old Connor and 15 year old Asher. Wes and
Asher both have cystic fibrosis which moderately restricts their lifestyles. Wes attends Mount Royal University
full time except for the two summer months. His tuition fees for 2018 were $6,700. Wes works at Sharp when
he is able as a knife sharpener. Asher also helps at Sharp part time on the weekends with cleaning, filing and
doing various odd jobs. Connor is heavily involved in sports so he doesn’t participate in the business. Besides
playing on school teams, Connor joined a volleyball club which ran for 5 months, costing Annalise $1,200 in
fees.

Annalise’s 62 year old father Frank has been living with the family since he divorced Annalise’s 64 year old
mother Bonnie. Bonnie lives with a friend in Edmonton. Bonnie was a stay at home mother so her only
income is from Canada Savings Bonds which paid her $2,900 in 2018. Frank has modest pension income of
$9,300. He handles cleaning and cooking duties for the family in exchange for not paying rent. Frank also
watches Asher after school until Annalise gets home. She paid Frank $4,800 for 2018 for this for which he gave
her receipts. The 2 youngest boys attended an overnight camp in July for 2 weeks for a total cost of $1,100.

In March, Annalise’s 43 year old brother Nate began living with the family in their 2 bedroom condo. Given the
cramped circumstances, Annalise bought a modest two story house which the family moved into in June. To
help pay for the new home, Annalise sold a cottage at a lake that her family only used for a few weeks each
summer. Information on these homes is in Exhibit B. Nate was unable to find work in 2018, in part due to his
special needs related to his legal blindness. His only income was $7,250 received under the “Alberta Works”
welfare program.

Annalise divorced her ex-husband Sam in 2012. It was an amicable split so they used the same lawyer to draft
their separation agreement. Terms of the agreements include Sam paying Annalise $1,500 per month for the
three children and $1,200 per month for Annalise. Starting on January 1, 2018, Sam agreed by phone to
increase the amount provided for Annalise to $1,600 per month.

Annalise has a part time job as a legal assistant at a nearby law firm. She kept this job because it has a defined
contribution pension plan as well as a medical/dental benefits family plan. Her employment information is
below:
2018 2017
Salary $18,800 $17,200
Employer RPP premiums 400 350
Employer medical/dental plan premiums 1,250 1,200
Federal income taxes 2,630 2,410
CPP 757 678
EI 306 323
Annalise RPP premiums 300 250
Annalise medical/dental plan premiums 930 850

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At the end of 2017, Annalise had $45,800 of unused RRSP deduction room and $6,000 of undeducted RRSP
contributions carry forward. Other carry forwards from 2017 include $1,000 of charitable donations and a
$21,000 net capital loss carry forward. Annalise has an arrangement with her bank to transfer her RRSP
contribution every month automatically. In 2017, the monthly amount was $250 but starting in January 2018
Annalise increased it to $350 per month. Annalise also contributed $2,400 into an RESP for Asher in 2018.

Annalise owned the following non-registered investments at the beginning of the year:

• 5,000 shares Middleton Ltd, a private Canadian company - adjusted cost base $49,700
• 2,100 shares Delfino Inc., a public Canadian company - adjusted cost base $12,000

During 2018, Annalise had the following transactions:

• Purchased 780 shares of Middleton for $8.25/share on January 13

• Purchased 1,200 shares of Middleton for $10.75/share on April 30
• Sold 600 shares of Middleton to Asher on July 1 for $9 per share. Shares were valued at $14 per share
on that date. Asher sold the shares for $21 per share on December 15.
• Gifted 1,100 shares of Delfino to Connor on September 15 when fair market value was $10 per share.
Connor sold 500 of the shares on December 3 rd for $10,000 before brokerage fees.
• Sold jewellery inherited from her grandmother for proceeds of $3,500. Her grandmother originally
purchased the jewellery for $300 in 1943 and it was valued at $2,300 when Annalise received it.

Note:
o All share purchases and sales are subject to a 1.75% brokerage fee except the sales to family
members.
o Middleton shares paid a $2.50 per share non-eligible dividend on November 30.
o Delfino shares paid a $4.00 per share eligible dividend on October 31.

Annalise paid the following medical bills in 2018:

Frank $4,900 Dental work (no coverage)
Asher 650 Prescription glasses (no coverage)
Connor 1,600 Physical therapy (plan covers 50%)
Annalise 3,800 Prescription medicines (plan covers 80%)

Annalise paid $6,400 in instalment payments for 2018.

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Required: Using Microsoft Excel, respond to the following requirements. All work must be shown to obtain
full marks.

Part A
Discuss fully the treatment of the monthly payments Annalise receives from her ex-spouse Sam.

Part B
It is currently February 23, 2019 and Annalise is wondering what her maximum deductible contribution to her
RRSP would be. Calculate this amount for her.

For the remaining Parts, assume that it is now April 14, 2019 and the Annalise’s actual RRSP contribution
made on February 23, 2019 was $10,000.

Part C
Prepared Sharp’s 2018 income statement for tax purposes. Where revisions have been made to the cash
income statement, clearly show your work using schedules and/or explanations.

Part D
Determine whether the principal residence exemption should be used for the sale of the condo or the cottage.
Clearly indicate the years designated to each property.

Part E
Determine minimum Net Income for Tax Purposes and Taxable Income for the 2018 taxation year for Wes,
Connor, Asher, Frank, Bonnie and Nate. Also, determine Federal Taxes Payable and Net Federal Taxes Owing
for Wes. Ignore any GST or PST considerations. Show all work, even if the result is zero.

Part F
1. Determine minimum Net Income for Tax Purposes, Taxable Income, Federal Taxes Payable and Net Federal
Taxes Owing for the 2018 taxation year for Annalise. Ignore any GST or PST considerations. For any
amounts provided but excluded from your calculations (excluding amounts found in the Exhibit) explain
why they have been excluded. Ignore any GST or PST considerations. Show all work, even if the result is
zero or NIL.
2. Determine any amounts available for carry forward for Annalise and her family at the end of 2018.

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 Exhibit A
Cash Income Statement for Sharp
For the year ending December 31, 2018

Building sale proceeds 237,000

Land sale proceeds 253,000
Sales 205,400
Sharpening revenues 76,112
Truck sale proceeds 3,900
Wages expense (109,700)
Knives purchases (68,100)
Truck cost (42,100)
Vehicles expense (26,900)
Entertainment expense (15,601)
Advertising expense (14,700)
Miscellaneous expenses (8,556)
Charitable donations (4,000)
Computer cost (1,320)
Income 484,435

The building was purchased in 2014 for $476,000 including $74,000 for land. It was used as a retail store
until Annalise determined that her mobile store offered a much better profit margin. The store was sold in
December 2018. This was the only building Sharp owned in 2018 Class 1 had a UCC balance of $325,000 at
the start of 2018.

Sharp has two trucks used to provide mobile knife sharpening to its commercial customers. During 2018,
Annalise sold one truck and replaced it with a new truck. Opening UCC for the trucks was $26,300.

Wages expense includes the following amounts for the children:

Wes 17,300
Connor 9,000
Asher 700

Vehicles expense includes $13,900 to replace the transmission on the remaining old truck.

Entertainment expense included $1,400 for an annual party for Annalise and her employees and their
spouses as well as $200 for a visit to the Calgary Zoo for Nate and the children.

Advertising expense includes $3,200 for a spot on a US website page focusing on Calgary restaurateurs.

Note: Ignore CPP calculations on self-employed business income.

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 Exhibit B
House Information

The condo was purchased by Annalise in 2015 for $430,000. The cottage was originally purchased by Sam in
1986 for $26,000. As part of the divorce proceedings, Annalise received the cottage when it was valued at
$108,000. At this time, the couple elected out of the spousal rollover and claimed the principal residence
exemption designating the years 1986 to 2011. The two story house was purchased for $436,000 plus real
estate and lawyer fees of 20,000.

The condo sold for a price of $465,000 less real estate and lawyer fees of $18,500. The cottage was sold to a
friend for $145,000 less fees of $8,500.

While cleaning out the cottage for sale, Asher found an original Star Wars replica light saber that was
purchased for $35. Annalise auctioned the saber on EBay for $4,600.