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Sandra Dumont is a lawyer who resides in St. John’s, NL. For five…
Sandra Dumont is a lawyer who resides in St. John’s, NL. For five years, until June 30, 2022, she had
been employed by Calco Ltd., a national restaurant company which is a Canadian controlled private
corporation. She had worked at the Corner Brook office of Calco until July 2022 when she moved
to St. John’s to start a full-time law practice. (Distance from St. John’s to Corner Brook is 689km).
Sandra had operated her law practice as a sole proprietorship in Corner Brook on a part time basis
since 2018.
Sandra is 42 years of age and is married to Bob. They have three children. Gracie is 5 and Cal is
11. Samantha is 18 and has just started her first year at university.
You have just completed a meeting with Sandra and have gathered the information outlined in
the attached exhibits.
EXHIBIT I
Sandra Dumont Information Regarding Work at Calco
1. Dumont’s salary to June 30, 2022, was $105,000. From this, Calco deducted CPP of $3,499 and
EI of $1,001 income tax of $32,000 and $500 for Dumont’s portion of the private group medical
insurance premium. An additional premium of $500 was paid by Calco. Also, Calco paid the
$800 premium for Dumont’s group term life insurance coverage of $50,000.
2. On June 30, 2022, Dumont returned the company car that Calco had provided her. The car had
a cost of $45,000, and Calco’s undepreciated balance was $28,000. Calco also had paid the
operating costs for the car, which amounted to $4,100. Dumont had driven her car 10,000 km,
of which 8,200 km were for business use.
3. Dumont was well regarded by her employer, and the employer decided in April 2022 to give
her an all-expenses paid vacation to the Caribbean. The cost to Calco of this vacation was
$7,500.
4. In 2021, Dumont borrowed $20,000 from Calco. She has paid interest at 5% on the loan.
Dumont used the borrowed funds for the down payment to purchase a rental property. The
CRA’s prescribed interest rate was 4% in 2021. Dumont repaid the loan on June 30, 2022.
5. On June 30, 2022, Dumont sold 1,500 shares of Calco Ltd. for $65 per share. These shares were
purchased by Dumont in 2021 because of her exercising the option to purchase the shares at an
option price of $25 per share. When the option had been granted to Dumont, the shares were
selling at $19.50 per share, and when she exercised the option the shares were selling at
$32.50 per share.
6. Sandra also was awarded a gift for meeting her sales targets during the time she worked at
Calco in 2022. The corporation gave her a $450 gift certificate for Jack Astor’s Restaurant. In
addition, Sandra was given a new briefcase that Calco purchased from Staples Office Depot
for $450, as a birthday gift.
7. In early 2022, Sandra took advantage of her employer’s counselling services. She received
personal financial planning advice valued at $1,500, and her daughter Samantha received
mental health counselling valued at $1,200.
8. Sandra and her family moved to St. John’s NL in July 2022. Sandra and her entire family flew
from Deer Lake (Corner Brook’s airport) to St. John’s. Expenses related to the move were as
follows:
House hunting trip in May 2022 – hotel and airfare $4,800
Airfare for the family in July 2022 for the actual move 3,500
Allied Moving Company – to move household effects 15,500
Hotel and meals in St. John’s while waiting for their new house- 20 days at
$200 per day 4,000
Legal cost related to the sale of their home in Corner Brook 2,800
Legal costs to purchase a home in St. John’s, NL 1,800
Cleaning costs to clean the house in Corner Brook before the sale closed 250
Calculate the 2022 net income for tax purposes, taxable income, and
federal & Newfoundland tax for your client Sandra Dumont. also calculate
any alternative minimum tax liability. Please clearly identify any assumptions that you make.
EXHIBIT II
Business Income- Sandra Dumont Proprietor
Sandra is a busy lady with her law practice. She provides the following information re her
income and expenses for 2022.
Revenue $260,000
Office supplies 11,500
Depreciation on machinery 10,000
Cost of lottery tickets (hoping for the big payout!) 1,000
Other expenses 40,000
Travel 5,500
Meals and entertainment 8,000
Membership Dues to Good Life Fitness 1,000
Total expenses 77,000
Net income 183,000
Accounting gain on the sale of the building 80,000
Net income from the business $263,000
You have been provided with the following information:
1. Other expenses include $1,200 of donations to registered charities and $2,500 related to
obtaining financing under the Small Business Loans Act. Other expenses also include $2,000 of
interest paid on this loan that was advanced. It also includes $500 made as a donation to the
Liberal Party of Canada.
2. At the end of the previous year (2021), the undepreciated capital cost of certain asset classes
was as follows:
Class 1 $80,000
Class 8 32,000
Class 10 50,000
During the current year, the proprietorship sold its land and building in Corner Brook that it used to
operate the part time law practice, for $160,000 (land $40,000, building $120,000). The original cost
of the property was $100,000 (land $20,000, building $80,000). The building had an accountingnetbook
value of $60,000 at the time of sale. Upon the move to St. John’s, Sandra decided that their new
home was large enough so she could operate her business out of an office built in the basement.
The business owns several pieces of equipment. During the year, one unit that originally cost
$10,000 and had a book value of $6,000 was sold for $8,000. Sandra also purchased $4,000 of
equipment to collate briefs to be used in court cases.
The business also purchased a new vehicle at a cost of $42,000 to be used in the business. This
was not the same vehicle that Sandra used in the performance of her employment duties.
Sandra also purchased a computer to be used in the business at a cost of $4,000. She also
purchased a Simply Accounting Software package for $950.
Finally, in September 2022 Sandra spent $2,000 on a patent on one of her processes that has a
legal life of ten years.
As mentioned, Sandra used her basement to operate her law practice once she was in St. John’s.
She had a dedicated space which was 750 square feet of her 3,500 square foot house. Expenses
related to the entire house during the period of the year the business was operated (after the
move to St. John’s) year were follows:
Heat and light $9,000
Property tax 2,400
Insurance 1,200
Mortgage interest 6,200
General repairs and maintenance 1,800
Repairs to the office portion of the house 1,500
Calculate the 2022 net income for tax purposes, taxable income, and
federal & Newfoundland tax for your client Sandra Dumont. also calculate
any alternative minimum tax liability. Please clearly identify any assumptions that you make.
