Pax Agarwal operates an unincorporated business with a Dec 31styear-end. During the year ending December 31, 2020, accounting net income was $183,000. Other information pertaining to the business is as follows:
1. Depreciation deducted in calculating net income was $25,000. Maximum CCA for the year was calculated to be $40,000.
2. During the year, a depreciable asset was sold for proceeds of $35,000. This asset had a NBV of $24,000, an original capital cost of $30,000 and belonged to a UCC class that had a January 1, 2020 balance of $18,000. This was the last asset inthe class.
3. During the year, business meals and entertainment totalled $14,000 which was expensed for accounting. Other information related to Pax’s tax situation is:-interest earned on savings account: $1,000-taxable capital gain on sale of personal assets: $18,000-allowable capital loss on sale of shares: $2,000-spousal support paid to ex: $12,000-RRSP deduction limit for 2019: $5,000-RRSP contributions of $4,000 were made in 2019 but werenotdeducted.
REQUIRED:show supporting analysisand explanations for all parts.
A. Calculate Pax’s NIFTP for 2020 before consideringany RRSP deduction he may claim in 2020, using good form. (This is review from COMM4125)
B. Calculate Pax’s 2020 RRSP Deduction Limit. To do this, assume that his 2019 earned income is equal to his 2020 earned income for RRSP purposes.
C. Pax wants to claim the maximum RRSP deductionin 2020. How much must he contribute in 2020 toclaim the maximum deduction?
D. Pax has never made a TFSA contribution. He wants you to tell him how much he could contribute and whether this is a better option for him than an RRSP. He would like a concise answer –3-4 key points, please.E. Fresh air bonus: photo and super brief description, please.Not sure what I am talking about? View my welcome back video.