Taxation

MEMO

To: Tracy

Subject: Total Income from Business for tax purposes.

Comment: Please see your total income from business for tax purposes of $10,733.75. Calculations are provided in table below; with notes following for you own reference:

Note 1

Gross Business Income: $34,300 =(35,000+500-1,200)

• Money received from consulting services $35,000;

• Add reserves deducted last year $500;

• Deduct reserves for this year $1,200.

AP: 4-10 page 2

Note 2

Cost of goods sold $19,100.

Note 3

Relevant for Business-use-of-home-allowable claim: $981.25.

• Receipts for condo fees $1,800

• Mortgage interest $5,250

• Receipts for Utilities (light, heat, water) $ 800

Calculation allowable claim:

(50 m²/400 m²) x (1,800+5,250+800)= $981.25

Note 4

Motor vehicle allowable claim is $550.00.

AP: 4-10 page 3

Note 5

Eligible business Expense:

A. Capital Cost Allowance: $2,100 =(1,500+600)

o Deductible CCA on computer equipment used for diagnostic purposes $1,500;

o Deductible CCA for Vehicle $600.

B. Telephone and utilities:

o Long distance bills for business total $250.

C. Meals and entertainment:

o Savoir Faire cocktail party for clients (50% x $300) = $150.00.

D. Business tax, fees, licences, dues, memberships, and subscription: $130 =(50+80)

o Computer association $50;

o Computer World magazine subscription $80.

E. Bad debts:

o Unable to collect for two jobs from last year debts of $300.

o

Note 6

Not eligible for business expense:

• Future Shop for a television and DVD player $200

• Straw Warehouse for living room furniture 5,500

The above information expenses are provided from personal bank account. There is not enough evidence provided to conclude that the above expenses are related to conduct business. For example it does not mention whether or not the above equipment and furniture was needed to conduct business at home with customers or suppliers; it only specifies that there are often...