(Past exam question: 36 minutes)
(Text: Chs. 3, 9,
Due to downsizing, Murphy Brown lost her job as vice president of a broadcasting company in New Brunswick, in late 2012. Murphy decided to use this opportunity to do some travelling and, in order to do so, she withdrew funds from her RRSP, as required.
In the spring of 2013, Murphy decided to look for a new job. However, because the economy was still weak, she found no opportunities in New Brunswick. Murphy saw several advertisements in the newspaper for jobs which interested her in Southern Ontario, so she flew to Toronto in April 2013 and spent one week job hunting. At the end of that week, Murphy got a job with a broadcasting company in Mississauga, beginning May 1, 2013.
Murphy would like your help in preparing her 2013 personal income tax return. The following is the information which she has given you:
1. Funds withdrawn from RRSP in 2013 $ 60,000
2. Salary earned from May 1, 2013 - December 31, 2013 $ 85,000
3. Cost of company car purchased and provided by employer May 1, 2013 -
December 31, 2013 (including HST @ 13%) $ 35,000
4. Operating costs of car (including HST) paid by employer
(car is used 75% for business; total kilometres driven is 20,000) $ 5,000
5. Premiums on group long-term disability insurance plan
paid for by employer $ 700
6. Premiums on group term life insurance of $500,000
paid for by employer $ 1,170
7. 3% loan provided by employer to allow Murphy to
purchase a home, interest payable monthly in arrears
(loan outstanding May 2, 2013 - December 31, 2013) $200,000
1st quarter 4%
2nd quarter 4%
3rd quarter 5%
4th quarter 5%
8. Murphy was not a member of a RPP during 2013.
9. Moving expenses incurred by Murphy:
(a) commission on sale of home in New Brunswick $ 6,000
(b) plane fares to Toronto for Murphy and her husband $ 1,500
(c) cost to move furniture, etc. $ 2,000
(d) legal costs on purchase of home in Mississauga $ 1,000
(e) land transfer tax on purchase of home in Mississauga $ 6,000
10. Job search costs incurred by Murphy including one week
trip to Toronto in April 2013 $ 1,200
11. Dental expenses incurred by Mr. Brown $ 2,100
Problem 10-16 (Cont.)
12. Date of Birth Net Income
Mr. Brown (husband) 26-02-59 Nil
Quayle Brown (daughter) 16-10-89 $ 32,000
Eldon Brown (son) 25-05-93 $ 3,500
Quayle is working in Toronto and living at home. Eldon is attending university in New Brunswick. He attended university for four months in 2013 and paid tuition of $1,600 and residence fees of $1,800.
13. Murphy became a member of her employer's stock option plan. Murphy was granted an option to purchase 1,000 common shares at $15 per share, which was the FMV at the time the option was granted. Murphy exercised the option in November 2013 when the shares had a value of $21 per share and sold the shares in December 2013 for $22 per share.
14. Charitable donations in 2013 (consistent with prior years):
Murphy Brown $ 750
Mr. Brown $ 375
15. Contributions during the year:
EI $ 891
Compute Murphy Brown's federal taxes payable before surtax for 2013. Assume that her salary and employment benefits in 2012 were of the same type and in the same amount as those indicated for 2013.
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