Chelsea’s Minimum Net Income & Tax for Tax Purposes

Case 1
It is March of 2021 and you have been hired to prepare the 2020 tax return for Chelsea Lee. She has provided you with the following information:
Chelsea is thirty years old, divorced, and has an eight-year-old child from a former marriage. Child support payments from Chelsea are $500 a month. Chelsea lives in Cornwall, and is a salesperson for Tri-scope Inc. The earnings from the job include a base salary of $6,000 per month plus a commission of 1% on the sales Chelsea makes in the month, which were $50,000 every month in 2020.
Chelsea moved to Cornwall from Bermondsey on December 1, 2019 due to a promotion with Tri-scope. Chelsea’s tax deductible moving expenses totaled $9,500, and there was no reimbursement from Tri-scope. $4,500 of this expense was accurately claimed on the 2019 tax return. Chelsea took out a $120,000 mortgage to purchase a new home in Moncton. The total interest payments were $8,400 in 2020.
Chelsea’s personal vehicle is used to perform the work duties, and Chelsea pays for the expenses with no reimbursement from Tri-scope. However, an allowance of $400 is received each month which is treated as unreasonable for tax purposes. Chelsea purchased a new car in 2019 which is used seventy-five percent of the time for business purposes. The undepreciated capital cost of the vehicle at the beginning of 2020 was $28,000. Total costs to operate the vehicle are $800 per month. Interest expense on the car loan is $200 per month.
Chelsea spends $300 per month on fashionable clothing for work, and $500 per year on a new cell phone. The cell phone bill is $80 per month, of which seventy-five percent is for employment use. Chelsea takes files home from the office at the end of the day and reviews the sales calls in a home office. The files are then returned to the office at Tri-scope in the morning prior to leaving for the day to make sales calls. Chelsea’s monthly total expense for the home insurance, property taxes, maintenance, and utilities is $1,000. The home office occupies ten percent of the square footage in the home. Chelsea maximizes RRSP contributions each year. The 2019 Notice of Assessment showed RRSP room of $12,000. Earned income was $42,000 in 2019 which consisted of $6,000 in commissions. Tri-scope does not have a registered pension plan. CPP for enhanced contribution is $166.
Required:
A. Calculate Chelsea’s minimum net income & Tax for tax purposes for 2020. Use the aggregating formula from Section 3 of the Income Tax Act to show your answer (40 marks).

B. Indicate why any items have been omitted from your calculations (10 marks).