Dr. Marquez is a dentist with a well-practice in North York,Toronto, Ontario. She has sought y our advice regarding the deductibility/taxability of the following expenditures and income items identified during the current taxation year:
- Insurance payments Included a $1,650 premium for coverage of her office and contents, $3,800 for malpractice coverage, and $2,100 in life insurance premiums.
- Payments were made to a collection agency in the amount of $1,375 for assistance in collecting past due amounts from patients.
- Contributions of $1,000 were made to various registered charities.
- Dr. Marquez paid a total of $21,0 00 to her husband for his services a s a full-time bookkeeper and receptionist.
- A total of $5,300 was spent to attend a dental convention in Chicago, Illinois. Dr. Marquez was accompanied by her husband and $1,750 of the total cost of the trip relates directly to him.
- Anamountof $1,200 was paid for membership in a racquets club. In addition, $1,600 was spent for court time, approximately 40 percent of which was for time spent playing with patients.
- Dr. Marquez paid $1,800 in legal and accounting fees. These fees related to objecting to a personal income tax reassesment fora previous tax year. The objection was not successful and, as a consequence, Dr. Marquez was required to pay additional taxes of $17,900, plus $1,710 in interest on the late payments.
- Dr. Marquez purchased the building in which her practice is located in 2005. Her practice uses 50 percent of the floor space in the building and, on January 1, 2019 the Class 1 UCC for the building is $575,000.
- Dr. Marquez’ late father was an amateur painter who didn’t sell a single painting while he was alive. He gave Dr. Marquez a number of his paintings over the years. Shortly after his death, he was “discovered” and his paintings were in demand. During 2019, she sold two of his large paintings for $10,000 each. The electrician doing the renovations in the building fell in love with one of his other paintings. The electrician offered to trade $10,000 in services for it and Dr. Marquez accepted the offer.
- During the year, Dr. Marquez spent $3,300 purchasing provincial lottery tickets.
Required: Advise Dr. Marquez with respect to the deductibility/taxability of the preceding expenditures and income in the calculation of Net Income for Tax Purposes. Explain your position on each expenditure or income item.
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