I have this tax assignment to do, and there are a couple of things I'm not sure on.
Fred and Wilma own two rental properties in Toronto, which were purchased a couple of years ago. Fred had bought both properties with his own funds, but they are under both Fred and Wilma’s names. On June 30 2006, the Flints sold one of the two rental properties that they own (Rental#1). They sold the property for total proceeds of $500,000. The details of the sale of Rental#1 are as follows:
Land Building(Class 3) Furniture(Class 8)
Original cost $125,000 $175,000 $38,000
U.C.C., December 31, 2005 n/a 135,000 16,000
Proceeds, June 30, 2006 260,000 220,000 20,000
The proceeds of $20,000 for the furniture were received in cash on June 30, 2006. For the land and building, the proceeds received were $200,000 of cash (paid on June 30, 2006) and a $280,000 debt secured by the land and building. The debt is to be amortized over 15 years with a four-year term and with an interest rate of 8%, payable monthly. Principal repayments of $30,000 are to be made on January 1 each year commencing January 1, 2007. At the end of the four-year term, the balance of the debt will be paid in full.
How do you account for the interest? Should it be included in reserves of capital gains on disposition?
Also... this is a question that I think is specific to the program TaxPrep.
Fred and Wilma have two children. Pebbles is 22 years old and Dino is 17. Pebbles attended a university on a full-time basis in another city for eight months, had employment income for tax purposes of $8,000 from a summer job while living at home, and received a $2,000 scholarship. Fred paid for Pebbles’s tuition fees of $4,000 and Pebbles paid her own moving costs from the university which were $150.
She's not a dependent, but is there a way to connect her tax return to his so that he can get the tuition credit?
Thanks in advance for any help!