The following income statement was prepared for Mahal, Min, Murphy & Associates (“3M Consulting”),

a partnership comprised of four partners who share income equally.

Mahal, Min, Murphy & Associates

INCOME STATEMENT

for the year ended December 31, 2017

Gross revenue ………………………………………………. $994,250

Less:

Professional staff employee

salaries ……………………………………..

$229,000

Office salaries …………………………… 74,000

Rent …………………………………………. 42.000

Office supplies ………………………….. 17,000

Client entertainment …………………. 5,075

Capital cost allowance ……………….. 16,222

Donations to charities ……………….. 250,000

633,297

$360,953

Gain on sale of securities of public

companies …………………………………

$100,000

Dividend income:

Dividends received from taxable

Canadian corporations ………………. 25,000

Capital dividends ………………………. 5,000

Net income for accounting purposes …

130,000

$490,953

The adjusted cost base to Ms. Mahal of her partnership interest was $45,792 at the beginning of the

year. Her drawings for the year were $77,500.

The dividends were received from a CCPC, all of whose income was eligible for the small business

deduction.

REQUIRED

A. Compute the partnership income for the year, the income to be allocated to Ms. Mahal and the

nature of the income.

B. Compute the adjusted cost base to Ms. Mahal of his partnership interest as at December 31st,

2017 and as at January 1st, 2018.