Anita Lee, Vice-President of Gary Inc., has asked for your assistance concerning the tax implications of certain amounts and benefits she received from her employer during 2012.
Salary, gross.......................................................$ 90,000
Payroll deductions:
Income taxes........................................................$36,000
Canada Pension Plan premiums.....................................2,307
Employment Insurance premiums.....................................840
Group accident disability insurance premiums...........110 ( 39,257)
Net pay..............................................................$ 50,743
Additional Information
(1) In November 2012, Anita was in a skiing accident and was unable to work for four weeks. During this period she received disability payments totalling $1,600 from Paris Life Insurance Ltd. Half of the disability insurance premiums were paid by Gary Inc. and half by Anita (see payroll deduction above). Anita has paid a total of $350 in disability insurance premiums since she commenced employment at Gary Inc. in 2009.
(2) In 2012, Gary Inc. paid $424 (including HST) for the preparation of Anita's 2011 income tax return and $530 (including HST) for Anita to see a financial planning consultant regarding retirement planning.
(3) Anita is taking courses towards her M.B.A. degree on a part-time basis during the evening. She is taking the courses on her initiative and for her own benefit. During 2012, Gary Inc. paid for the tuition for these M.B.A. courses which amounted to $1,000. Gary Inc. also paid $400 in tuition for Anita to attend a two-day computer workshop on company time to learn about the new software system that the company had just installed.
(4) Director's fees of $2,000 were received by Anita from Clint's Hi-Tech Ltd., a company owned by Anita's spouse.
(5) Christmas gift of $200 cash was received and was expensed by Gary Inc.
(6) Anita received an employee loan of $8,000 on January 15, 2012, at 3% interest to purchase a notebook computer for personal use. The interest was payable on each anniversary date of the loan, and Anita paid the interest owing on the loan on the due date in 2013. Assume that the prescribed interest rates applicable to employee loans for 2012 are: first quarter, 7%; second quarter, 6%; third quarter, 8%; fourth quarter, 7%.
(7) For 12 months, Gary Inc. paid Anita a monthly gas allowance of $250 regardless of the number of kilometres she drove. In addition, she was provided with a company-owned automobile costing $38,500 (including HST) at the beginning of January. Anita's kilometres for personal use were 16,000 out of a total of 25,000 kilometres. Operating costs paid (excluding gas) by Gary Inc. during 2012 amounted to $2,920, including insurance of $600 and HST.
(8) Anita and her spouse Clint were provided with Gary Inc.'s condo in the Bahamas for a one-week holiday during the winter. Excluding HST considerations, such accommodation during this peak period would have cost them $500 as opposed to the $100 actually paid by Anita.
(9) Anita used her frequent-flyer points accumulated as a result of her business trips (which had been paid by Gary Inc.) for her holiday in the Bahamas. She saved $800, plus $104 of HST, by using the frequent-flyer points.
(10) Anita bought merchandise from Gary Inc. during the year and saved $180 (excluding HST of
$23) using its 30% employee discount, which is available to all employees. Gary Inc.'s mark-up is 100%.
REQUIRED
(A) Calculate Anita Lee's employment income inclusions for 2012 in accordance with the Act and the CRA's administrative position. Ignore the effects of the leap year.
(B) Explain why you omitted any of the above amounts from your answer in part (A).
(C) If the facts were changed so that Anita had not been provided with a company-owned automobile and instead used her own car for employment purposes, how would this affect the computation of Anita's employment income in accordance with the Act? Assume that Gary Inc. continues to pay for Anita's car operating costs.