Mr. Peter Rajagopal, who is a salesman in regina, Saskatchewan, has incurred the following expenses in connection with his employment in 2012. He was not reimbursed and did not receive an allowance in respect of any of these expenses. Peter has a form T2200, signed by his employer, attesting to all of these expenses.
(1) Peter uses one room in his home exclusively as a home office. He uses his home office most days and evenings to do paperwork and make phone calls and his home office computer is connected to his employer's computer system by modem. He visits his office at his employer's premises approximately once a week and spends the remainder of the time on the road, making sales calls throughout Western Canada.
(2) The following expenses relate to Peter's home office which occupies 10% of the square footage of his house:
Utilities.................................................................. $ 3,100
Mortgage interest....................................................... 12,000
House insurance......................................................... 1,150
Municipal taxes.......................................................... 3,050
Maintenance.............................................................. 2,700
Total..................................................................... $22,000
10% thereof.............................................................. $2,200
Capital cost allowance on computer equipment ($6,900 ( 15%)...1,035
Rental of photocopier................................................... 1,200
Rental of fax machine...................................................... 200
Office supplies............................................................ 750
Additional monthly charges for telephone services for family Internet connection
(12 ( $30)..........................................................................360
Long distance calls............................................................ 1,000
(3) Peter also has the following promotional expenses:
Meals (with clients in Regina, excluding the cost of his own meals)... $ 2,100
Theatre tickets..................................................................... 1,200
Promotional gifts.................................................................. 1,300
Country club membership........................................................ 3,200
(4) Peter paid the following automobile expenses:
Gas and oil..................................................................... $2,000
Insurance........................................................................ 1,100
Licence.............................................................................. 90
Repairs............................................................................. 800
Cellular phone airtime charges (used for employment-related calls only).700
Parking (employment related)...................................................320
Peter purchased the car that he uses for employment purposes on August 1, 2011 for $50,000 plus $3,000 GST and $5,000 provincial sales tax. Peter did not claim CCA on the car in 2011; therefore, the capital cost allowance rate for the car is 30% in 2012. The car was driven a total of 40,000 kilometres in 2012; 32,000 of the kilometres driven related to Peter's employment use.
(5) Peter also incurred the following travel expenses (while away at least 12 hour):
Airfare................................................................................... $ 4,520
Meals and accommodation (including $2,400 for meals) .......................... 4,960
Registration fees for convention in Vancouver to increase product knowledge... 800
Out-of-town entertainment............................................................... 3,200
(6) Interest on bank load:
-- to buy the computer equipment for the home office in (1) above.......... $ 320
-- to buy the car in (4) above......................................................... 800
(7) Peter's remuneration from employment is as follows:
Salary.............................................................................. $40,000
Bonus based on company sales................................................... 17,000
REQUIRED
Compute the total deductible amount of expense under each of the following sets of assumptions:
(A) Peter chooses to use the following deductions as an employee:
(i) Paragraphs 8(l)(ft), (ft.l), (z), and (j),or
(ii) Paragraphs 8(1)(/), (i),and (j).
(B) Peter's situation is changed to that of an independent sole proprietor.
Assume that all the amounts given are accurate, supported by receipts and reasonable in the circumstances. Present your answer in tabular form for ease of comparison of alternatives.