Art Vandelay has been employed by Vandelay Industries Limited (VIL), a company founded by his father in law, George Costanza since early in 2015. The corporation, which sells latex and glue products, is a Canadian-controlled private corporation, based in Webwood, Ontario. Mr. Vandelay has requested your help in the preparation of his 2019 tax return. He has provided you with the following information about his receipts and selected disbursements. 1. $140,000 Salary, gross Payroll deductions: Income taxes Canada Pension Plan premium Employment Insurance premium Group accident disability insurance premiums $38,000 2,749 860 600 Net pay (42,209) $ 97.791 2. Director's fees of $3,400 received from VIL. 3. Art exercised a stock option to buy 1,000 shares of VIL at $25 per share. The fair market values at the date of grant (August 2018) and purchase (July 2019) were $24 per share and $27 per share, respectively. Also, in October 2019, Art was granted an option on an additional 1,000 shares, which had a fair market value of $29 per share at the time. The exercise price is $26. 4. A cash birthday gift of $450 was paid to Art. VIL corporate policy was to deduct such gifts. 5. Art and his life partner were provided with the company's condo in Colorado for two weeks during the winter ski season. They had to pay VIL $1,500 for accommodations that would otherwise have cost them $3,400. Art was not involved in any business activities during this trip. 6. Art's life partner accompanied him on a business trip to Cuba that was paid for by his employer. The main purpose of the trip was for Art to work with a customer. His life partner performed no business function during the trip. They did not extend their trip to include a vacation. Art's expenditures of $5,000, including applicable taxes, were paid by VIL and were reasonable in relation to the business function. The portion of the travelling expenses related to Art's life partner were also paid by VIL and amounted to $1,000, including applicable taxes. 7. During 2019, VIL paid for Art to have his income 2018 tax return prepared by the company's accountants Slim Shady and Sons at a cost of $375, including HST. 8. During the year, VIL provided its employees with free meals in the company cafeteria. Art much like his father George, likes his Kung Pao chicken hot and his meals cost the company $1,100 to prepare and serve. The meals would have cost Art $1,900 at the local Shanghai Bistro restaurant. 9. VIL provided Art with a car, which they bought January 3, 2019. $38,529 5,085 4,300 Capital cost of the car including applicable taxes Capital cost allowance claimed by company in 2019 Operating costs paid by the company Kilometres driven in 2019 as per Art's log: Business use Personal use Amount paid by Art to VIL for personal use at $0.20 per kilometre (2,400 km * $0.20) 7,600 2,400 480 10. In May 2019, Art was in a production accident and was unable to work for six weeks. During this period, he received disability payments totalling $11,538 from Star Life and Disability Assurance Co. All disability insurance premiums were paid by Art through payroll deduction. 11. VIL paid Art an allowance of $18,000 to cover the cost of moving from Gander, Newfoundland, to Ontario, plus a $35,000 payment in respect of an actual loss on the sale of his former home. Art's newly acquired home required some major renovations. While the Ontario property was not inhabitable, VIL provided Art with a company-owned apartment. Art stayed in the apartment for two months, paying $300 per month, while rent in this building for a similar unit was $1,000 per month. 12.VIL made available in-house tax expert Christian Wolfe to provide Art with tax planning advice valued at $800, including applicable taxes. 13. During the holiday season in 2019, VIL gave all of its employees wrist watches that cost the company $150, including applicable taxes. The company claimed these costs as a business expense in computing corporate taxable income. 14. The company installed recreational facilities at its head office. All employees are permitted to use these facilities free of charge. The equivalent value for similar facilities at a private club would be $1,100 per year, including applicable taxes. Required: Part 1 80 % of assignment mark (a) Determine Art's employment income inclusions for 2019 in accordance with the provisions of the Act and the CRA's administrative position as reflected in IT-470R and related announcements. Include your reference source for each item included. (b) Briefly explain why any items were omitted from the calculations above. Include your reference source for each item omitted. Part 2 20 % of assignment mark Mr. Vandelay has recently received an offer of employment from another corporation, which is based in Ottawa. He would be responsible for their eastern Ontario region. The offer contains the following. (i) In addition to a higher salary and commission, he has been offered a signing bonus of $8,500, to be paid to him before commencing employment. (ii) He will receive a moving allowance of $10,000 and he will be compensated for any loss on the sale of his home, which is expected to be $30,000. (iii) He would not be provided with a company car, but he would receive an interest-free loan to purchase his own car. He would also receive an allowance of $0.455 per kilometre for employment driving. If Mr. Vandelay accepts this offer, he will be asked to sign an agreement with his present employer undertaking not to sell for his new employer in southwestern Ontario for a period of three years. For the signing of this agreement, he will receive a payment of $10,000 from his current employer on his termination of employment with the corporation. His new employer would not oppose this agreement. Explain (in no more than 1 full page) the tax implications of the above features (in Part 2) of this offer without supporting calculations. You may use point form to address these items. End of assignment requirements. Art Vandelay has been employed by Vandelay Industries Limited (VIL), a company founded by his father in law, George Costanza since early in 2015. The corporation, which sells latex and glue products, is a Canadian-controlled private corporation, based in Webwood, Ontario. Mr. Vandelay has requested your help in the preparation of his 2019 tax return. He has provided you with the following information about his receipts and selected disbursements. 1. $140,000 Salary, gross Payroll deductions: Income taxes Canada Pension Plan premium Employment Insurance premium Group accident disability insurance premiums $38,000 2,749 860 600 Net pay (42,209) $ 97.791 2. Director's fees of $3,400 received from VIL. 3. Art exercised a stock option to buy 1,000 shares of VIL at $25 per share. The fair market values at the date of grant (August 2018) and purchase (July 2019) were $24 per share and $27 per share, respectively. Also, in October 2019, Art was granted an option on an additional 1,000 shares, which had a fair market value of $29 per share at the time. The exercise price is $26. 4. A cash birthday gift of $450 was paid to Art. VIL corporate policy was to deduct such gifts. 5. Art and his life partner were provided with the company's condo in Colorado for two weeks during the winter ski season. They had to pay VIL $1,500 for accommodations that would otherwise have cost them $3,400. Art was not involved in any business activities during this trip. 6. Art's life partner accompanied him on a business trip to Cuba that was paid for by his employer. The main purpose of the trip was for Art to work with a customer. His life partner performed no business function during the trip. They did not extend their trip to include a vacation. Art's expenditures of $5,000, including applicable taxes, were paid by VIL and were reasonable in relation to the business function. The portion of the travelling expenses related to Art's life partner were also paid by VIL and amounted to $1,000, including applicable taxes. 7. During 2019, VIL paid for Art to have his income 2018 tax return prepared by the company's accountants Slim Shady and Sons at a cost of $375, including HST. 8. During the year, VIL provided its employees with free meals in the company cafeteria. Art much like his father George, likes his Kung Pao chicken hot and his meals cost the company $1,100 to prepare and serve. The meals would have cost Art $1,900 at the local Shanghai Bistro restaurant. 9. VIL provided Art with a car, which they bought January 3, 2019. $38,529 5,085 4,300 Capital cost of the car including applicable taxes Capital cost allowance claimed by company in 2019 Operating costs paid by the company Kilometres driven in 2019 as per Art's log: Business use Personal use Amount paid by Art to VIL for personal use at $0.20 per kilometre (2,400 km * $0.20) 7,600 2,400 480 10. In May 2019, Art was in a production accident and was unable to work for six weeks. During this period, he received disability payments totalling $11,538 from Star Life and Disability Assurance Co. All disability insurance premiums were paid by Art through payroll deduction. 11. VIL paid Art an allowance of $18,000 to cover the cost of moving from Gander, Newfoundland, to Ontario, plus a $35,000 payment in respect of an actual loss on the sale of his former home. Art's newly acquired home required some major renovations. While the Ontario property was not inhabitable, VIL provided Art with a company-owned apartment. Art stayed in the apartment for two months, paying $300 per month, while rent in this building for a similar unit was $1,000 per month. 12.VIL made available in-house tax expert Christian Wolfe to provide Art with tax planning advice valued at $800, including applicable taxes. 13. During the holiday season in 2019, VIL gave all of its employees wrist watches that cost the company $150, including applicable taxes. The company claimed these costs as a business expense in computing corporate taxable income. 14. The company installed recreational facilities at its head office. All employees are permitted to use these facilities free of charge. The equivalent value for similar facilities at a private club would be $1,100 per year, including applicable taxes. Required: Part 1 80 % of assignment mark (a) Determine Art's employment income inclusions for 2019 in accordance with the provisions of the Act and the CRA's administrative position as reflected in IT-470R and related announcements. Include your reference source for each item included. (b) Briefly explain why any items were omitted from the calculations above. Include your reference source for each item omitted. Part 2 20 % of assignment mark Mr. Vandelay has recently received an offer of employment from another corporation, which is based in Ottawa. He would be responsible for their eastern Ontario region. The offer contains the following. (i) In addition to a higher salary and commission, he has been offered a signing bonus of $8,500, to be paid to him before commencing employment. (ii) He will receive a moving allowance of $10,000 and he will be compensated for any loss on the sale of his home, which is expected to be $30,000. (iii) He would not be provided with a company car, but he would receive an interest-free loan to purchase his own car. He would also receive an allowance of $0.455 per kilometre for employment driving. If Mr. Vandelay accepts this offer, he will be asked to sign an agreement with his present employer undertaking not to sell for his new employer in southwestern Ontario for a period of three years. For the signing of this agreement, he will receive a payment of $10,000 from his current employer on his termination of employment with the corporation. His new employer would not oppose this agreement. Explain (in no more than 1 full page) the tax implications of the above features (in Part 2) of this offer without supporting calculations. You may use point form to address these items. End of assignment requirements