Assignment #$1$: Calculation of Net Employment Income for an Individual

Read the following scenario:

Jane Jackson resides in Edmonton, AB$,$ and has been employed by Finlay Ltd$.$ for a number of years as their accountant.

$$ Jane$$s T$4$ slip for the current year indicates the following amounts were deducted from her gross salary of $$80,000$:

Deductions Amounts

CPP $($maximum for the year$*)$

EI $($maximum for the year$*)$

RPP contributions $$4,500\mathrm{.}00$

Pension adjustment $9,000\mathrm{.}00$

Income tax deducted $20,000\mathrm{.}00$

Union dues $300\mathrm{.}00$

Charitable donations $1,200\mathrm{.}00$

$*$ See the current year$$s tax rate sheet to determine the CPP and EI reported on the T$4$ slip.

$$ The following amounts are paid by Finlay Ltd$.$ and not included on Jane$$s current year T$4$ slip:

Paid by Findlay Ltd$.$ Amounts

Private health insurance plan premiums $$1,800$

Public health insurance plan premiums $1,500$

Group term life insurance policy premiums $400$

Allowance for incidental expenses $($$$400$ per month$)4,800$

$$ Finlay Ltd$.$ provided Jane with a motor vehicle for the entire year, and the company also paid for all operating costs for the vehicle, with $$5,150$ paid for operating costs in the current year. The vehicle was purchased by Finlay Ltd$.$ three years ago at a cost of $$50,000($incl$.$ GST$).$ In the current year, Jane drove $22,000$ kilometres; $10,000$ kilometres were personal and $12,000$ were for employment purposes.

$$ On October $1$ of the current year, Jane purchased $1,000$ shares of Finlay Ltd$.$ under a stock option plan. Finlay Ltd$.$ is a Canadian public corporation. The following information is provided:

Stock Options Amounts

Option granted on Jan. $1$ of the prior year, FMV $=$ $$10$ per share

Option price $=$ $$10$ per share

Option exercised on July $1$ of the current year, FMV $=$ $$16$ per share

Note: On December $31,$ Jane continues to hold the $1,000$ Finlay Ltd$.$ shares, since she anticipates they will appreciate in value.

$$ In the current year, her mother travelled with her to Montreal when Jane attended a five$-$day conference for accountants. Finlay Ltd$.$ reimbursed her for the full cost of $$5,000,$ of which $$2,000($including GST$)$ was for expenses she incurred for her mother.

$$ On July $1$ of the prior year, Finlay provided Jane with an employee loan in the amount of $$10,000$ at the annual interest rate of $1\%.$ The loan requires annual principal repayments of $$2,000$ on June $30$ of each year. Jane made the first annual repayment on June $30$ of the current year.

$$ Canada Revenue Agency$$s interest rates for the calendar quarters in the current year are:

Quarter Rates

Quarter #$1($January $1$ to March $31)3\%$

Quarter #$2($April $1$ to June $30)2\%$

Quarter #$3($July $1$ to Sept $30)3\%$

Quarter #$4($Oct $1$ to Dec $31)3\%$

$$ In the current year, Jane paid the following amounts personally:

o CPA professional dues $($annual$)$ in the amount of $$800($paid on June $30)$

o Employment expenses: Jane paid for supplies $($used for employment purposes$)$ in the amount of $$1,250($expenses occurred throughout the year$).$ Finlay Ltd$.$ has authorized these expenses and filed Form T$2200$ accordingly.

Answer the following:

$1.$ For each amount paid by Finlay Ltd$.$ that was not reported on Jane$$s T$4$ slip, determine if there is a taxable benefit and give brief explanations to support your response $($i$.$e$.,$ explain why the amount is a taxable or non$-$taxable benefit$).(20$ pts$)$

$2.$ Calculate the total amount of taxable benefits for Jane in the current year $($show all your calculations$).(40$ pts$)$

$3.$ Calculate Jane$$s net employment income for the current year, in accordance with sections $5$ to $8$ of the Income Tax Act. Round your calculations to the nearest dollar and provide appropriate references to the ITA. $(40$ pts$)$