General Instructions

All answers are to be completed based on the current course content which is for the 2020 tax year as provided in the 41st edition of the text book.

Jim Halpert has been employed since 2016 by ABC CO. (ABC), a Canadian public corporation incorporated in Ontario in 2014. ABC sells office cleaning supplies. Jim has asked you, Dwight B. Schrutt the trusted tax guy at ABC for your help in the preparation of his 2020 personal tax return. He has provided you with the following information about his receipts and selected disbursements. 1. $116,000 Salary, bonus Deductions: Income taxes Canada Pension Plan premium Utilities (300/3,000 * $1,200) Employment Insurance premium Meal costs during trips to plant Cell phone purchased Group accident disability insurance premiums Net Income $38,000 2,898 120 860 565 600 800 (43.843) $ 72,157 2. Included in the above salary, bonus amount is a $5,000 bonus that was awarded to him on December 31st 2020 and paid on the next payroll run date of January 14th 2021. 3. Two years ago, ABC Co. granted Jim an option to purchase 2,000 of its common shares at $32 per share. At the time the option was granted, ABC's shares were trading at the value of $30 per share. On January 31, 2020, Jim exercised the options and purchased 2,000 shares of ABC Co. (trading value at purchase date was $44 per share). On November 30, 2020, he sold all of the shares at $48 each. 4. A cash birthday gift of $250 was paid to Jim. ABC Co. corporate policy was to deduct such gifts to determine corporate income. 5. ABC Co requires that Jim work out of his home from time to time. They have supplied him with a computer and printer for this purpose; however, he must pay for his own supplies. His house is 3,000 square feet and his workstation is in a room of about 300 square feet. He also uses the room as a den and guest room. Utility costs for his home for 2020 amounted to $1,200. Jim has not kept a log of the dates when he worked from home. 6. Jim travels out of town from time to time to ABC's manufacturing plant. ABC Co. reimburses him for all travel costs, except meal costs. The plant is only 90 km from the head office, and he always returns home the same day after working a normal eight-hour day. 7. In June 2020, Jim was in accident and was unable to work for six weeks. During this period, he received disability payments totalling $13,427 from Soo Disability Assurance Co. All disability insurance premiums were paid by Jim through payroll deduction. 8. During the holiday season in 2020, ABC Co. gave all of its employees a Yeti cooler package with the company name etched in them that cost the company $275 per employee, including applicable taxes. ABC has in excess of 100 employees. The company claimed these costs as a business expense in computing corporate taxable income. 9. ABC Co. installed recreational facilities at its head office which allowed for proper distancing protocols to be followed. All employees are permitted to use these facilities free of charge. The equivalent value for similar facilities at a private club would be $1,400 per year, including applicable taxes. 10.Jim purchased a new cell phone for $600 including taxes to use while he was on the road. The employer did not reimburse him for this purchase. 11. In April of 2020 ABC Co. paid local CPA Slim Shady $250 in cash of course to complete Jim's 2019 and 2018 personal tax returns as Jim had not previously filed them. Required: Part 1 75 % of assignment mark 30 marks out of 40 (a) Determine Jim's employment income and taxable income for 2020 in accordance with the provisions of the Act and the CRA's administrative position as reflected in IT-470R and related announcements (b) Briefly explain why any items were omitted from the calculations above. For Part 1, include your legislated/administrative reference source for each item included, referencing the page number in the text is not required. Part 2 25 % of assignment mark 10 marks out of 40 Jim's fiance Pam has some stock option and employer leased questions for you. She has some "hypothetical" questions for you that she would like answers to. Pam works for a public corporation, Beskar Metals Coproration (BMC). Her stock question is.... On January 1, 2019, she was given an option to purchase 1,000 shares of BMC for $8 per share (the option extended for two years). On December 15, 2019, she exercised her option and bought 1,000 shares at $8 per share. On June 15, 2022, Pam sold the 1,000 shares. The value of the shares at the particular dates was as follows: Date option granted Date option exercised Date shares sold $ 8.50 $10.00 $14.00 Required: 1. Determine and present the amount and type of income from these transactions and in which year that income is taxable based on the above ? 2. Determine and present the amount and type of income from these transactions and in which year that income is taxable if the value of the shares at the date the option was granted was $7.50 rather than $8.50 ? 3. Determine and present the amount and type of income from these transactions and in which year that income is taxable if BMC was a Canadian-controlled private corporation based on the following amounts. Date option granted Date option exercised Date shares sold $ 8.50 $10.00 $14.00 Pam's automotive question is as follows Pam's employer has provided her with a company leased 2020 Toyota 4Runner Sport in 2020 for the first time. Prior to 2020 she used her own vehicle, a 2001 Honda Civic from 2001 to 2019. Details of this lease, vehicle usage, and cost details are as follows. Monthly logs are submitted to payroll within 5 days of the month end. Pam pays through payroll deduction 10 cents per kilometer for personal use based on these logs. Annual lease including HST is $7,500 Operating costs for the vehicle for the year, paid by the employer is $4,800 including HST Business use by Pam totaled 24.000 kms while personal use totaled 16,000 kms Pam had access to the vehicle in all 12 months for the year. Required: Determine and present to Pam the total automobile benefit amount that her employer would report on her T4 slip for the 2020 year. End of assignment requirements. Jim Halpert has been employed since 2016 by ABC CO. (ABC), a Canadian public corporation incorporated in Ontario in 2014. ABC sells office cleaning supplies. Jim has asked you, Dwight B. Schrutt the trusted tax guy at ABC for your help in the preparation of his 2020 personal tax return. He has provided you with the following information about his receipts and selected disbursements. 1. $116,000 Salary, bonus Deductions: Income taxes Canada Pension Plan premium Utilities (300/3,000 * $1,200) Employment Insurance premium Meal costs during trips to plant Cell phone purchased Group accident disability insurance premiums Net Income $38,000 2,898 120 860 565 600 800 (43.843) $ 72,157 2. Included in the above salary, bonus amount is a $5,000 bonus that was awarded to him on December 31st 2020 and paid on the next payroll run date of January 14th 2021. 3. Two years ago, ABC Co. granted Jim an option to purchase 2,000 of its common shares at $32 per share. At the time the option was granted, ABC's shares were trading at the value of $30 per share. On January 31, 2020, Jim exercised the options and purchased 2,000 shares of ABC Co. (trading value at purchase date was $44 per share). On November 30, 2020, he sold all of the shares at $48 each. 4. A cash birthday gift of $250 was paid to Jim. ABC Co. corporate policy was to deduct such gifts to determine corporate income. 5. ABC Co requires that Jim work out of his home from time to time. They have supplied him with a computer and printer for this purpose; however, he must pay for his own supplies. His house is 3,000 square feet and his workstation is in a room of about 300 square feet. He also uses the room as a den and guest room. Utility costs for his home for 2020 amounted to $1,200. Jim has not kept a log of the dates when he worked from home. 6. Jim travels out of town from time to time to ABC's manufacturing plant. ABC Co. reimburses him for all travel costs, except meal costs. The plant is only 90 km from the head office, and he always returns home the same day after working a normal eight-hour day. 7. In June 2020, Jim was in accident and was unable to work for six weeks. During this period, he received disability payments totalling $13,427 from Soo Disability Assurance Co. All disability insurance premiums were paid by Jim through payroll deduction. 8. During the holiday season in 2020, ABC Co. gave all of its employees a Yeti cooler package with the company name etched in them that cost the company $275 per employee, including applicable taxes. ABC has in excess of 100 employees. The company claimed these costs as a business expense in computing corporate taxable income. 9. ABC Co. installed recreational facilities at its head office which allowed for proper distancing protocols to be followed. All employees are permitted to use these facilities free of charge. The equivalent value for similar facilities at a private club would be $1,400 per year, including applicable taxes. 10.Jim purchased a new cell phone for $600 including taxes to use while he was on the road. The employer did not reimburse him for this purchase. 11. In April of 2020 ABC Co. paid local CPA Slim Shady $250 in cash of course to complete Jim's 2019 and 2018 personal tax returns as Jim had not previously filed them. Required: Part 1 75 % of assignment mark 30 marks out of 40 (a) Determine Jim's employment income and taxable income for 2020 in accordance with the provisions of the Act and the CRA's administrative position as reflected in IT-470R and related announcements (b) Briefly explain why any items were omitted from the calculations above. For Part 1, include your legislated/administrative reference source for each item included, referencing the page number in the text is not required. Part 2 25 % of assignment mark 10 marks out of 40 Jim's fiance Pam has some stock option and employer leased questions for you. She has some "hypothetical" questions for you that she would like answers to. Pam works for a public corporation, Beskar Metals Coproration (BMC). Her stock question is.... On January 1, 2019, she was given an option to purchase 1,000 shares of BMC for $8 per share (the option extended for two years). On December 15, 2019, she exercised her option and bought 1,000 shares at $8 per share. On June 15, 2022, Pam sold the 1,000 shares. The value of the shares at the particular dates was as follows: Date option granted Date option exercised Date shares sold $ 8.50 $10.00 $14.00 Required: 1. Determine and present the amount and type of income from these transactions and in which year that income is taxable based on the above ? 2. Determine and present the amount and type of income from these transactions and in which year that income is taxable if the value of the shares at the date the option was granted was $7.50 rather than $8.50 ? 3. Determine and present the amount and type of income from these transactions and in which year that income is taxable if BMC was a Canadian-controlled private corporation based on the following amounts. Date option granted Date option exercised Date shares sold $ 8.50 $10.00 $14.00 Pam's automotive question is as follows Pam's employer has provided her with a company leased 2020 Toyota 4Runner Sport in 2020 for the first time. Prior to 2020 she used her own vehicle, a 2001 Honda Civic from 2001 to 2019. Details of this lease, vehicle usage, and cost details are as follows. Monthly logs are submitted to payroll within 5 days of the month end. Pam pays through payroll deduction 10 cents per kilometer for personal use based on these logs. Annual lease including HST is $7,500 Operating costs for the vehicle for the year, paid by the employer is $4,800 including HST Business use by Pam totaled 24.000 kms while personal use totaled 16,000 kms Pam had access to the vehicle in all 12 months for the year. Required: Determine and present to Pam the total automobile benefit amount that her employer would report on her T4 slip for the 2020 year. End of assignment requirements