Ms. Mae West is a senior representative of the Marketing Division of Alpha Foods Ltd.(AFL) a Canadian Controlled Private Corporation (CCPC) that cultivates/ manufactures and imports herbal medicines. Ms. Mae is a key employee and receives various benefits including stock options. Mae presents you with receipts and notes, as she is having trouble determining her gross employment income and deductions allowed in in computing her income from employment (net employment earnings).

i) During 2021 Ms. West received a salary of $152,500 and commission income of $15,955 based on her sales. In addition, AFL declared a $50,000 bonus for Mae (based on companys performance) on October 28,2021. Mae on December 7,2021 received $30,000 with the remaining amount payable March 17, 2022. AFL has Fiscal Period End December 31,2021.

ii) The following were withheld by Alpha Foods Ltd.: (Canada Pension Contribution $3,166) (Employment Insurance Premiums $890) (Registered Pension Plan Contribution (Define Contribution) $6,200) (Federal and Provincial Income Tax Deducted $ 39,100) (Donation to United Way $2,300)(Group sickness/disability protection plan 50% of total annual premium $1,600)(Payment for Personal use of Company Car $600)(Group Term Life Insurance $800)

iii) The Company paid the following amounts on behalf of Ms. West:(Group sickness/ Accident/Disability insurance Plan (50%) Sun Life $ 1,600)(Dental Plan and Drug Plan 100% premiums paid- Manulife Co $700)(Extended Health care 100% premiums paid Manulife Co $850)( AFL Contributed to the Registered Pension Plan matching contribution $ 6,200) (Group Term Life Insurance $800)

iv) AFL provided West with the following additional benefits: Allowance for acquiring business clothing $3,900 (Squash Club membership for employment related usage 3,700) (Financial advisor fees $1,600 )

v) Ms. West was required to pay 2021 dues to her professional association in the amount of $ 780 -Canadian Association of Professional Herbal Organic Food. Growers (a trade union recognized by statute) .

vi) On January 3 2021, Mae was seriously injured and confined to a hospital and home for three full months due to a skiing accident at Mount Saint Louis Moonstone. Alpha Foods Ltd. (AFL) sponsors a group disability plan for its employees. The plan provides periodic benefits that compensate for lost employment income. The annual premium on this plan is $3,200, with this cost being shared equally by the employer and the employee. Because Mae became disabled in January, 2021, she did not make any contribution in that year. In the years prior to 2021, Mae had total contributions of $16,000. During 2021, because of her disability, Mae receives benefit under the plan totaling $24,000.

vii) Ms. West is provided with a car that is leased by AFL. The monthly lease payments for 2021 are $ 793( $702 plus $91 HST). During 2021, Mae drives the automobile a total 8,000 km of which 6,000 km are employment related. The automobile is used by her for 2 months during the year. AFL paid a total of $7,250 in operating costs. When Ms. West is not using the automobile, company policy requires that it be returned to their premises.

viii) On June 1,2021, Ms. West received a interest free loan of $50,000 to purchase a automobile for employment purposes. This loan is required to be repaid over a 4 year period. Loan is still outstanding at end of the year.[loans available to all employees.] Assume the 2021 prescribed interest rates applicable to employee loans are as follows: First & Second quarters 2%; Third& Fourth quarters 3%.

ix) AFL has a policy of giving all employees gifts to promote employee loyalty and help local businesses. During 2021, Ms. West receives from AFL the following: A weekend at a local health spa. The value of the gift was $240. A $490 gift certificate at a local shoe store. An Easter basket of gourmet treats valued at $245 and a Christmas basket of fruit,nuts and cheese with a value of $215.Mug, T-shirt and Pens with the ALF logo on them. The value of the gift $65. A $600 reclining easy chair for outstanding customer service during the year. A cash award of $300 in recognition of 10 years of service with the employer

x) During 2021 Mae became very depressed[mental health] (may have been caused by her hospitalization). AFL suggested she take advantage of the company assistance program. She went to seven sessions in October and November and felt much better. AFL paid $1,680 for Maes counselling services in respect of mental health

xi) Ms. West is taking courses towards her Culinary Certificate at George Brown College on a part-time basis during the evening. She is taking the courses on her initiative and for her own benefit. During 2021, AFL paid for the tuition for these Culinary courses which amounted to $ 1,000. AFL. also paid $ 200 in tuition fees for Mae to attend a five (5) day computer workshop to learn about the new organic food growing and manufacturing techniques .

xii) In 2020,AFL. [ a CCPC company) granted Mae options to buy 20,000 shares of the companys stock at $ 4.00 per share. At the time of the grant the estimated Fair Market Value ( FMV) of the shares were $5.00 per share . On October 28, 2021 all these options were exercised. At this time, the estimated Fair Market value of the share are at $7.00 per share.

xiii) Ms. Wests previous employer was a Canadian controlled private corporation.In 2010, she was granted options to buy 500 of the companys shares at $20 per share. This option price was higher than the estimated fair market value of the companys shares at the time the options were granted. On March 31, 2011, Ms. West exercised these options. At this time the fair market value of the shares was $24 per share. On October 28,2021she sold the shares for $28 per share.

xiv) Ms. Wests husband, William C. accompanied her on a business trip to Los Angeles that was paid for by AFL. The main purpose of the trip was for Mae to work with a AFLs client. William C. performed no business function during the trip. They did not extend their trip to include a vacation. Ms.. Wests expenditures of $4,200, included applicable taxes , paid by AFL and are reasonable in relation to the business function. The portion of the travelling expenses related to William C.werealso paid by AFL and amounted to $1,700 including applicable taxes.

xv) All of these expenses are necessary and are required to be paid by Ms.West under her contract of employment. Her employer has duly signed form T2200 Declaration of Conditions of Employment.

Travel Costs:

Meals (consumed while traveling>12 hours from employers main office) $ 600 Air fares...3,410 Taxi fares 280 Accommodation3,170 Mae purchased an automobile in 2021 and it has been determined that automobile is used used 75% for employment purposes. Automobile operating expenses (gas, oil, maintenance, repairs insurance etc.) totaled $4,900 . The applicable CCA (100% claim), Class10.1: 30%(33,900+16,950) x30%)=$15,255 Interest paid on the purchase of automobile $838 General office expenses: Christmas gifts to large clients (not meals or entertainment)$1,500 Client entertainment expenses: Entertainment Expense $ 2,800 Tickets to sporting events attended with clients $ 3,200 = $6,000 Home office space expenses (the following are 100% of the relevant costs for the year; Maes home office occupies approximately 15% of the total square footage of her home). Assume that Mae meets the criteria set out in SS 8(13) of the Income Tax Act for deducting home office expenses. Property taxes $3,600 House insurance 960 Maintenance 440 Mortgage interest 5,900 Utilities 2,700 = $13,600

NOTE: Declaration of Conditions of Employment- [requires her to pay her own expenses while carrying out the duties of employment; requires her to travel away from her employers place of business; requires her to be away for at least 12 consecutive hours from the municipality and metropolitan; she did not receive or was entitled to receive a motor vehicle allowance; meets the criteria set out in SS 8(13) of the Income Tax

Act for deducting home office expenses. and she was not reimbursed for any expenses.

Required:a) Calculate Mae Wests Gross Employment and minimum Net Employment income(earnings) for 2021. (maximum 2021 deductible employment expenses). Indicate the income under section 5, 6 , 7 -ITA and expenses that are deductible under paragraph )8(1)(f) under 8(1)(i), 8(1)(j), & 8(1)(m).[Hint: Calculate deductions only under Par. 8(1) (f) , Par 8(1)(i) & (j) ,8(1)(m) as set in answer sheet]

USE ANSWER SHEET PROVIDED :

Salary/wages: Bonus: Commissions:

Withheld by AFL ie. Income Tax, CPP,EI. etc. nil

Allowance /Financial Advisor /Membership

Taxable Benefits: - Gifts/ Awards: cash/ non cash:

Company paid : RPP,Group term Life Insurance/,Health

Imputed Interest (sec.804ITA)Loan

Standby Benefit : Operating Benefit:

Group sickness benefit (par.6(1)(f)ITA:

Tuition Fees

Los Angeles trip

Counselling Services

Stock Options:

Stock Options:

Gross Employment:

Deduction :[;8(1)(f);8(1)(i);8(1)(j);8(1)(m) ITA]

Par.8(1)(f) [Sales expenses]

Travel- Meal

Airfares

Taxi

Accommodations

Automobile

Promotion-

Christmas gifts

Office in the Home

Office in Home

Office in Home

Entertainment-

Par.8(1)(i)[Dues ]-

[Office in Home]

[Office in Home]

Par.8(1)(j)[CCA auto]-

[Interest auto]-

Par.8(1)(m)[RPP] NET EMPLOYMENT INCOME (Earnings)