On September 1, 2020 you started work as a investment dealer at Top Corp. Prior to starting this job you were a commerce student at University. Top Corp. requires you to use your own car and pay expenses related to earning commission income. You purchase a car on September 1, for $21,000 (HST included). Top Corp. lends you $21,000 for the car, on the condition that you repay $7,000 a year, without interest for the next three years. Payments are due on December 31. The prescribed rate from September 1 to December 31, 2020 was 7%. The total amount you paid for gas and operating costs for the car was $1,600. The amount of capital cost allowance on the car relating strictly to employment income is $2,000. The total kilometers you drove from September 1 to December 31, 2020 is 12,500 of which 5,000 are personal kilometers. Your net pay for the year was $16,520. Your T4 slip indicated: Gross Salary 4,000 Commissions 18,000 Bonus 300 Employment Insurance Premiums (356) Canada Pension Plan Contributions (944) Charitable Donations (280) Income Tax Deducted (4,200) To earn commission income you paid the following: Meals and entertainment 2,300 Client promotional material 1,500 Top Corp. paid the airfare and accomodation for you and your partner to attend a conference in New York City. The trip cost Top Corp. $800 for each of you (a total of $1,600). Top Corp. also paid the $400 premium for group life insurance. Required: Calculate Net Employment Income. Show all calculations. ITA 3(a) Part 1 (ITA 3) Division B Net Income to Division C Taxable income to Taxes Payable for Individuals + Bin # 1 - Net Employment - losses carry forward 20 years and carry back 3 years (carrying baskets) + Bin # 2 - Net Business & Property losses carry forward 20 years and carry back 3 years (carrying baskets) + Bin #4 - Other Income ITA 3 (b) ITA 3 (c) + Bin # 3 - Net Capital - losses carry forward for infinity and carry back 3 years (carrying basket) Bin #5 - Other Deductions = Sources of Income ITA 3 (d) Losses in current year from Bins 1, 2,4 = Division B Net Income ITA 110 Equivalent to Capital Gains Deduction for Employee Stock Options Payments included to calculation Division B but not included for Division C(e.g. social assistance) Losses from other years (carrying baskets Bin #1 & 2) Losses from other years (carrying basket Bin #3 limited to Net Capital Income included in ITA 3 (b)) ITA 111 = Division C Taxable Income X Applicable Tax Rates ITA 118 Tax Credits = Division E Taxes Payable for Individuals
