PLEASE ANSWER ALL THE PARTS CORRECTLY AND FULLY
FOLLOW TAXATION RULES OR ANY CANADIAN (ONTARIO BASED) INCOME TAX RULES IF REQUIRED!!
Question 2 Bucky Barnes began working as a commissioned sales representative for a company that sells medical equipment to hospitals in 2019. In 2020, his contract stated that he would earn a base salary of $90,000 plus commissions based on meeting his sales targets for the year. Bucky must travel across Canada, to all major cities, and is responsible for paying certain travel expenses. Bucky must pay for his own meals and entertainment expenses while on the road. Furthermore, he must book all transportation (air/train) and hotels and is required and pay for them himself. Bucky also pays for his own promotional costs. Bucky gave you the following list of expenses he paid in 2020 (assume all are reasonable): Airline tickets $11,200 VIA Rail tickets 8,800 Hotels 14,200 Meals (alone) 1,800 Meals (with clients) 7,600 Promotional items (hats & golf balls for clients) 900 Tickets to sporting events/concerts with clients 4,250 Golf club membership * 3,700 *Bucky estimates that he golfed about 2 rounds per week on average at his club over the summer, of those rounds maybe / were with clients. Bucky is his company's first roaming employee". The company does not have an office in Ottawa (where Bucky and his family live) and Bucky does not have an office at the company's headquarters in Toronto. Bucky works from home exclusively and, even though he does not meet clients at his home, the space is only used as an office and is "off limits" to his wife and children. During 2020, Bucky incurred the following expenses related to his home. Home Expenses (total for the year): Insurance (on home) $1,200 Laptop & Printer for office 2,400 Mortgage Interest 5,200 Property Taxes 3,500 Utilities 2,200 Internet (used by all members of house) 1,800 Bucky's office occupies 300 square feet and his home has 2,800 square feet total. Bucky's employer paid the following during 2020: Salary $ 90,000 Commissions 25,000 Group health Insurance premiums 1,400 Life Insurance Premiums 800 Contributions to RPP* 4,000 *Bucky matched the contributions to the RPP and also contributed $4,000 in 2020. In speaking with Bucky you learn that he received an all-expenses paid trip to Wakanda with his wife for meeting his annual sales targets. He estimates that trip was worth $13,200. He also received $5,000 cash from a supplier who ran a contest with all salespersons across Canada in an attempt to boost sales. Required: Bucky does not know if he should have his employer fill out the appropriate forms so he can file his taxes as a commissioned employee or if it would be better to file them as a "regular employee". He has come to you for advice. a) Calculate Bucky's gross employment income before deductions. (3 marks) b) Calculate Bucky's maximum employment deductions if he is a commissioned employee. (7 marks) c) Calculate Bucky's maximum employment deductions if he is a "regular" employee. (3 marks) d) Chose the best-case scenario for Bucky (i.e. the lowest net employment income) and calculate his net employment income. Explain why you chose to either designate him as a commissioned employee or not. (4 marks) Use good form and show all calculations. For any items excluded but mentioned in the case facts above, please, provide an explanation. (17 marks) Question 2 Bucky Barnes began working as a commissioned sales representative for a company that sells medical equipment to hospitals in 2019. In 2020, his contract stated that he would earn a base salary of $90,000 plus commissions based on meeting his sales targets for the year. Bucky must travel across Canada, to all major cities, and is responsible for paying certain travel expenses. Bucky must pay for his own meals and entertainment expenses while on the road. Furthermore, he must book all transportation (air/train) and hotels and is required and pay for them himself. Bucky also pays for his own promotional costs. Bucky gave you the following list of expenses he paid in 2020 (assume all are reasonable): Airline tickets $11,200 VIA Rail tickets 8,800 Hotels 14,200 Meals (alone) 1,800 Meals (with clients) 7,600 Promotional items (hats & golf balls for clients) 900 Tickets to sporting events/concerts with clients 4,250 Golf club membership * 3,700 *Bucky estimates that he golfed about 2 rounds per week on average at his club over the summer, of those rounds maybe / were with clients. Bucky is his company's first roaming employee". The company does not have an office in Ottawa (where Bucky and his family live) and Bucky does not have an office at the company's headquarters in Toronto. Bucky works from home exclusively and, even though he does not meet clients at his home, the space is only used as an office and is "off limits" to his wife and children. During 2020, Bucky incurred the following expenses related to his home. Home Expenses (total for the year): Insurance (on home) $1,200 Laptop & Printer for office 2,400 Mortgage Interest 5,200 Property Taxes 3,500 Utilities 2,200 Internet (used by all members of house) 1,800 Bucky's office occupies 300 square feet and his home has 2,800 square feet total. Bucky's employer paid the following during 2020: Salary $ 90,000 Commissions 25,000 Group health Insurance premiums 1,400 Life Insurance Premiums 800 Contributions to RPP* 4,000 *Bucky matched the contributions to the RPP and also contributed $4,000 in 2020. In speaking with Bucky you learn that he received an all-expenses paid trip to Wakanda with his wife for meeting his annual sales targets. He estimates that trip was worth $13,200. He also received $5,000 cash from a supplier who ran a contest with all salespersons across Canada in an attempt to boost sales. Required: Bucky does not know if he should have his employer fill out the appropriate forms so he can file his taxes as a commissioned employee or if it would be better to file them as a "regular employee". He has come to you for advice. a) Calculate Bucky's gross employment income before deductions. (3 marks) b) Calculate Bucky's maximum employment deductions if he is a commissioned employee. (7 marks) c) Calculate Bucky's maximum employment deductions if he is a "regular" employee. (3 marks) d) Chose the best-case scenario for Bucky (i.e. the lowest net employment income) and calculate his net employment income. Explain why you chose to either designate him as a commissioned employee or not. (4 marks) Use good form and show all calculations. For any items excluded but mentioned in the case facts above, please, provide an explanation. (17 marks)
