Question 6

Mr. Crosbie is a salesperson and is considering the following offers of employment at Computer Tech Ltd. Both of these offers would require that Mr. Crosbie start employment on January 2, 2017. The following information is given regarding Mr. Crosbie's employment.

Offer #1

1. Mr. Crosbie's gross salary for the year ending December 31, 2017 would be: $205,000

ii) Mr. Crosbie would have the above fixed salary with no commissions.

iii) Mr. Crosbie's employer would withhold the following amounts from his income: Federal Income Tax Withheld at Source $51,250

CPP Contributions Withheld at Source 2,564

EI Insurance Premiums Withheld at Source 836

Employee's RPP Contributions 10,250

iv) Mr. Crosbie's employer would also make a matching contribution to the RPP in the amount of: $10,250

v) The employer would pay for a Group Dental Plan with Sun Life for Mr. Crosbie at a cost of: $1,100

vi) Computer Tech Ltd. would lease a vehicle for Mr. Crosbie at the start of his employment and he would have exclusive use of this vehicle for the duration of his employment

Lease Payments per month is: $530 Includes Lease Insurance per month of: $55

The company would pay for all of the operating costs of the automobile which are estimated to be: $18,000

vii) The company would provide Mr. Crosbie a Travel Allowance for Hotel, Meals and Airline: $32,000 CRA will consider this Travel Allowance to be reasonable in the circumstances. No allowance is provided for Advertising, Promotion or Entertaining Client expenses.

Loan Amount $124,000

Interest Rate on Loan 2%

Prescribed Interest Rate for 2017 5% (21 Marks)

Offer #2

1. Mr. Crosbie's gross salary for the year ending December 31, 2017 would be: $185,000
2. Mr. Crosbie would also earn commissions based on his sales which are estimated to be: $28,000
3. Mr. Crosbie's employer would withhold the following amounts from his income

Federal Income Tax Withheld at Source $53,250

CPP Contributions Withheld at Source 2,564

EI Insurance Premiums Withheld at Source 836

Employee's RPP Contributions 10,650

iv) Mr. Crosbie's employer would also make a matching contribution to the RPP in the amount of: $10,650

4. The employer would pay for a Group Dental Plan with Sun Life for Mr. Crosbie at a cost of: $1,100
5. The company will reimburse Mr. Crosbie for travel costs incurred for employment for Hotel, Meals and Airline .
6. The company will not provide Mr. Crosbie with a vehicle but will provide a monthly vehicle allowance of: $1,400
7. Mr. Crosbie estimates that the total costs associated with owning a vehicle in 2017 will be: Operating Costs $11,800

Capital Cost Allowance ( Tax Depreciation) (100%) $3,100

Financing Costs $1,300

Other Information:

The following information is applicable to both of the alternative offers

1. Both offers include a $1,000,000 life insurance policy. The company will pay all of the premiums of $3,400.

2. Employment related expenses for 2017 are estimated to be as follows:

Hotels $11,600

Air Travel $7,100

Meals incurred while travelling $7,900

Advertising and Promotion $24,000

Entertaining Clients $6,800

3. Whether it is the employer's automobile or his own personal vehicle, he would use the car throughout 2017.

51,000 KM are estimated to be driven in total for 2017

40,800 KM are anticipated by Mr. Crosbie to be related to employment activities.

4. Mr. Crosbie will be required to provide a home office where he will have a separate room used exclusively to meet clients on a regular basis.

The annual costs related to his home are provided below:

House Insurance $1,200 Property Taxes $4,300

House Heating Costs $1,800 Mortgage Interest $13,900

House Power Costs $2,100 Painting (office space) $130

Purchase of Desk and Chair $2,400

Total Square Footage of Personal House: 2,000

Total Square Footage of Home Office: 180

Required:

1. (a) Calculate Mr. Crosbie's minimum Net Employment Income for the year ending December 31, 2017 for the employment offer # (provide all calculations and explanations)
2. 1. (b) Calculate Mr. Crosbie's minimum Net Employment Income for the employment offer # (provide all calculations and explanations)
3. 2. Explain one advantage and one disadvantage from either offer.

This question about tax 2017-2018 edition Byrd &chens canadian tax principles.