Sami Limited made two non-interest-bearing advances to its sole shareholder and president, Ms. Sami Forns during 2019 fiscal period ended December 31, 2019. The total advances were $400,000 and were recorded as a receivable in the books and records of Sami Limited. Details of the advances are set out below.

 

1. $350,000 was advanced to Sami on March 1, 2019 to aid her in the purchase of a water-front condo — top floor, of course. At the time of the advance, Sami signed a note with the corporation agreeing to repay the principal in equal annual instalments of $35,000 a year for the next ten years. The first principal repayment is due on February 28, 2020. The company has a policy of making such loans to other employees but never made a similar loan to an employee in the past.

2. On September 1, 2019, $50,000 was advanced to Sami to purchase a new car for herself. The car is used for employment purposes. The company has a policy of aiding its key employees to purchase automobiles that will be used to carry out their employment duties and has made such loans to other key employees in the past. At the time of the advance, Sami signed a note with the corporation agreeing to repay the principal in equal annual instalments of $10,000 a year over five years. The first principal repayment is due on January 1, 2020. Sami used this car 75% for the employment purposes during the year. Required: Sami Limited is not in the business of lending money. Calculate Sami’s taxable benefits and deduction (if any) due to these two transactions for the year 2019. Assume that the following prescribed interest rates applicable to taxable benefits during 2019;

Quarter 1 3%

Quarter 2 4%

Quarter 3 3%

Quarter 4 3%