Tax question. please provide detailed answers

Calculation of Net Employment Income for an Individual

Read the following scenario:

Jane Jackson resides in Edmonton, AB, and has been employed by Finlay Ltd. for a number of years as their accountant.

• Janes T4 slip for the current year indicates the following amounts were deducted from her gross salary of $80,000:

Deductions	Amounts
CPP (maximum for the year*)
EI (maximum for the year*)
RPP contributions	$4,500.00
Income tax deducted	20,000.00
Union dues	300.00
Charitable donations	1,200.00

* See the current years tax rate sheet to determine the CPP and EI reported on the T4 slip.

• The following amounts are paid by Finlay Ltd. and not included on Janes current year T4 slip:

Paid by Findlay Ltd.	Amounts
Private health insurance plan premiums	$1,800
Public health insurance plan premiums	1,500
Group term life insurance policy premiums	400
Allowance for incidental expenses ($400 per month)	4,800

• Finlay Ltd. provided Jane with a motor vehicle for the entire year, and the company also paid for all operating costs for the vehicle, with $5,150 paid for operating costs in the current year. The vehicle was purchased by Finlay Ltd. three years ago at a cost of $50,000 (incl. GST). In the current year, Jane drove 22,000 kilometres; 10,000 kilometres were personal and 12,000 were for employment purposes.

• On October 1 of the current year, Jane purchased 1,000 shares of Finlay Ltd. under a stock option plan. Finlay Ltd. is a Canadian public corporation. The following information is provided:

Stock Options	Amounts
Option granted on Jan. 1 of the prior year, FMV	= $10 per share
Option price	= $10 per share
Option exercised on July 1 of the current year, FMV	= $16 per share

Note: On December 31, Jane continues to hold the 1,000 Finlay Ltd. shares, since she anticipates they will appreciate in value.

• In the current year, her mother travelled with her to Montreal when Jane attended a five-day conference for accountants. Finlay Ltd. reimbursed her for the full cost of $5,000, of which $2,000 (including GST) was for expenses she incurred for her mother.

• On July 1 of the prior year, Finlay provided Jane with an employee loan in the amount of $10,000 at the annual interest rate of 1%. The loan requires annual principal repayments of $2,000 on June 30 of each year. Jane made the first annual repayment on June 30 of the current year.

• Canada Revenue Agencys interest rates for the calendar quarters in the current year are:

Quarter	Rates
Quarter #1 (January 1 to March 31)	3%
Quarter #2 (April 1 to June 30)	2%
Quarter #3 (July 1 to Sept 30)	3%
Quarter #4 (Oct 1 to Dec 31)	3%

• In the current year, Jane paid the following amounts personally:

• CPA professional dues (annual) in the amount of $800 (paid on June 30)
• Employment expenses: Jane paid for supplies (used for employment purposes) in the amount of $1,250 (expenses occurred throughout the year). Finlay Ltd. has authorized these expenses and filed Form T2200 accordingly.
• Other employment related expenses were as follows:
  • Travel Costs (Hotel and Airline costs) $15,600
  • Travel Costs (Meals) 11,300
  • Advertising and Promotion 26,000
• Jane uses 25 percent of her personal residence as an office (T2200 form filed). During the year, the costs associated with her home were as follows:
  • Interest Payments on Mortgage $9,100
  • Property Taxes 3,750
  • Utilities 1,925
  • Insurance 1,060
  • Furnace, Wiring and Foundation Repair 4,200

Using Excel template in D2L, calculate Janes net employment income for the current year, in accordance with sections 5 to 8 of the Income Tax Act. For each amount, determine if there is a taxable benefit and give brief explanations to support your response (i.e., explain why the amount is a taxable or non-taxable benefit). Round your calculations to the nearest dollar and provide appropriate references to the ITA.

Template attached above

Amounts 5 6 ITA Reference ITA S.5(1) Gross Salary (this is the starting point for calculating net employment income) 8 9 10 Taxable Benefits/ Employment Deductions ITA Reference Amounts Taxable benefits are added to gross salary in calculating net employment income Employment Expenses are subtracted from gross salary in calculating net employment income (enter o for items excluded from employment income calculation) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 O Net Employment Income 39 Amounts 5 6 ITA Reference ITA S.5(1) Gross Salary (this is the starting point for calculating net employment income) 8 9 10 Taxable Benefits/ Employment Deductions ITA Reference Amounts Taxable benefits are added to gross salary in calculating net employment income Employment Expenses are subtracted from gross salary in calculating net employment income (enter o for items excluded from employment income calculation) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 O Net Employment Income 39