The following information relates to Sarah Sharpes employment information for the year ended December 31, 2020 Sarah works for a public traded restaurant company called Tom Huntons. Sarah works as an area manager in Kamloops so she travels extensively for work. During the 2020 year Sarah used the company car throughout the year on a day-to-day basis to visit stores and go to and from work. Total kilometers driven in 2020 numbered 25,000. Personal kilometers, including the distance travelled to and from work, represented 14,000 kilometers. The car was purchased in 2018 for a cost, including all applicable taxes, of $65,000. The car now has a fair market value of $22,000. The company also paid all operating expenses for the year totaling $6,800. When Sarah started working for the Tom Huntons, she was offered 5,000 stock options with a purchase price (Strike Price) of $25 a share. At the time the options were granted to Sarah, the shares were trading on the stock exchange at $20 a share. On July 1, 2020, when the stock was trading at $100 per share, she exercised 2,500 options. On August 15, 2020, Sarah sold 1,500 of the shares for $125 per share. On December 11 th, when the shares were trading at $62 per share, she sold 1,000 shares. When Sarah accepted the transfer to Kamloops (from Toronto) at the start of the year, she received a loan, February 1, 2020, from the company for $150,000. Sarah used this amount as follows:

Description Amount Purchase of new home 125,000 Investments to her RRSP 15,000 Trip to Hawaii, personal 10,000 150,000

The company has offered Sarah the loan at a 1% interest rate over the next 5 years. The loan will be reassessed after this time. Sarah pays only interest payments to Tom Huntons. Assume the CRA prescribed rates are as follows: Q1: 4%, Q2: 4%, Q3: 5% Q4: 5% Sarah is not required to have an office at home.

Other information related to her employment at Tom Huntons: Gross Salary

198,000

Less Payroll deductions Federal and provincial income taxes - 73,260.00 Employee contribution to a registered pension plan - 8,500.00 Charitable donations Breast Cancer - 2,500.00 Canadian Pension Plan contributions - 2,898.00 Employment Insurance contributions - 856.00 Union dues - 2,500.00

Net Pay Received

107,486

Fringe Benefits: Employer contribution to a registered pension plan

5,000

Life insurance premiums paid by employer

3,000

Club membership (Sarah always meets clients there)

2,200

Membership to Food and Beverage Association of BC

1,450

Reimbursement of moving expenses for relocating from Toronto

7,000

Childcare benefit

6,000

Ten-year anniversary gift (golf clubs and bag).

2,000

Wedding gift (coffee maker)

750

Restaurant gift certificate as a birthday present.

200

Baseball cap and water bottle with Company logo on it.

30

Loyalty points (estimated dollar amount)

25

Medical Expenses paid by employer

4,500

Professional Membership dues

2,000

SELECTED ADDITIONAL NOTES: The membership to the Food and Beverage Association of BC (FBABC) was an idea that Sarah brought to the ownership of the company. Her husband is the Executive Director of FBABC but she thinks the networking with other members and restaurant related resources will help the company on a day-to-day basis. The company contributes $500 towards Sarahs childcare at a public daycare that is next to the main office. The medical expense paid by the employer was for a voluntary cosmetic procedure.

Sarah is a Registered Massage Therapist and these fees are her yearly dues paid by the corporation as part of her employment contract.

Required: 1. Calculate Sarahs 2020 net income from employment for tax purposes. 2. Give explanations why certain items were excluded from you calculation. 3. Will Sarah be able to claim a deduction in calculating taxable income with regards to the stock option? Explain your answer. 4. Assuming Sarah has disposed of no capital properties in 2020 other than her shares of Tom Huntons; what will be the tax consequences resulting from the disposition. Be specific. (hint, think any gains or losses she may have!) 5. Would your calculation of Sarahs net employment income change if the company she worked for were a Canadian Controlled Private Company? Be specific.