THREE PROBLEMS (100 MARKS) Problem 1 (50 marks) Ms. Martha Gobel is a linguist, specializing in Asian languages. As the daughter of a Canadian diplomat, she has become familiar with the many customs and practices found throughout Asia. In 2021, a headhunting firm in B.C. connected her with Golden Mountain Experiences (GME), a public company, which had begun operations in Whistler, B.C. GME had need of a representative to promote their Canadian services to Asian tour operators and executives.

When her mother was diagnosed with a terminal illness, Martha moved into her house in Ottawa to help care for her. Her mother died in early 2020, leaving Martha her considerable estate, including her house. When GME offered her a position in November, 2021 with a start date of January 1, 2022, she immediately accepted.

The final income tax return of her mother stated the FMV of her house was $525,000 on March 3, 2021. When Martha put the house on the market on November 15, 2021, the listing price was only $450,000 because of a nearby landfill. At the urging of the listing agent she accepted an offer for $390,000 in April, 2022, resulting in a $135,000 loss on the property.

Other Information: Other information relevant to 2022 is as follows:

1. GME owned a suite hotel and offered her the use of a unit there at a rate of $2,000 per month. The regular monthly rate for the unit was $5,000 per month. She moved in on January 1, 2022. Through contacts, she finds a large townhouse in Whistler that she purchases on May 15, 2022 for $1,600,000. After doing extensive renovations, she moves out of the hotel and into her townhouse on July 1, 2022.

2. As an incentive to accept the position, GME agreed to compensate her for one-half of any loss on the sale of her Ottawa home. The $67,500 [(1/2)($135,000)] payment was made on May 30, 2022.

3. In order to help Martha with the purchase of her new townhouse, GME provided her with a $100,000 interest free housing loan. The funds are provided to Martha on May 1, 2022. Assume that the prescribed interest rate for employee loans for all of 2022 is 2%.

4. In 2022, Martha earned a salary of $175,000. This included several large bonuses due to her exceptional sales ability. The Company withheld the following amounts from her salary: Income Taxes $53,000 CPP 3,500 EI 953 RPP Contributions 2,500 Payment for personal use of automobile 1,200

5. GME contributed $2,500 on Marthas behalf to the Companys RPP.

6. GME provides group medical coverage to all of its employees. The PHSP premiums paid by GME on Marthas behalf cost $1,115 for the year.

7. During the year, Martha received two non-cash gifts from GME, a season ski pass worth $1,000 and a Christmas gift certificate redeemable at many restaurants in Whistler Village for $100. IAF320 ASSIGNMENT TERM 2231 4 / 7

8. Her favourite uncle visited her and went skiing with a day pass that Martha provided. He died after falling and hitting his head on a boulder while skiing out of bounds. GME provided Martha with grief counseling services worth $665.

9. Up until her uncle's death, Martha purchased many day passes at Whistler for friends and families using GME's 15% corporate discount. A statement from GME stated that Martha had saved a total of $1,050 using the discount in 2022.

10. Martha was granted options to buy 100 of the company's shares at $100 per share when she joined the staff of GME. At that time, the shares were trading at $94 per share. On May 10, 2022, the shares are trading at $123 per share. She acquires 50 shares for cash of $5,000 on that date. She still owns the shares on December 31, 2022.

11. GME provided Martha with a membership in the exclusive Blackcomb Ski Club And Spa. The cost of the annual membership was $5,000. Martha took her clients there for meals and drinks. GME paid all the charges on her account as they were related to potential clients of GME. In 2022, this amounted to $22,200.

12. GME provides Martha with a luxury vehicle that she uses to drive her clients on tours and to and from the airport. It was purchased in late 2021 for $120,000, including GST and PST. The vehicle was used by Martha throughout 2022. During the year, she drove the vehicle a total of 102,000 kilometers, of which 90,000 were for employment purposes and 12,000 for personal use. GME pays all operating and maintenance costs, a total of $23,000 during the year. GME withheld $1,200 from her December salary to pay for her personal use of the vehicle for 2022.

13. Marthas demanding job requires her to meet with clients at all hours of the day and night because many of them are on international flights. GME will provide her with a signed form T2200 stating that she is required to pay for certain employment expenses without reimbursement and use a portion of her home for employment purposes. Martha has renovated in order to have a separate area in her townhouse to be used exclusively to entertain her clients, in addition to signing the contracts. She has no receipts for the renovations she did. She was unable to find a contractor who would invoice and accept cheques. Since she needed the work finished quickly, Martha reluctantly paid cash. She used this work space between July 1 and December 31, 2022. This work space occupied 600 square feet of the 2,222 square feet available in her townhouse. Work space related expenditures are as follows: Monthly Maintenance Fee (For 6 Months) $5,400 Hydro (For 6 Months) 450 Property Insurance (6 Months) 575 Property Tax (6 months) 2,600 Big screen TV used solely for the entertainment of clients (promotional videos, ski races, etc.) 2,600 Office Furniture 5,600 Furniture for client's entertainment area 12,400

14. Martha received an allowance of $400 per month for 6 months to cover the costs of maintaining a workspace in her home. Required: Determine Marthas net employment income for 2022.