UH. wtmproymenr Income 1l3.880 ADVISORY CASES Case 1: Sandra Rae Sandra Rae has worked in the investment business in Calgary for 12 years and is a salaried plus commissioned employee. Recently, however, Sandra has wished for more inde pendence in her career. The alternative of starting her own mutual fund company is neither feasible nor cost effective. A recent offer from a new investment corporation has drawn her attention. Sandra decided to enter into a contract arrangement with Global Investments Inc. According to the agreement, a license costing $10,000 would give her the right to use the Global name on her letterheads, business cards, and any promotional materials. Sandra could also participate in selling any Global Investment product. The arrangement is peculiar. According to the agreement, Sandra is required to execute a minimum of $750,000 in sales each year before her contract can be renewed for another year. Although Global Investments has an office in Calgary, the agreement stipulates that Sandra use her own office, supplies, computer, printer, fax, telephone, and automobile. The agreement also stipulates that Sandra not work for any other investment firm, nor act as her own agent. Although Sandra will execute transactions, closing a sale requires the signature of the client, herself and a vice president of Global Investments. Upon the close of a sale, Sandra submits an invoice to Global Investments earning her a management fee equal to 4% of gross sales. Sandra converted her guest bedroom into a fulltime and solepurpose home office. She will not be reimbursed for any expenses incurred for setup, travelling or office expenses. She is also required to carry professional liability insurance. On the other hand, Global Invests ments will provide the expertise, research, promotion, and ordering materials. Last week, Global Investments placed an announcement in the newspaper introducing five new sales associates, including Sandra. How does this new venture affect her computation of net income? If!)