Ursula Chang works as a Senior Account Manager for Decorous Stone and Tile (Deco), a Canadian public company. Her responsibilities include selling tiling products to various retailers across North America, as well as negotiating supplier contracts on behalf of her employer. Ursulas financial information for 2021 is as follows:

1. Salary $180,000

Payroll deductions (paid by Ursula):

• Employment Insurance premiums: $890
• Canada Pension Plan contributions: $3,166 (includes CPP enhanced contributions of $290)
• Registered pension plan contributions: $8,000
• Gym membership: $200
• Income tax: $50,000

1. Deco paid for the following expenses on behalf of Ursula:

• Golf club dues (Ursula uses the club exclusively for recreation): $2,500
• Group term life insurance premiums: $900
• Private health insurance premiums: $700
• Registered pension plan contributions: $8,000

1. Ursula is the top performing account manager at Deco and consistently exceeds her sales targets. She earned commissions of $90,000 for her performance in 2021. By December 31, 2021, she had only received $10,000 of these commissions; the rest will be paid in January 2022.
3. Ursulas performance in 2021 was so exceptional that she was also awarded a cash bonus of $20,000, a $300 bottle of champagne, and a $200 gift card for her outstanding service. The cash bonus was awarded in December 2021, but will not be paid until March 2022.
5. Due to the significant volume of sales Ursula manages, she is required to hire assistants at her own expense. Ursula hired her two daughters, Samantha and Rachel, and paid each of them a $6,000 salary in 2021. Samantha is in high school and works on a part-time basis after school and over the summer. Rachel attends university and is too busy focusing on her studies to work a part-time job, but she was paid the salary anyways so that she would have some spending money while in school.
7. For the first six months of the year, Ursula used her own car to carry out her employment duties. The car was leased and the monthly lease payments were $1,000 plus 13% HST. The lease terminated on June 30, 2021.
9. On July 1, 2021, Deco provided Ursula with a company-owned vehicle. The company vehicle cost Deco $70,000 plus 13% HST. Deco also paid for all the operating costs of the vehicle effective July 1, 2021. The operating costs totalled $3,000 for July through December.
11. Ursula maintains a vehicle log that shows she drove approximately 1,667 km each month in 2021. Employment use of the car each month was 60%.
13. The company flew Ursula to China in March 2021 to negotiate several new supplier contracts on behalf of Deco. The travel costs, which were paid by Deco, totalled $8,000. This amount included extra airfare of $2,000 to allow Ursula to bring her spouse on the trip.
15. Ursula incurred the following expenses out of pocket:

    Car operating expenses (January 1 to June 30)	$	6,000
    Transportation (other than car) and accommodation in Canada	$	5,000
    Client entertainment meals	$	1,000
    Advertising and promotion	$	3,000
    Tablet computer	$	700

17. Ursula was granted an option to acquire 1,000 shares of Deco for $15 per share. At that time, Deco shares were trading for $15 a share. In December 2021, when Deco shares were trading for $18 per share, Ursula exercised the option and acquired 1,000 shares. Ursula did not sell any shares in 2021.

Required: Determine Ursulas employment income for tax purposes for the 2021 taxation year. Provide a brief explanation for any amounts you have purposely excluded from the calculation.

PART 2 Decorous Stone and Tile (Deco) is a Canadian public company and wholesale distributor of various commercial and residential tiling solutions. Deco sources its products from various manufacturers throughout Canada and Asia. Its primary customers are construction companies and big box retailers throughout North America. Deco also has showrooms in several large Canadian cities where it sells directly to local contractors. Decos income statement for the year ending December 31, 2021, is as follows:

Sales				$	52,000,000
Cost of sales					32,000,000
Gross profit					20,000,000
Expenses:
Salaries and commissions	$	3,400,000
Employee bonuses		1,000,000
Employee benefits		933,000
Interest and bank charges		389,000
Amortization		1,100,000
General and administrative		3,450,000
Advertising and promotion		3,900,000
Legal and accounting		220,000
Loss on disposal of assets		122,000
Travel		8,000
Allowance for doubtful accounts		200,000
Donations		10,000
Total expenses					14,732,000
Net income for accounting purposes				$	5,268,000

Additional information:

1. The salary and commissions expense includes $400,000 of stock-based compensation relating to the companys stock option plan, and $200,000 of commissions that will be paid in January 2022. The stock options were issued prior to July 2021.
3. Employee bonuses were accrued at year-end and will be paid in March 2022.
5. Employee benefits expense includes $37,500 for golf memberships for Decos account managers and company executives.
7. Interest and bank charges expense includes $4,750 paid to the CRA for late HST remittances, and $7,100 in financing fees to extend the terms of a mortgage on a warehouse. The rest of the expense relates to funds that were borrowed in previous years to purchase warehouse and office space.
9. General and administrative expenses includes:

Site investigation costs for a proposed warehouse (site was rejected): $25,000 Client meals and entertainment: $103,500 Company holiday party: $33,000 Permanent landscaping around three of the companys showrooms: $160,000 Warranty accrual of $1,000,000 (actual claims in the year were $650,000)

1. Advertising and promotion expense includes $200,000 of advertising in a foreign newspaper that was distributed to Canadian customers.
3. Legal and accounting expense includes:

Audit fees: $65,000 General corporate affairs: $51,500 Legal fees to enforce collection of overdue accounts receivable: $103,500

1. During the year, Deco incurred $100,000 in legal fees relating to the issuance of new shares. For accounting purposes, this amount was booked to equity and is not included in the legal and accounting expense on the income statement.
3. The travel expense relates to sending a senior account manager to China to negotiate several new supplier contracts with various manufacturers in the region. Included in these costs is $800 for meals.
5. The allowance for doubtful accounts was calculated as 2% of the year-end accounts receivable.
7. The UCC balances as of January 1, 2021, are:

• Class 1: $5,000,000
• Class 8: $3,200,000
• Class 10: $400,000
• Class 12: nil

1. Deco has the following capital asset additions and disposals during the year:

• On July 1, 2021, Deco implemented a new company policy to provide cars to its senior account managers. Deco purchased a luxury automobile for $70,000 plus 13% HST on that date.
• Deco replaced the roof on one of its warehouses for a cost of $300,000. For accounting purposes this cost was capitalized (and not expensed in the income statement).
• Deco began outsourcing its deliveries to third parties as a means of cost reduction. This resulted in its entire fleet of delivery trucks being sold off for proceeds of $250,000. The trucks originally cost $750,000.
• New furniture and fixtures were acquired for $325,000 in the year. Old fixtures originally costing $150,000 were sold off for proceeds of $25,000.
• Small tools with an aggregate cost of $450,000 were sold off for proceeds of $100,000.
• For accounting purposes, the dispositions of the trucks, fixtures, and small tools resulted in a loss on disposal of assets of $122,000 on the income statement.

1. Decos Class 1 assets qualify for CCA at 6%.

Required: Using net income for accounting purposes as your starting point, determine Decos business income for tax purposes for the 2021 taxation year.