You have been transferred (at your request) to the tax group of PTPC, a major public accounting firm. For your first assignment, your partner has given you the file for Wendy Armstrong, a major individual client of the firm. Wendy has been a salesperson employed by Chemical Ltd. since early in 2015. Chemical Ltd. is a Canadian-controlled private corporation, based in Mississauga, Ontario. Wendys sales territory is southwestern Ontario and she is required to travel regularly within that territory.

You have been asked by your partner to help Wendy with the preparation of her 2017 income tax return. She has provided you with information about her activities and compensation, as follows.

Wendys base salary for 2017 was $115,000. However, she also earned sales commissions in the amount of $20,000.

Total salary and commissions $135,000

Withholding by employer from salary

Income tax $38,000

Registered Pension Plan 6,400

Canada Pension Plan 2,564

Employment insurance 836

Group term life insurance 750

Group disability insurance (40% of total premium) 400 48,950

Net Salary $ 86,050

Chemical Ltd. also provided Wendy with a $15,000 allowance for meals, entertainment, and accommodation, a $4,200 allowance for car expenses (independent of the number of kilometers driven for business), and a $540 allowance for clothing. To help Wendy develop and maintain her clientele for Chemical Ltd., the corporation paid $3,000 for Wendy to be a member of the Mississauga Gold and Country Club. (Wendy does not enjoy playing golf, and uses this membership solely for the benefit of Chemical Ltd.) Wendy is expected to pay all business expenses herself, including any costs related to travel and automobile expenses. This is specified in her contract of employment, and her employer provides her with appropriate forms indicating this requirement. Wendy incurred the following costs related to her employment in 2017:

Meals while traveling for business $ 7,600

Client entertainment $ 4,000

Accommodation $10,000

Car gas and oil $ 5,900

maintenance $ 2,000

The company also provides Wendy with a standard benefit package. Included in this package is $450 in premiums for Green Shield group extended private medical insurance and $385 in premiums for Green Shield dental plan (private) insurance, as well as $80 in premiums for group term life insurance. The company also pays 60% of the total premium for group disability insurance.

During 2017, Wendy received payments in the amount of $1,200 per month for three months from the above-noted group disability plan while disabled due to a fall off a loading dock while counting inventory. Ms. Tax had paid premiums of a total of $900 since commencing employment in 2015. She has not received benefits previously.

The company provides lunch in the executive dining room at no charge to all key employees. The cost to the company of her eating lunch once per month in this dining room was $200.

On August 1, 2015, Chemical Ltd. loaned Wendy $6,000 to purchase shares of the company through an employee share-purchase plan. The loan agreement required the payment of monthly interest at 1% per year. The principal is payable in full on August 1, 2020. The prescribed rates of interest for 2017 were: 3% in the first quarter, 3% in the second quarter, 4% in the third quarter, and 3% in the fourth quarter.

Under Chemical Ltd. corporate policy, Wendy was permitted to purchase Chemical Ltd. products for her personal use at a 20% discount from selling price. During the year, she purchased $1,000 (at selling price before the discount) of products for her sister.

Wendy incurred legal fees of $1,500 during the year to recover unpaid salary from her former employer, which she left in 2011. She also paid $250 to PTPC (your employer) for assistance in preparing her 2016 tax return and for counselling regarding tax matters. Wendy paid $300 to a community college for a course on personal motivation to help her in her career and paid $750 for clothing to maintain her wardrobe at professional standards for her job.

Questions:

1. Your partner has asked that you to determine Wendys Division B employment income for tax purposes for 2017. Be sure to show all calculations, whether or not necessary to the final answer. Make sure that your schedules are clear and legible.
2. In point form, indicate and explain why you did not include any of the above amounts in your calculation of employment income.