The following information relates to Leonard, a middle-management accountant, not engaged in negotiating contracts, of a public corporation, Peter Productions Ltd. which is located in Ontario.
(A) Salary - gross ................................................ $ 80,000
Payroll deductions:
Income taxes...........................................................$23,500
Registered pension plan (money purchase; see (B) below).........5,500
Canada Pension Plan contributions................................... 2,307
Employment Insurance contributions................................... 840
Charitable donations...................................................... 350
Employee's portion of benefit plans (see (B), below)...... 800 (33,297)
$ 46,703
(B) The company paid the following additional matching amounts on behalf of Leonard (an equal amount was withheld from salary as the employee's contribution, as shown in (A) above):
Registered pension plan$5,500
Dental plan - Sun Life Co175
Group income protection - Royal Insurance Co225
Extended health care - Liberty Mutual150
Group term life insurance - General Insurance Co250
The group term life coverage for Leonard was $300,000.
(C) Selected additional information concerning Leonard's receipts, disbursements, and other benefits:
(i) Trip to Europe from one of Peter Productions Ltd.'s clients in appreciation of
Leonard's services (including HST)..............................................................$ 6,000
(ii) Periodic payments received from Royal Insurance under the group income protection plan during a three-month illness. This plan had been in existence since 2000 and Leonard's share of the premium since that date was $2,300 ........................................................ 12,000
(iii) Peter Productions Ltd. paid Leonard's annual membership fee in a golf club ......... 2,100
(iv) Early in 2012, Leonard was granted an option to purchase 1,000 of the company's shares for $2 per share. At that time the shares were trading on the market at $3 per share. Later in the year, Leonard exercised the option and acquired 1,000 shares when they were trading at $4.50 per share. In December 2012, he needed cash, so he sold the 1,000 shares for $5 each.
(v) Leonard paid the following amounts during the year:
Annual membership fee of a professional accounting body (including HST) .................. 800
Registered retirement savings plan ................................................................. 3,500
Legal fees in appealing an income tax assessment (including HST) ........................... 1,900
REQUIRED
(A) Calculate the employment income of Leonard for 2012 in accordance with Subdivision a of Division B.
(B) Indicate why you omitted any of the above amounts.
(C) Compute the GST rebate that should be claimed and the income tax consequences of the rebate to be received in 2013.