summer midterm540solutions I

summer midterm540solutions I - Mid-term summer 2009...

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Unformatted text preview: Mid-term summer 2009 Personal Taxation(ACC540) QUESTION #1(40 MARKS): John Smith accepted the position of senior manager and corporate director of Sears Mozart, a Canadian Controlled Private Corporation located in Hamilton, Ontario,on January 15 th 2008. John is married with three children, Agnes 5, Angela 10 and Arthur 4 and certified as disabled by a medical doctor. John moved from Victoria, B.C. on January 4 th , 2008, to Hamilton, Ontario, in order to get settled so he can start his job on January 15 th . His moving expenses were as follows:- Moving van to transport his belongings.$1,600 Airfares for himself and family.. 4,800 Hotel(20 nights while he waited for his new home to be Painted) 1,500 Meals(20 nights).. 4,000 He received in February 2008, a moving allowance of $40,000 from the new employer. During the 2008 fiscal year, he received the following amounts and benefits from his new employer. i. Gross Salary$150,000 Commission income 50,000 Payroll deductions: Income taxes$40,000 Canada Pension Plan 1,900 Employment Insurance 719 Registered Pension Plan.. 1,000 Group Accident disability 350 . 43,969 Net Pay.. $156,031 Additional information: ii. During the year the Company provided John with a company-owned car. Details relating to the car are as follows:- Capital cost of the car(including all taxes)$45,000 CCA claimed by the Company this year 6,750 Operating costs paid by Company. 5,600 Kilometres driven by John in the year:- Business use..15,200 Personal use4,800 Amount of re-imbursement by John.. 600 1 iii. John exercised a stock option to buy 1,000 shares of his Company on May 10 th , 2008, at $25 per share. The fair market value at the date of grant and date of purchase were $24 per share and $27 per share respectively. Also on June 15 th , 2008, John exercised another option to purchase an additional 1,000 shares at $25 per share. The fair market value of the shares on this date was $26 per share. At the same time, John took advantage of a low interest loan which the Company had arranged with the Bank of Montreal for those employees who needed funds to purchase the shares. The employees were allowed to borrow at 4% per annum. The fair market rates in 2008 were as follows:-1 st Qtr. 7%, 2 nd Qtr.6%, 3 rd Qtr. 6% and 4 th Qtr. 7%....
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summer midterm540solutions I - Mid-term summer 2009...

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