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Unformatted text preview: WEEKS 2 & 3 Revised Sept 22, 2010 INCOME / LOSS FROM EMPLOYMENT- Chapter 3 General rules are covered in Sections 5 to 8, as follows : Section 5- defines employment income Section 6- defines what must be included as employment income Section 7- defines specific rules dealing with stock options offered to employees Section 8- defines what can be deducted in the determination of employment income Consequently as per the above, EMPLOYMENT INCOME is a net concept of income inclusions less allowable deductions- ITA 5 (1)- “ A taxpayer’s income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by the taxpayer in the year”. • Salary and wages refer to monetary amounts received for employment services. • Remuneration is broader and includes any type of reward or benefit. • Gratuities means income which includes payments made by persons other than the employer . • Employment income is normally reported and taxed on a “cash” received while, business income is reported and taxed on an accrual basis not cash basis. • ITA 78 (4) - An incorporated business can deduct a declared salary bonus if paid within 180 days after it’s year-end ; however, the employee is taxed in year the bonus is received— (this provides a tax planning opportunity for owners/shareholder/managers) • If a bonus is to be paid after more than 3 years after the end of the calendar year in which employee services were rendered, then the bonus would be a Salary Deferral Arrangement (“SDA”) and taxable to the employee in the year employment services were rendered and also deductible by the employer in that same year, Ie, as if the bonus was paid • ITA 248(1)- a right in a taxation year, to receive an amount after the year, where it is reasonable to assume that one of the main purposes was to defer tax....
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This note was uploaded on 01/24/2011 for the course ACCO 330 taught by Professor Mastromonaco during the Fall '10 term at Concordia Canada.
- Fall '10