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10.7.1 - He also paid $750 of professional fees Bill has...

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BILL - INCOME TAX PROBLEM EMPLOYMENT EXPENSES Bill Student graduated from Carleton University in 2002. He wants to estimate the amount of income taxes he will pay in 2005. He expects his employer will withhold $11,000 of income taxes during 2005. Bill has a sales oriented position in a large international corporation that pays a base salary plus commission, which are a function of the amount he sells. Bill expects to make $50,000 in 2005 of which $20,000 comes from commissions. Bill has investments that will generate $2,000 (Grossed-up) in Canadian Dividend Income and $2,000 in interest income during 2005. He made $10,000 of capital gains which are 50% taxable and incurred $1,500 of interest expenses as he uses margin. During 2005 Bill has paid $4,000 into the corporation’s pension plan and $3,000 into his registered retirement savings plan.
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Unformatted text preview: He also paid $750 of professional fees. Bill has been told that he can deduct certain expenses related to his employment because he is partly paid on commissions. He has a relatively new car that has a $300 per month lease. He expects that he will drive the car for 20,000 kilometers in 2005 or which 5,000 kilometers relate to business. He expects to pay $1,000 in gas bills and $1,000 in repair and maintenance bills in 2005. He expects to spend $5,000 on food & beverage and $3,000 for entertainment, all which relate to work. Finally he expects to contribute $1,000 in chartable donations in 2005 (tax credit is approximately 25%). REQUIRED: Calculate in the following order: 1. Allowable motor vehicle expense. 2. Employment expenses 3. Total income 4. Total deductions 5. Taxable income 6. Taxes owing or tax refund...
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