Chapter 4 P4-10 - Solution to P4-10 Employment income 20X6...

Solution to P4-10
Employment income 20X6:
ITA 5(1) Salary - QR Ltd. $56,000
- AP Ltd. 2,000
58,000
ITA 5(1) Holiday pay 1,000
ITA 5(1) Commission advance 1,500
ITA 6(1)(f) Insurance receipts - $4,500 - ($500 + $3,000) 1,000
ITA 6(1)(e) Standby charge - 35,000 x 2% x 7 months $4,900
ITA 6(1)(k) Auto operating benefit - 24¢ x 12,000 km 2,880
7,780
less reimbursement (800 ) 6,980
ITA 7(1) Stock option benefit - 4,000 shares x ($8 - $6) 8,000
76,480
Employment expenses:
ITA 8(1)(m) RPP (4,000)
ITA 8(1)(b) Legal - salary dispute (800)
ITA 8(1)(h.1) Auto lease - $904 x 2 months (Note 3) $1,808
Auto operating costs 900
$2,708
Employment portion - 70% (1,896 )
Net employment income $69,784
Notes :
1. The commission earned in 20X6 but not received until 20X7 is included in employment
income in 20X7 [ITA 5(1)].
2. The employer’s contribution to the RPP ($4,000) and the $500 premium for group
sickness and accident insurance paid by the employer are not taxable benefits. They
are specifically excluded [ITA 6(1)(a)(i)].
3. Ebo paid car lease payments of $960 per month. Automobile lease payments for tax
purposes are limited to $800 (plus tax) per month. Therefore, the monthly amount