Acco340Lecture 2-3 - Employment Income

Treated as medical expenses that are potentially

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treated as medical expenses  that are potentially eligible for a tax credit against   overall taxes payable BENEFITS RECEIVED FROM PLAN: -Payments made to employees by their employer or payments made by insurance company in order  to acquire qualifying medical goods and services== are NOT an employee taxable benefit   2. Loans to Employees  (not subject to GST)                                                ITA 80.4(1) deems a taxable benefit on all  interest free  or  low-interest  loans to employees in consequence of  prior, current or future employment.  The benefit is the free or low interest that applies to the loan. Note:  If the employer charges a rate similar to a lending institution, then there is no interest   employee benefit. As per IT-421R2, the   benefit is imputed based on the prescribed rate   set on a  calendar quarterly basis   as  specified in ITR4301, less any interest paid  during the year or       within 30 days of the year-end.     Notes: i)Prescribed rate (Treasury Bill rate during first month of the preceeding quarter) is the base rate               that does not include extra 2% ( due  from  CRA up to June 30, 2010 ) or extra 4%  (due  to  CRA) Eg .  If the prescribed rate is 3%, then                                    -3% is used for the interest benefit calculation, ie the base rate;                                    -5% is used for a tax refund due from CRA    Effective July 1, 2010, base rate will apply on refunds                                       -7% is used for any tax due to the CRA
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ii)      ITA 80.4(2) refers to different rules for loans to certain shareholders iii) ITA 80.5 makes imputed  taxable interest benefit deductible to the employee if  the loan proceeds  were used to purchase assets that could produce business or property income iv) ITA 80.4(4) refers to different rules for loans to assist an employee with a   home purchase or  home relocation First 5-years, the prescribed rate applicable when the loan was extended is  fixed , ie, a  ceiling on the benefit as the rate  could be lowered but not raised during this 5-year period  After 5 years, ITA 80.4(1) deems that a new loan exists and that future prevailing  prescribed rates would apply      For a home purchase loan, the ITA 80.4(4), the annual employment benefit cannot exceed the benefit that would result from applying the rate that was in effect when the loan was made.
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