You are required to determine the loan benefits applicable to the three

You are required to determine the loan benefits

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You are required to determine the loan benefits applicable to the three employees
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Employment IncomeActivitiesSolution to Illustration 4.4Nana YaaBased on the rules governing loan benefits, Nana Yaa will not suffer tax on loan benefit because:Her loan repayment period does not exceed 12 monthsShe had no similar loan outstanding at any time during the previous twelve months Her current loan amount of GH¢8,000 does not exceed her three months basic salary of GH¢14,130.Workings 1Nana Yaa’s three month’s basic salary is GH¢ 56,520. *3/12 = GH¢ 14,130.00.
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Employment IncomeActivitiesYaa BabeComputation of Yaa Babe’s loan suggests that she will suffer tax on loan benefit because:Her loan repayment period exceeds 12 monthsHer total amount of GH¢16,000 exceeds her three month’s basic salary of GH¢10,000.00Workings 2Yaa Babe’s three month’s basic salary= GH¢ 40,000 x 3/12 = 10,000Interest payable at statutory rate = GH¢ 16,000 x 22% = 3,520Actual loan interest paid = GH¢ 16,000x 8% = 1,280Total loan interest benefit = GH¢3,520-1,280 = 2,240However taxable loan benefit is limited to (2,240*1/4) = 560The amount of GH¢560 will be added to Yaa Babe’s employment income and taxed accordingly.
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Employment IncomeActivitiesNana Ama Assessment and calculation of Nana Ama’s loans and employment income for the year of assessment suggests that Nana Ama will suffer for tax on loan benefits. This is because:Her loan repayment period exceeds 12 months The aggregate of the current loan (GH¢10,000.00) and the similar outstanding loan (GH¢5,000.00) during the previous twelve months is GH¢15,000.00 which exceeds her three month’s basic salary of GH¢12,500.00.
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Employment IncomeActivitesNana Ama Workings 3Nana Ama’s three month’s basic salary = GH¢ 50,000.00x3/12 = 11,000Interest payable at statutory rate= GH¢ 15,000.00x22% = 3,300Actual loan interest paid = GH¢15,000.00*8% = 1,200Total loan interest paid= GH¢ 3,300-GH¢1,200= 2,100However taxable loan benefit is limited to (2,100.00*1/4) = 525.00The amount of GH¢525 will be added to Nana Ama’s employment income and taxed accordingly.
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Employment IncomeActivitesThe summary of Loan benefits applicable to each employee is as followsNana YaaYaa BabeNana AmaGH¢GH¢GH¢Total cash emolument 56,52058,00072,500Loan benefit -560525Total employment income56,52058,56073,025
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Discussion Questions and ProblemsSee Page 176 -200 for more discussion questions and problems
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  • Fall '18
  • DR MAAME ADWOA GYEKYE JANDO
  • Taxation in the United States

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