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Ms. Emm Tax is employed as an internal auditor of Uncle Stan's Enterprises Limited, a Canadian-controlled private

corporation. She is provided with a car owned by the corporation to allow her to travel to the various plants and offices of the firm. An amount is withheld from her salary for the personal use of the car, which amounts to 30% of the 30,000 total kilometres driven in the year. On her auditing trips, she is away for a minimum of five days. Ms. Tax is considered to be a "key employee" and receives various benefits, including stock options.

Ms. Tax presents you with a shopping bag full of receipts and notes written on scraps of paper from which you develop the following information for the year 2018.

 

Net salary

$84,746

Withholding by employer from salary

 

Income tax

$42,000

 

 

Registered Pension Plan

8,400

 

 

Canada Pension Plan

2,594

 

 

Employment Insurance

858

 

 

Group term life insurance

750

 

 

Group disability insurance (40% of total premium)

400

 

 

Payment for personal use of company car

  2,100

   57,102

Total salary

$141,848

Travel allowance paid by employer

$ 8,100

 

($135 per day for 60 days; actual reasonable travelling expenses for 2018 were $10,665, consisting of $2,400 for meals, $4,400 for accommodation, and $3,865 for air and ground transportation)

 

Book value of company-owned automobile

31,280

 

(original capital cost in November 2017 of $32,000, plus 13% HST; capital cost allowance claimed by company in 2018 of $7,650; operating costs paid by employer for 2018 of $9,575, including HST)

 

Payment received from group disability plan while disabled by falling off a loading dock while counting inventory

3,750

 

(she paid premiums of a total of $1,200 since commencing employment in 2014 and she has not received benefits previously)

 

Employer contributions

 

Group term life insurance policy Premium

450

 

 

Group disability insurance plan (60% of premium)

600

 

 

Liberty Health extended medical insurance premium

900

 

 

Ontario health payroll tax

1,100

 

 

Registered Pension Plan

8,400

 

Proceeds received from sale of 100 shares of stock (representing less than 1% of all shares) acquired under the employee stock option plan at an option price of $10 per share

1,500

 

(when she was granted the option in 2014, the fair market value of the stock was $12; when she exercised the option in 2014, the fair market value was $13)

 

Fees paid by company for University of Waterloo correspondence course in philosophy taken on Ms. Tax's own initiative on her own time

950

Donation to Lower Taxes Party of Canada, a registered political party

100

Premium paid by Ms. Tax on personal whole life insurance policy

500

Membership fees paid by Ms. Tax to athletic club

900

Interest received on Canada Savings Bonds purchased through payroll savings plan

200

Birthday gift paid in cash under company policy and deducted by employer

200

Cost (including all taxes) to company of her eating lunch once per month in the executive dining room at no charge

300

Interest paid to company on a $10,000 loan for unanticipated expenses; the loan was outstanding throughout 2018 at a rate of 1%

100

 

(assume that the prescribed rates for 2018 are: 2%, 3%, 4%, and 3% for the first, second, third, and fourth quarters, respectively)

 

Value of internal auditor's required uniform consisting of green eyeshade, elastic armbands, white blouse, and dark grey suit (three sets), all tastefully monogrammed with the firm's logo and provided by the company

2,700

Premium paid by Ms. Tax for Liberty Health private dental insurance

500

Dues paid by Ms. Tax to the Institute of Internal Auditors, a professional body recognized by legal statute

450

Gain on sale of shares purchased as a result of a stock tip given by Uncle Stan who was told by a friend that Underground Airways stock was about to take off

1,200

Bonus payable on December 31, 2018 but not paid to Ms. Tax until January 2019

4,000

Expenses paid by company for Ms. Tax's husband who accompanied her on an auditing trip to Moosonee

2,050

 

Required:

(A)  Determine the amount of Ms. Tax's income from employment for 2018. Show all aspects of the required calculations, whether or not necessary to the final answer.

(B)  Briefly comment on why you consider any of the above amounts to be inapplicable to the calculation. Be sure to comment on all items not used in your computation of employment income.

 q1.pngQ1a.png

q1.png

Ms. Emm Tax is employed as an internal auditor of Uncle Stan's Enterprises Limited, a Canadian-controlled
private corporation. She is provided with a car owned by the corporation to allow her to travel to the various
Employer contributions
plants and offices of the firm. An amount is withheld from her salary for the personal use of the car, which
Group term life insurance policy Premium
450
amounts to 30% of the 30,000 total kilometres driven in the year. On her auditing trips, she is away for a
minimum of five days. MS. Tax is considered to be a "key employee" and receives various benefits,
Group disability insurance plan (60% of premium)
600
including stock options.
Liberty Health extended medical insurance premium
900
Ms. Tax presents you with a shopping bag full of receipts and notes written on scraps of paper from which
Ontario health payroll tax
1,100
you develop the following information for the year 2018.
Registered Pension Plan
8,400
Net salary
$84,746
Proceeds received from sale of 100 shares of stock (representing less than 1% of all shares)
acquired under the employee stock option plan at an option price of $10 per share
1,500
Withholding by employer from salary
(when she was granted the option in 2014, the fair market value of the stock was
Income tax
$42,000
$12; when she exercised the option in 2014, the fair market value was $13)
Registered Pension Plan
8.400
Fees paid by company for University of Waterloo correspondence course in philosophy
950
Canada Pension Plan
2,594
taken on Me. Tax's own initiative on her own time
Employment Insurance
858
Donation to Lower Taxes Party of Canada, a registered political party
100
Group term life insurance
750
Premium paid by Me. Tax on personal whole life insurance policy
500
Group disability insurance (40% of total premium)
400
Membership fees paid by Me. Tax to athletic club
900
Payment for personal use of company car
2.100
57.102
200
Total salary
$141,848
Interest received on Canada Savings Bonds purchased through payroll savings plan
200
Travel allowance paid by employer
$ 8,100
Birthday gift paid in cash under company policy and deducted by employer
$135 per day for 60 days; actual reasonable travelling expenses for 2018 were
Cost (including all taxes) to company of her eating lunch once per month in the executive
$10,665, consisting of $2,400 for meals, $4,400 for accommodation, and $3,865
dining room at no charge
300
for air and ground transportation)
Interest paid to company on a $10,000 loan for unanticipated expenses; the loan was
Book value of company-owned automobile
31,280
outstanding throughout 2018 at a rate of 1%
100
(original capital cost in November 2017 of $32,000, plus 13% HST; capital cost
(assume that the prescribed rates for 2018 are: 2%, 3%, 4%, and 3% for the first,
allowance claimed by company in 2018 of $7,650; operating costs paid by
second, third, and fourth quarters, respectively)
employer for 2018 of $9,575, including HST)
Payment received from group disability plan while disabled by falling off a loading dock
Value of internal auditor's required uniform consisting of green eyeshade, elastic
3,750
armbands, white blouse, and dark grey suit (three sets), all tastefully monogrammed
while counting inventory
with the firm's logo and provided by the company
2,700
(she paid premiums of a total of $1,200 since commencing employment in 2014
and she has not received benefits previously)
Premium paid by Me. Tax for Liberty Health private dental insurance
500

Q1a.png

Dues paid by ME. Tax to the Institute of Internal Auditors, a professional body recognized
by legal statute
450
Gain on sale of shares purchased as a result of a stock tip given by Uncle Stan who was
told by a friend that Underground Airways stock was about to take off
1,200
Bonus payable on December 31, 2018 but not paid to Me. Tax until January 2019
4,000
Expenses paid by company for Ms. Tax's husband who accompanied her on an auditing
trip to Moosonee
2,050
Required:
(A) Determine the amount of Me. Tax's income from employment for 2018. Show all aspects of the
required calculations, whether or not necessary to the final answer.
B) Briefly comment on why you consider any of the above amounts to be inapplicable to the calculation
Be sure to comment on all items not used in your computation of employment income.

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