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Case I A: Calculation of Net Employment Income for an Individual

Read the following scenario:

Jane Jackson resides in Edmonton, AB, and has been employed by Finlay Ltd. for a number of years as their accountant.

• Janes T4 slip for the current year indicates the following amounts were deducted from her gross salary of $80,000:

Deductions	Amounts
CPP (maximum for the year*)
EI (maximum for the year*)
RPP contributions	$4,500.00
Income tax deducted	20,000.00
Union dues	300.00
Charitable donations	1,200.00

* See the current years tax rate sheet to determine the CPP and EI reported on the T4 slip.

• The following amounts are paid by Finlay Ltd. and not included on Janes current year T4 slip:

Paid by Findlay Ltd.	Amounts
Private health insurance plan premiums	$1,800
Public health insurance plan premiums	1,500
Group term life insurance policy premiums	400
Allowance for incidental expenses ($400 per month)	4,800

• Finlay Ltd. provided Jane with a motor vehicle for the entire year, and the company also paid for all operating costs for the vehicle, with $5,150 paid for operating costs in the current year. The vehicle was purchased by Finlay Ltd. three years ago at a cost of $50,000 (incl. GST). In the current year, Jane drove 22,000 kilometres; 10,000 kilometres were personal and 12,000 were for employment purposes.

• On October 1 of the current year, Jane purchased 1,000 shares of Finlay Ltd. under a stock option plan. Finlay Ltd. is a Canadian public corporation. The following information is provided:

Stock Options	Amounts
Option granted on Jan. 1 of the prior year, FMV	= $10 per share
Option price	= $10 per share
Option exercised on July 1 of the current year, FMV	= $16 per share

Note: On December 31, Jane continues to hold the 1,000 Finlay Ltd. shares, since she anticipates they will appreciate in value.

• In the current year, her mother travelled with her to Montreal when Jane attended a five-day conference for accountants. Finlay Ltd. reimbursed her for the full cost of $5,000, of which $2,000 (including GST) was for expenses she incurred for her mother.

• On July 1 of the prior year, Finlay provided Jane with an employee loan in the amount of $10,000 at the annual interest rate of 1%. The loan requires annual principal repayments of $2,000 on June 30 of each year. Jane made the first annual repayment on June 30 of the current year.

• Canada Revenue Agencys interest rates for the calendar quarters in the current year are:

Quarter	Rates
Quarter #1 (January 1 to March 31)	3%
Quarter #2 (April 1 to June 30)	2%
Quarter #3 (July 1 to Sept 30)	3%
Quarter #4 (Oct 1 to Dec 31)	3%

• In the current year, Jane paid the following amounts personally:

• CPA professional dues (annual) in the amount of $800 (paid on June 30)
• Employment expenses: Jane paid for supplies (used for employment purposes) in the amount of $1,250 (expenses occurred throughout the year). Finlay Ltd. has authorized these expenses and filed Form T2200 accordingly.
• Other employment related expenses were as follows:
  • Travel Costs (Hotel and Airline costs) $15,600
  • Travel Costs (Meals) 11,300
  • Advertising and Promotion 26,000
• Jane uses 25 percent of her personal residence as an office (T2200 form filed). During the year, the costs associated with her home were as follows:
  • Interest Payments on Mortgage $9,100
  • Property Taxes 3,750
  • Utilities 1,925
  • Insurance 1,060
  • Furnace, Wiring and Foundation Repair 4,200

Answer the following:

Part A: Calculate Janes net employment income for the current year, in accordance with sections 5 to 8 of the Income Tax Act. For each amount, determine if there is a taxable benefit and give brief explanations to support your response (i.e., explain why the amount is a taxable or non-taxable benefit). Round your calculations to the nearest dollar and provide appropriate references to the ITA.

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