Chapter 3 - Example 2 Guide PDF

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Employment Deductions Problem Guide...

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Chapter 3 Problem 23 Do not proceed to solution unless you have attempted to complete these problems on your own!

Included under Section 5

Employee’s expenses/payments (consider whether deductible under section 8)

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Income taxes paid are not deductible (ss 8(2))

not deductible under section 8

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deductible under paragraph 8(1)(m)

Employment benefits: consider whether should be included or exempted under Sections 6 and 7

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Employer’s contribution to private health service plan is not a taxable benefit (Subparagraph 6(1)(a)(i))

Taxable benefit, should be included in employment income (Ss 6(4))

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5

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6

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Taxable benefit because it is not mandatory (Income Tax Folio S2-F3C2), should be included in employment income (P 6(1)(a))

7

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Belongs to supplementary unemployment benefit plan, Exempted from employment income (Subparagraph 6(1)(a)(i))

$400 monthly travel allowance is too low compared to the actual travel expenses ($19,200), not reasonable (sp 6(1)(b)(v))

Not reasonable allowance can not be exempted from employment income (p 6(1)(b))

$400 monthly auto allowance is not based solely on kilometers driven, thus not reasonable (sp 6(1)(b)(x))

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Include $1,400 (Ned’s wife’s expenses) as employment income (p 6(1)(a))

Non-cash gifts below $500 are not taxable benefit, do not need to be included in employment income

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Counselling service related to retirements is not a taxable benefit (clause 6(1)(a)(iv)(B)), while that related to tax preparation is a taxable benefit (p 6(1)(a)), include 514 (2,568 * 20%) in employment income

Employer paid rent is a taxable benefit (P 6(1)(a), Ss 6(23)), should include 1,200 * 3 ($ 3,600) in employment income

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One half of the compensation on housing loss above $15,000 should be included in employment income, in this case it is $750 (Ss 6(20))

Allowance for moving expenses is a taxable benefit (p 6(1)(b))

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Mortgage interest reimbursement ($2,000) is a taxable benefit (p 6(1)(a), Ss 6(23))

The benefit of the use of the in-house swimming pool provided by the employer available to all employees is not a taxable benefit [Income Tax Folio S2-F3-C2].

textbook pages 138-139 cost for leased passenger vehicle (advanced topic beyond CPA Competency map))

Deductible under P 8(1)(h.1) after prorating for employment use ($10,200 × 22,500/36,000=$6,375)

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Deductible under P 8(1)(h.1) after prorating for employment use (1,300+1,050,+180+120) × 22,500/36,000=$1,656 Total deductible automobile expenses under P 8(1)(h.1): $6,375 + $1,656 = $ 8,031

Half of the meals expense can be deducted ($3,600 (p 8(1)(h), Ss 8(4), Ss 67.1(1))

Full amount of the travelling expenditures related to accommodation can be deducted (p 8(1)(h))

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