Assignment task:
The following information for 2021 has been presented to you by Paula Promoter, the new vice-president of marketing for a public Canadian oil company, Overpriced Petroleum Limited. Paula, who is 52 years old and now lives in Calgary, travels extensively across Canada. Paula, whose duties involve the negotiating of contracts, began her employment with Overpriced Petroleum on January 1, 2021.
Salary-net of payroll deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49496
Director fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Receipt of an amount, not to compete, from former employer . . . . . . . . . . . 50,000
Termination payment from former employer . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Travel allowance (Note (1) below):
Accommodation and meals @ $200 per day for 150 days . . . . . . . . . . . . . . 30,000
Car operating cost allowance @ 45¢ per kilometre plus $10 per day of
travelling for business travel only (9,000 kilometres) for 150 days . . . . . 5,550
Income protection receipts received from Regal Assurance (Note (2) below) 15,000
Benefits paid by the corporation:
Registered pension plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,000
Extended health care-Liberty Mutual . . . . . . . . . . . . . . . . . 2,125
Group income protection premiums
-Regal Assurance (Note (2) below) . . . . . . . . . . . . . . . . . 1,050
Membership fee in Petroleum Club (membership required by
all employees)
-initiation fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
-annual fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500
Moving costs (Note (3) below) . . . . . . . . . . . . . . . . . . . . . . . . 42,000
Group term life insurance (coverage is $300,000) . . . . . . . . . . 600
Loans by company (Note (4) below) . . . . . . . . . . . . . . . . . . . 160,000 $213,275
$377,275
Payroll deductions and selected disbursements - 2021
Payroll deductions:
Income taxes withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,000
Registered pension plan (defined benefit)
-current contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Canada Pension Plan contributions . . . . . . . . . . . . . . . . . . . . . 3,754
Employment insurance contributions . . . . . . . . . . . . . . . . . . . 1002
Group income protection premiums (Note (2)) . . . . . . . . . . . . 1,050 $ 50806
Purchased 2,000 common shares on July 1, 2021 under a stock
option plan at a price of $25 per share. Fair market value of
shares at the date of purchase was $35. Fair market value of
the shares was $25 per share on the date when the option was
granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Legal fees paid in connection with the collection of the $50,000 noncompetition
receipt from her previous employer . . . . . . . . . . . . . 5,000
Notes and Additional Information:
(1) Paula's actual travelling and car expenses, which she is required to pay according to the terms of her employment contract, are as follows:
Meals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,250
Accommodation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,750
Travel costs (other than car see below) reimbursed by company . . . . . . . . . . 6,000
Car expenses (10,000 kilometres for business purposes out of total kilometres of 16,000):
Gasoline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,700
Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800
Auto accident costs while on a business trip 1,600
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800
Licence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Interest paid on car loan (see Note (4), below) . . . . . . . . . . . . 300
$6,290
The following information for 2021 has been presented to you by Paula Promoter, the new vice-president of marketing for a public Canadian oil company, Overpriced Petroleum Limited. Paula, who is 52 years old and now lives in Calgary, travels extensively across Canada. Paula, whose duties involve the negotiating of contracts, began her employment with Overpriced Petroleum on January 1, 2021.
Receipts and Fringe Benefits - 2021
Question 2: Net Employment Income
(2) The company paid 50% of the premium to Regal Assurance re income protection payment.
During 2021, Paula received $15,000 in periodic payments in respect of an eightweek illness.
(3) Although Paula started to work for Overpriced Petroleum on January 1, 2021, her family did not move to Calgary from Toronto until February 28, 2021. The company paid for all the moving costs of $12,000, an actual loss on the sale of Paula's Toronto home of $25,000 and a disruption allowance of $5,000.
(4) Paula obtained two loans from the company as part of her employment contract:
(a) Loan of $150,000, dated July 1, 2021, to acquire a new home in Calgary. The loan bears annual interest at 2% and is repayable over a 25-year period in equal annual instalments on the anniversary date of July 1. Interest is payable on the same date.
(b) Loan of $10,000, dated January 1, 2021, to assist in the acquisition of a car acquired in early January 2021 for $35,000 (excluding GST; no PST in Alberta) to be used in connection with her duties of employment. The loan bears annual interest at 3%, and is repayable over the next three years in equal annual instalments. Interest is payable December 31 each year. Paula paid the interest for 2021 on time on December 31, 2021.
A) Determine Paula Promoter's employment income for 2021 in accordance with Subdivision of Division B. Ignore the effects of a leap year in your answer. Show all aspects of the required calculations, whether or not necessary to the final answer. Provide support for benefits that are included by virtue of CRA's administrative position
NOTE: For simplicity you may assume that the prescribed interest rate is a constant 4% for all quarters.
Ignore the calculation of CCA when calculating the vehicle expenses.
(B) Indicate why you have excluded any of the above amounts from your answer. Be sure to comment on all items not used in the computation of employment income.