: 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

Pension adjustment

9,000.00

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.

Answer the following:

For each amount paid by Finlay Ltd. that was not reported on Janes T4 slip, 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).

Calculate the total amount of taxable benefits for Jane in the current year (show all your calculations).

Calculate Janes net employment income for the current year, in accordance with sections 5 to 8 of the Income Tax Act. Round your calculations to the nearest dollar and provide appropriate references to the ITA.