Ms. Mist is employed as an internal auditor by Universal Imports Limited (UIL), a Canadian-controlled private corporation. To drive to UIL’s locations, as required in her employment, UIL provides her with a car and withholds an amount for her salary to cover personal kilometers. During 2019, Ms. Mist used the car for 21,000 employment kilometers and 9,000 personal kilometers. When on an auditing assignment, she is out of town at least five days.
Ms. Mist provides you with the following information related to 2019:
|Gross salary||$ 140,000|
|Withheld from salary|
|Income tax||$ 42,000|
|Registered Pension Plan||8,500|
|Canada Pension Plan||2,594|
|Group term life insurance||750|
|Payment for personal use of company car||2,000||57,702|
|Net salary||$ 83,298|
|Travel allowance paid by employer||8,100|
|$ 135 per day for 60 days
Actual reasonable travelling expenses for 2019 were:
$ 2,400 for meals
$ 4,400 for accommodation
$ 3,865 for air and ground transportation
|Book value of company-owned automobile||31,280|
|Original capital cost in November 2018
Operating costs paid by employer in 2019
|Group term life insurance policy Premium||450|
|Extended medical insurance premium||900|
|Registered Pension Plan||8,400|
|Premium paid by Ms. Mist for private dental insurance||500|
|Expenses paid by UIL for Mr. Mist to accompany her on an auditing trip to Banff. During the trip Ms. Mist broke her leg and personally incurred $3,000 in medical expenses.||3,000|
|Luggage set received as a birthday gift||300|
|Airport premium lounge passes received in recognition of five-year service, it was the first long term service award received by Ms. Mist||400|
|Bonus payable on December 31, 2019, that was paid to Ms. Mist in January 2020||5,000|
|Fees paid by Ms. Mist to the Institute of Internal Auditors, a professional body recognized by legal statute||450|
|Fees paid by UIL for a Wantlen University Spanish course.||950|
|Fees paid by Ms. Mist paid to Super Fit Athletic Club||900|
|Donation made to BC Search and Rescue, a registered charity||500|
|Interest received on total return bond portfolio||200|
|Dividends received on UIL stock||750|
|Proceeds received from sale of 1,000 shares of UIL stock acquired under the employee stock option plan
The options were granted in 2015 with an exercise price of $10 when the market value of the shares was $12 per share.
Ms. Mist exercised the options in 2015 when the fair market value was $13 per share.
|Gain on sale of shares held in her non-registered portfolio||5,000|
|Loss on sale of shares in her TFSA portfolio||(7,500)|
|Carryover of a net capital loss on shares sold in 2014||(3,500)|
|Ms. Mist received a $100,000 low interest home purchase loan in 2018.
The balance is due in 2021. Interest paid in 2019 was $100.
Ms. Mist’s husband received a severance package in 2018 and used 2019 to renovate their house. His taxable income in 2019 was $5,000. Their 20-year-old son dependant lives with them. In 2019 they paid $8,000 in tuition at a recognized Canadian University and also his $4,000 medical bill following a mountain biking accident. Their son’s income in 2019 was $10,000. Ms. Mist receives annual spousal support of $12,000 from a prior marriage.
- Determine the federal tax payable for Ms. Mist in 2019. Clearly identify sources of income, net income for tax purposes, taxable income and federal tax in your calculation. Present all aspects of the required calculations.
- Explain any tests applied in the determination of the appropriate tax treatment.
- Explain any amounts excluded from your calculation of tax payable.