Reference no: EM133235037

Question - Employment Income - Comprehensive

Cindy Lee, a new marketing representative for a public Canadian oil county, Joel Inc. (in Calgary), has asked for your assistance regarding to computing her employment income during 2022. Because her job duties involve negotiating contracts with customers, she needs to travel extensively across Canada.

Base salary $42,000

Gross commissions $ 35,000

Payroll deductions: Income taxes $19,950

Canada Pension Plan contributions 3,200

Employment Insurance contributions 870

Registered pension plan contributions 3,500

Union dues 250(27,770)

Netpay $49,230

Additional Information -

(1) As the present, Cindy has made several important decisions. It has brought three big contracts. Thus, the annual sale has been increased 20% (compared to previous year's 15% and industry average 12%). Based on Joel Inc compensation agreement, Cindy should have received $15,000 bonus for the achievement. However, the company only paid her $10,000 this year and has negotiated with Cindy to pay her the remaining $5,000 later towards the end of next year.

(2) Joel Inc. have contributed to the following plans for Cindy in the following amounts:

Group life insurance (coverage is $300,000) $600

Registered pension plan 5,000

Extended health care 2,500

Group sickness insurance plan (Relief Assurance) 1,025

(3) During 2022, Cindy received $ 8,000 in periodic payments from the group sickness insurance plan (Relief Assurance) in respect of an six-week illness.

(4) Although Cindy stated to work for Joel Inc. on January 1, 2022, her family did not move to Calgary from Toronto until March 15th, 2022. The company reimbursed Cindy for all the moving costs of $10,000 and an actual loss on the sale of Cindy's Toronto home of $30,000.

(5) In 2022, Joel Inc. paid $400 (including HST) for the preparation of Cindy's 2021 income tax return and $530 (including HST) for Cindy to see a financial planning consultant regarding physical health.

(6) Cindy is taking courses towards her M.B.A. degree on a part-time basis during the evening. She is taking the courses for a promotion opportunity within the company. During 2022, Joel Inc. paid for the tuition for these M.B.A. courses which amounted to $8,000.

(7) Birthday gift of watch was received from Joel Inc., which costed $400.

(8) Cindy received an employee loan of $150,000 on January 1st, 2022, at 1% interest to purchase a new home in Calgary. The interest was calculated each quarter, and Cindy paid the interest owing on the loan on the due date of each quarter in 2022. Assume that the prescribed interest rates applicable to employee loans for 2022 are: first quarter, 3%; second quarter, 2%; third quarter, 4%; fourth quarter, 2%.

(9) Throughout the year, Joel Inc. paid Cindy a monthly gas allowance of $200 regardless of the number of kilometres she drove. In addition, she was provided with a company-leased automobile with a lease cost of $13,500 (including $1,700 of insurance and HST) at the beginning of January. Cindy's kilometres for work use were 10,000 out of a total of 25,000 kilometres. The total operating costs during 2022 amounted to $2,920 (excluding gas) were paid by Joel Inc.

(10) Joel Inc. granted Cindy stock options at the beginning of January 2022, which allow her to purchase 2,000 common shares at $25 per share after 6 months of service. The fair market value of the shares was $26 per share on the grant date. Cindy exercised part of the stock options to purchase 1,000 shares on October 1, when the fair market value of shares was $45 per share.

(11) Cindy's actual sales expenses incurred to earn commission income, which she is required to pay according to the terms of her contract, are as follows:

Travel expenses (hotel and airfare) $4,530

Restaurant bills 4,510

Golf club membership and food 2,300

(12) Cindy also set up a show room in her home. She has converted formal living room into the products show room. The living room is about 10 % of her home size. (It has based on the square footage estimated). She will have video online meeting with clients and potential customers. She will show the products during the meeting. In order to keep the safety of the products, she also has to purchase special insurance (in addition to home insurance) to insure these products. The special insurance has costed her $450 per year. Cindy has also spent $1,000 to decorate the showroom and purchase supplies for the showroom. Other expenses for the whole home in the year as following.

Utility expenses $4,800

Maintenance expenses 1,300

Home insurance 1,100

Property taxes 5,800

Mortgage interests (including interests paid on the employee loan (item (8)) above) 9,200

Required - Cindy would like you to calculate her income from employment for the current year. Please cross-reference your answer to the appropriate sections of the Act to each of the items included in the employment income. To avoid losing partial points, please make sure to (1) present the calculation process for items that are not given directly in the question, and (2) list as "items omitted" for any of the above amounts omitted in the calculation of employment income with the appropriate cross-reference (why omitted) as well.