Reference no: EM132588850
Olin Packett has been employed for over 10 years by a large Canadian public corporation. He works in their Victoria office. For the 2019 year, his gross salary is $75,000. While he does not receive commissions, he was awarded a bonus of $15,000 during 2019 based on his sales performance. One-half of this is paid in December, 2019, with the balance to be paid in February, 2020.
During 2019, Olin's employer withheld the following amounts from his gross wages:
Federal Income Tax $14,350
Employment Insurance Premiums 858
Canada Pension Plan Contributions 2,594
Registered Pension Plan Contributions 3,100
Donations to The United Way 750 Union Dues 275
Payments for Personal Use of Company Car 1,500
Premiums for Group Life Insurance Policy 423
Other Information
1. Olin is provided with a car that the company leases at a rate of $723 per month, including both GST and PST. The company pays for all of the operating costs of the car and these amounted to $4,200 during 2019. Olin drove the car a total of 33,000 kilometers during 2019, 27,500 kilometers of which were carefully documented as employment related travel. While he was in the hospital for 2 months (see Item 4), his employer required that the car be returned to company premises.
2. Olin was granted options to acquire 500 shares of his employer's common stock at a price of $31.00 per share 2 years ago. On the date the options were granted, the shares were trading at $29.50 per share. These options were exercised by Olin on February 16, 2019, when the shares were trading at $34.75 per share. Olin does not plan to sell the shares for at least 2 years.
3. In order to assist Olin in acquiring a new residence in Victoria, his employer granted him a three-year, interest free loan of $175,000. The loan was granted on July 1, 2019 and, at this point in time, the interest rate on open five-year mortgages was 4.5 percent. Assume the relevant prescribed rate was 2 percent on this date. Olin purchases a house for $327,000 on October 2, 2019.
4. On his birthday, Olin received several gifts including a hoverboard and drone. In his enthusiasm for his new toys, he flew the drone over his neighbor's swimming pool while maneuvering the hoverboard on the sidewalk in front of the two homes to watch it. The result was a concussion, a broken leg, a shattered wrist and a drowned drone. He was unable to work for a period of two months. As his employer provides disability insurance coverage, he received benefit during this period totaling $8,500. All of the premiums for this insurance plan are paid for by the employer and totaled $560 for 2019. The plan provides periodic benefits that compensate for lost employment income.
5. Olin's employer made a matching payment to the group life insurance policy. The premiums for 2019 on his behalf totalled $423.
Required:
Question 1: Calculate Olin's Net Employment Income and Taxable Income for the taxation year ending December 31, 2019. Show all of your calculations. Give reasons for items not used in your calculations.