Question

On January 2, 2019, Ms. Shirley Kantor moves from London, Ontario, to Thunder Bay, Ontario, in order to begin employment with Northern Enterprises Ltd. (NEL). Her salary for the year was $142,000. NEL withheld the following amounts from her earnings:

Federal And Provincial Income Tax $32,500

Registered Pension Plan Contributions

     (NEL Makes A Matching Contribution)     3,200

EI Premiums                                          860

CPP Contributions                              2,749

United Way Donations                           450

Professional Association Dues            1,250

Other Information:

1. Shirley’s moving expenses total $6,800. NEL reimbursed Shirley for 100 percent of these costs.

2. For the year ending December 31, 2019, Shirley was awarded a bonus of $32,000. Of this total, $25,000 was paid during 2019, with the remainder payable in January, 2020.

3. NEL provided Shirley with a car to be used in her employment activities and paid the operating costs for the year that totalled $8,100. The cost of the car was $39,550, including HST of $4,550. The car was available to Shirley throughout 2019. She drove a total of 63,000 kilometers. This included 8,000 kilometers of personal use.

4. In negotiating her new position with NEL, Shirley had asked for a $50,000 interest free loan as one of her benefits. NEL’s human resources department indicated that the CEO would not approve any employee loans. However, they agreed to advance $50,000 of her 2020 salary as of November 1, 2019.

5. In her employment related travels, Shirley has accumulated over 100,000 Aeroplan points. During 2019, she and her partner Diane used 50,000 of these points for a weekend flight to New York City. If she had purchased them, the tickets would have cost a total of $940.

6. NEL provided Shirley with the following additional benefits:

Allowance For Acquiring Business Clothing     $4,800

Squash Club Membership (No Employment Related Usage)                                   2,800

Financial Advisor Fees                        1,200

7. Shirley’s previous employer was a Canadian controlled private corporation. In 2018, she was granted options to buy 500 of the company’s shares at $20 per share. This option price was higher than the estimated fair market value of the company’s shares at the time the options were granted. On January 2, 2019, Shirley exercised these options. At this time the fair market value of the shares was $28 per share. Shirley immediately sells the shares for $28 per share.

8. Shirley was required by her employer to acquire a laptop computer to be used in her employment duties. At the beginning of 2019, she purchased a computer at a cost of $1,356, including HST of $256. During 2019, her expenditures for computer related supplies totalled $150.

Required: Determine Shirley’s net employment income for the year ending December 31, 2019.

Answer 1

Particulars	Amount
Income from salary	$142000
Bonus	$25000
Salary in advance	$50000
pension plan	$3200
Gain on shares(W.N.3)	$4000
Total income	$224200
Expenses
Moving expenses	$6800
Car expenses(W.N.1)	$16066
Travel expenses (W.N.2)	$4670
Purchase of Computer (W.N.4)	$0
EI Premium	$860
Donations	$450
Professional fees dues	$1250
Federal taxes	$32500
CPP Contributions	$2749
Total expenses	$65345
Net income of employment	$158855

W.N.1
Particulars	Amount
Cost of car	$39550
Less: operating cost	$8100
HST	$4550
Allowed deduction for business use(	$23484
Cost of car	$16066

W.N.2
Particulars	Amount
Flight cost	$940
Clothing allowance	$2400
Squash club membership	$4800
Financial advisor fees	$1200
Total cost	$9340
Allowed deductions(9340*50000/10000)-$4800)	$4670
Cost of travel	$4670

W.N.3
Particulars	Amount
Cost of purchase(500*$20)	$10000
Sale of shares(500*$28)	$14000
Gain on shares	$4000

W.N.4
Particulars	Amount
Cost of purchase	$1356
HST	$256
Cost	$150
Total computer cost	$1762
Allowed deduction	$1762
Computer cost	$0