Question

21. John secured employment as a commissioned salesman in July, 2017. In 2017, he received a base salary of $60,000, and $5,000 of commissions. A further $6,000 of commissions earned in December was paid to him in January, 2018. John worked away from the office negotiating sales contracts, and he is required to pay his own vehicle and promotional expenses. His employer has signed a Form T2200 certifying that requirement, and certifying that no reimbursements are paid for any expenses John incurs to earn commissions. John incurred the following costs from July through December 2017: Meals and entertainment for potential customers $14,000 Driving costs (90% of driving was for employment purposes): Fuel 4,000 Insurance 750 Repairs 2,250 Leasing costs ($500 per month) 3,000 What is the maximum deduction John may claim for employment expenses in 2017? A. $5,000. B. $9,000. C. $11,000. D. $16,000.

Answer 1

Meals and Entertainment for customers	14000
Driving cost:
Fuel	4000
insurance	750
Repairs	2250
Leasing cost [500*12]	3000
Total Driving cost [4000+750+2250+3000]	10000

EMPLOYMENT EXPENSE	8(1)(f)	8(1)(h.1)
50% of meals and entertainment expense	7000[14000*50%]	0 Deduction not available
90% of driving cost [used for employment purpose]	9000[10000*90%]	9000
Total Deduction	16000$	9000$
Limited to commission income received**	5000$	NO LIMIT
John can claim maximum of $9000
ANSWER B

**8 (1)(f) - The sales expenses incurred by a commission employee are only deductible against the commission portion of the employment income. The amount of deduction cannot exceed the commission that is received by the taxpayer during the year.

so 6000$ earned but not received during 2017 will not be considered for determining maximum limit.