Jacob Harper works as a retail store manager.
In the evenings and on weekends, he has a second job
as a car salesman for a national car dealership. His financial information for 2023 is as follows:
1. The annual salary from his day job is $85,000. The following amounts were deducted from his salary
by the employer in 2023:
Income tax 15,000
Employment Insurance premiums 1,002
Canada Pension Plan 3,125
Reimbursement for personal use of employer’s car 1,200
Union dues 500
Registered pension plan contribution 4,000
Charitable donations remitted to United Way 1,000
25,309
The employer paid the following amounts on behalf of Harper:
Employment Insurance premiums 1,403
Canada Pension Plan 3,125
Premiums for a mandatory provincial health insurance plan 1,000
Registered pension plan 3,500
Group term life insurance premiums ($50,000 coverage) 2,500
10,953
Harper used the employer’s cottage for a one-month holiday and paid the employer $300 rent. When
not being used by employees, the cottage is rented for the normal amount of $1,000 per month.
Harper was provided with a company car. The car cost the company $50,000. During the year, he
drove a total of 20,000 km, of which 15,000 was for personal use. The employer also paid all of the
operating costs, which amounted to $3,000.
During the year, Harper attended a conference in Washington. His son travelled with him at the
company’s expense ($1,500). The employer allowed staff to purchase merchandise from its retail
store at the company’s cost. During the year, Harper purchased for $2,000 merchandise with a market
value of $2,500.
On January 1, 2023, he was given an option to purchase 3,000 shares of his employer (the public
corporation) for $10 per share.
On June 15, 2023, he exercised his option and bought 3,000 shares at $10 per share (total = $30,000).
On December 15, 2023, he sold the 3,000 shares. The value of the shares at the particular dates was
as follows:
Date option granted $12
Date option exercised 15
Date shares sold 20
In order to assist Harper in acquiring a new residence, his employer granted him a three year, interest
free loan of $200,000. The loan was granted on July 1, 2023 and, at this point in time, the interest rate
on open five year mortgages was 5.5 percent. Assume the relevant prescribed rate was 3 percent on
this date and for the rest of the year. Harper purchases a house for $327,000 on October 2, 2023.
2. As a car salesman, Harper earned a base salary of $20,000 and received commissions of $6,000. In
relation to his work, he incurred the following expenses:
Dues to a local car dealership association 500
Car operating costs 5,000
Promotion (meals and drinks for clients) 3,900
Advertising—caps and pens 2,500
Purchase of a smart phone 700
3. Harper uses 30 percent of his personal residence as an office (T2200 form filed). During the year,
the costs associated with his home were as follows:
· Interest Payments on Mortgage $10,500
· Property Taxes 4,000
· Utilities 2,500
· Insurance 1,500
· Wiring and Foundation Repair 5,500
Required:
Part A:
Using Excel template, calculate Harper’s net employment income for the current
year, in accordance with sections 5 to 8 of the Income Tax Act.
For each amount, determine if there is a taxable benefit and give brief explanations to support your
response (i.e., explain why the amount is a taxable or non-taxable benefit). Round your calculations to
the nearest dollar and provide appropriate references to the ITA.
Part B:
When finished, upload your Excel workbook into Case Study I folder in D2L. Obtain solution from the
instructor. Grade your answer and explain why you made the errors. Was it a calculation error,
misunderstanding of the concept, etc.? Upload graded Excel work with your reflection into Case Study
I in D2L to receive reflection marks.
