Employment Income Chapter 3 1 Employment Income • Three items to consider for employees: – Employment Income INCLUSIONS – Specific Employment Income EXCLUSIONS – Allowable DEDUCTIONS from Employment Income 2 Assignment Problem 3-11 Jerald Gilreath is an employee of a Canadian publicly traded company. He works in their Calgary office and lives downtown in a high-rise condominium. In addition to his 2020 base salary of $175,000, he earns commissions of $21,460. Other employment related information follows: Required: Calculate Jerald’s minimum net employment income for the 2020 taxation year. Ignore GST and PST considerations. 3 Assignment Problem 3-11 1. Jerald’s employer requires him to pay all of his employment related expenses, as well as provide his own office space. Jerald has the required Form T2200 from his employer. 4 Assignment Problem 3-11 2. Jerald’s travel costs for 2020, largely airline tickets, food, and lodging, total $26,900. This includes $11,300 spent on meals while traveling for his employer. This meal total includes meals with clients of $4,300. 5 Assignment Problem 3-11 3. Jerald is a member of his employer’s registered pension plan. During 2020, $4,100 was withheld from his salary as a contribution to this plan. His employer made a matching contribution of $4,100. 6 Assignment Problem 3-11 4. During 2020, Jerald pays dues to his professional association of $422. 7 Assignment Problem 3-11 5. During 2020, Jerald was billed a total of $10,500 by his golf club in Calgary. Of this amount, $2,850 was the annual membership fee, with the remaining amount for meals and drinks with clients. He uses the club only when he is with clients. 8 Assignment Problem 3-11 6. For his employment related travel, Jerald drives a car that he purchased on January 1, 2020 for $42,000, including GST. During 2020, he drives 52,000 kilometers, of which 43,000 are employment related. Jerald had financed the car with a loan from a local bank and, during 2020, he paid interest of $2,750. The costs of operating the car during 2020 were $10,920. He has been advised by his accountant that, if the car were used 100 percent for employment related activities, the maximum CCA for 2020 would be $4,500. 9 Assignment Problem 3-11 7. Jerald uses 25 percent of his personal residence as an office. During 2020, the costs associated with his home were as follows: Interest Payments on Mortgage $ 9,100 Property Taxes 3,750 Utilities 1,925 Insurance 1,060 Furnace, Wiring and Foundation Repairs 4,200 Total $20,035 10 Assignment Problem 3-11 8. At the beginning of 2020, Jerald’s employer grants him options to buy 500 of the Company’s shares at a price of $17.50 per share. This was the market price of the shares at the time the options were granted. During July, 2020, when the shares are trading at $19.75 per share, he exercises all of these options. In order to buy Christmas gifts for his family, he sells 100 of these shares in early December, 2020. The proceeds are $20.50 per share. 11 Assignment Problem 3-11 9. His employer has a policy of giving all employees gifts to promote employee loyalty and help local businesses. During 2020, Jerald received the following gifts: • A weekend for him and his wife at a local hotel. The value of this gift was $425. • A $400 gift certificate at a local electronics/hardware store. • A basket of fruits, nuts, and cheeses, with a value of $225. 12 Assignment Problem 3-11 10. During 2020, Jerald purchased tickets to Calgary Flames games for $1,920. He used these tickets to attend the games with key personnel from important clients. He also purchased tickets to a Montreal Canadiens game in Montreal for $864. He used these tickets to attend the game with a prospective client located in Montreal. 13