Employment Income
Chapter 3
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Employment Income
• Three items to consider for employees:
– Employment Income INCLUSIONS
– Specific Employment Income EXCLUSIONS
– Allowable DEDUCTIONS from Employment Income
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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.
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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.
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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.
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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.
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Assignment Problem 3-11
4. During 2020, Jerald pays dues to his professional association of
$422.
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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.
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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.
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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
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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.
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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.
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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.
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