Question

Ram Singh is employed by OM Inc., a public corporation, as an internal auditor. Information relating to his employment for the year 2019 is as follows:-

i.            In 2019 Ram received a salary of $130,000. The employer withheld $33,000 for income taxes, $2,700 for Canada pension contributions and $750 for Employment insurance. Other withholdings from the paycheck were $6,000 for contribution to the Company’s Registered Pension Plan, $600 for contributions to the Group Term Life Insurance, $1,400 for contribution to the Group Disability Plan.

The employer also contributed $6,000 to Ram’s RPP and $600 to the Group Term Life Insurance Plan.

ii.           Because Ram had to travel to various Company’s locations away from his regular workplace, the employer provided him with a yearly travelling allowance of $7,000.

iii.          OM provides three of its senior executives with an allowance to attend conventions of their choice. In 2019, Ram received $2,000 for this allowance and was not required to account for the costs. He attended one convention and incurred costs of $2,200.

iv.          Ram was provided with a car by the employer for use in business. The car was purchased in 2019.

Details relating to this car are as follows:-

                             Cost of car (including all taxes)………………………………………………$41,000

                             Operating cost paid by employer (including HST)……………………. ........ 8,400

                             Total kilometres driven…………………………………………………………15,000

                             Kilometres driven for employment purposes…………………………….......10,000

                             Re-imbursement to Company for use of car……………………….…….......$2,400

vi.          In June 2019, OM announced a new employee stock option plan. The plan allowed each employee to purchase 2,000 shares of OM at $14 per share. At the time of the announcement the shares were trading at $15 per share. On July 1^st, Ram purchased 1,000 of the shares when the shares were trading at $18 per share. On October 15^th of the same year, Ram exercised his rights and purchased the remaining 1,000 shares when the shares were trading for $20 per share.

In December Ram and his spouse wanted to go to Europe for Xmas and he sold 500 of the shares at $25 per share so that he can have funds for this trip.

Also, at the time of granting the option, the employer arranged with a local credit union to make loans available to the employees who wanted to buy the shares at a rate of 4%(fair market value of interest rates for the year 2019 was 5%). Ram took the opportunity and bought the shares.

vii.         OM introduced a holiday cruise award for executives who gave special service to the Company. Ram qualified and won the award in 2019. In March 2020, he and his spouse went on the cruise which cost $2,150. The value of the award was $3,000.

x.           Other non-cash perks received from the employer:-

                             Contributions to the R.P.P……………………………………………....$6,000

                             Contributions to a group R.R.S.P……………………………………...$2,000

                             Dental Plan valued at……………………………………………………$1,500

                             Mandatory employer-paid provincial health tax………………...........$1,700

                             Membership in the local golf club…………………………………….....$2,000

                             Hard hat and safety glasses……………………………………………….$ 450

viii.        Ram and his spouse were provided with the company’s condo in the Bahamas for one week holiday during the winter. Such accommodation during this peak period would have cost them $400 as opposed to $100 actually paid by him.

ix.          OM paid $1,000 to the Certified Public Accounting Association for Ram’s professional fees for the year. They also paid $600 for him to attend a conference on new accounting standards to be implemented in the current year.

x.           Ram also had income from investments as follows:-

              Interest earned on a joint bank account with his spouse…………………………..$3,000

              Interest on his R.R.S.P, account………………………………………………………$1,500

              Interest earned on his 2018 personal tax assessment……………………………..$ 2000

              Interest on Govt. of Cda. Treasury Bills………………………………………………..$600

              Cash dividends received from investments in a Canadian resident Corp……......$3,000

              Cash dividends received from Amazon, a U.S. public Corp………………………..$5,100

                (15% withholding taxes)

              Interest paid on money borrowed to buy shares of Amazon……………………….$4,000

xi.          In 2019, Ram gave to each of his two children, aged 5 and 7, $2,000 each of Ontario Savings bonds paying interest at 2% annually.

Required:-Following S3 of the ITA, calculate Ram’s Net Income for the year.

(Show all your work papers)

QUESTION #3:

You are a pension adviser for the Bank of Montreal in Toronto. One of your duties is to meet with valued clients (portfolios over $1,000,000) to discuss and answer any questions the clients may have relating to their pensions.

You will be meeting with Jim Kim next week who has sent you by e-mail a number of questions he would like to discuss with you relating to pensions generally.

Below is the list of questions he has sent to you:-

              i.            What is meant by a contribution and deduction limit for R.R.S.P.

              ii.           What is the advantage of having a R.R.S.P. as opposed to having a T.F.S.A.

              III.          What are the advantages and disadvantages of having a spousal R.R.S.P.

              iv.          What are the tax implications if a withdrawal is made under the Home Buyers’ Plan.

Required:-

For each of the above situations, provide 5 bulleted points for you to discuss when you meet with the client.

Answer 1

Answer:

Step marks for each step are written in some areas (If want consider, otherwise please ignore).