Question

Question 1

Mark is a commission based sales person. His primary work is away from the head office. Mark's employers signed a T2200 form certifying that no reimbursements are paid for any expenses Mark incurs to earn commissions. Mark incurs the following expenses, exclusively for business use: Meals and Entertainment 15,000 Fuel 5,000 Insurance 1,000 Repairs 1,500 Lease on Car 500/month What are Mark's deductible employment expenses? options:

1) 10,000

2) 15,250

3) 28,500

Question 2

Which one of the following would be considered employment income for Canadian income tax purposes?

1) A private health services plan premium paid by your employer.

2) An all-expense-paid trip to Europe provided to you by a supplier of your company for reaching a sales quota.

3) Amounts paid by your employer for counselling services in respect of mental and physical health.

4) Benefits paid by your employer to a deferred profit sharing plan that does not pay out until 2024.

Question 3

Bill is the CEO of ABC Ltd. Bill takes his wife, Mary, on a three-day convention. Mary represents ABC Ltd. at the convention, and hands out brochures and gives a talk on motivational speeches, but she is not an employee of Bill's company. Which of the following statements is true for 2018?

1) No employee benefits will be added to either Bill's or Mary's income since Mary was primarily engaged in business activities on behalf of Connection Ltd.

2) Fifty per cent of the trip's cost for Mary would be added to Bill's employment income because she is not an employee of the company.

3) The cost of the hotel for Bill's wife would be added to Bill's employment income because she is not an employee of the company; thus, a personal benefit was received.

4) The cost of the trip for Mary would be added to her personal tax return as employment income even though she is not a regular employee of the company.

Question 4

Sandy is given the choice to receive a pay raise, either as a salary increase of $7,200 or as a benefit of a company leased car that will cost her employer $600 per month to rent, including HST. Sandy has come to you for advice so that she can minimize her employment income and thereby minimize her taxes. Which of the following statements is true?

1) Sandy should accept the salary.

2) Sandy should be indifferent between the two choices.

3) Sandy should ask her employer to lease a cheaper car and then pay the difference between the monthly leasing costs as part of her salary.

4) Sandy should accept the leased automobile.

Question 5

Which of the following statements is true regarding employment income?

1) All allowances and reimbursements received are taxable.

2) Some allowances are taxable but no reimbursements received are taxable.

3) All allowances and some reimbursements are taxable.

4) Some allowances and some reimbursements are taxable.

Answer 1

Answer 1:

3) 28,500

As Mark's employers signed a T2200 form certifying that no reimbursements are paid for any expenses Mark incurs to earn commissions and that is why all expenses are Mark's deductible employment expenses (15000 Meals and Entertainment + Fuel 5,000 + Insurance 1,000 + Repairs 1,500 + Lease on Car 500*12)=28500

Answer 2:

1) A private health services plan premium paid by your employer.

As per CRA Interpretation 2001-0080065, dated May 16, 2001 The employer will still be able to deduct the contribution, but the contribution will be counted as income too the employee, and will be taxable in employee's hand.

Answer 3

2) Fifty per cent of the trip's cost for Mary would be added to Bill's employment income because she is not an employee of the company.

As per Interpretation Bulletin IT-131R2, If a spouse or common-law partner accompanies an employee on a business trip, the amount you reimburse the employee for the spouse’s or common-law partner’s travelling expenses is a taxable benefit for the employee. The reimbursement is not considered a taxable benefit if the spouse or common-law partner went at your request and was mostly engaged in business activities during the trip.

Fifty per cent of the trip's cost for Mary would be added to Bill's employment income because she was not invited by the company and not mostly engaged in business activities during the 3 days trip.

Answer 4:

4) Sandy should accept the leased automobile.

Sandy should accept the leased automobile because it is a benefit and will minimise the employment income and thereby will minimise the tax too.

Answer 5

4) Some allowances and some reimbursements are taxable.

Not all allowances are are taxable and not all reimbursemet are taxable.