On March 1 of the current year, Len received a $100,000 loan from his employer. The loan bears interest at 1% per year. The interest is payable monthly. The principal is repayable at the end of five years. Len used $90,000 of the loan toward the purchase of his home. The $10,000 that was left over, he used to purchase investments. Assume the prescribed interest rates for the current year were 4% for the first quarter and 5% for the remainder of the year.
A. Determine the amount to be included in Len’s employment income for tax purposes for the current year. Income tax reference: ITA 6(9), 80.4(1), (4), (6), 80.5, 20(1)(c).
B. Assume Len purchased the home because of an eligible relocation. Calculate the home relocation loan deduction. ITA 110(1)(j).