It is March 15, 2021. Ajayas income from employment for the 2020 taxation year is $100,000. She
Question:
It is March 15, 2021. Ajaya’s income from employment for the 2020 taxation year is $100,000. She does not earn commission income, and has no other sources of income. She operates out of her home office, where she principally conducts her employment duties. This office represents 10% of the floor space in Ajaya’s home. Ajaya has told you that she spends about 60% of her time working from home and the other 40% of the time travelling. Ajaya paid the following amounts related to the 2020 taxation year:
Utilities for house 1,500
Minor repairs for house 1,200
Property taxes for house 4,000
House insurance 800
Mortgage interest 8,000
Ajaya’s employer lent her $50,000 on January 1, 2020, to be used to acquire a home in St. John’s, Newfoundland. The loan is interest free and no principal payments were required until the end of the loan period. The loan was fully repaid on March 1, 2021. Assume that the CRA-prescribed rates for employee loans were as follows for the current year:
January 1 to September 30 1%
October 1 to December 31 2%
Ajaya also received a Notice of Assessment for her 2019 tax return dated June 12, 2020. The CRA has disallowed many expenses from 2019. Ajaya disagrees with the assessment and wants to know what the next step is.
Required:
a) Determine Ajaya’s net income for tax purposes for 2020. Show all your calculations.
b) Outline the next steps Ajaya needs to take if she disagrees with the 2019 assessment. What is the deadline for completing this step
