Jack Duro has been employed in the accounts payable department as an A/P Supervisor for the past

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Question:

3 years by Mortal Metal Works Inc. (Benz), a public Canadian corporation incorporated in Ontario in 2014. BMW is a leading wholesaler of Mortal metals across Canada.

Jack Duro has asked you, Trust Banks CPA, the trusted tax person at Benz for your help in the preparation of their 2021 personal tax return. Jack has provided you with the following information about receipts, selected disbursements and the following information/calculations.

Jack Duro has been employed in the accounts payable department as an A/P Supervisor for the past

3 years by Mortal Metal Works Inc. (Benz), a public Canadian corporation incorporated in Ontario in 2014. BMW is a leading wholesaler of Mortal metals across Canada.

Salary

Deductions: $140,000

Income taxes $38,000

Canada Pension Plan premium 3,166

Utilities (500/2,500 * $1,500) 400

Employment Insurance premium 889

Clothing costs 1,800

Home office supplies 900

Group accident disability insurance

premiums 1,400 (44,055)

Net Income $85,945

2. On December 13^th 2021 Jack requested and received from Benz an advance of $7,500 against his 2022 salary. Boba needed the advance to pay for his family to attend Comicon in Michigan over the latter part of December. A cheque for $7,500 was paid through the accounts payable department at Benz. Jack monthly pay in January 2022 was reduced by $7,500 as a means for Boba to pay back the advance.

3. In 2018 Benz granted Jack stock options to purchase a total of 8,000 shares over the next 6 years. The exercise price of these shares is $44 and the fair market value of the shares on the grant date was $40 per share. During 2021, Jack exercised the option to purchase 1,000 of the shares when the market price per share was $56. Boba did not dispose of these shares during 2021 and this was the first time Boba had purchased any shares.

4. Image is important at Benz, as such in 2021 Jack was provided with a $2,400 clothing allowance by BMW paid monthly through accounts payable, $200 each month. During the 2021 year, Jack spent $1,900 on clothing to be worn at the Benz offices.

5. Benz requires that Jack work from home from time to time, usually around month ends. They have supplied Jack with a laptop computer and printer for this purpose; however, Jack must pay for any supplies used at home and internet access. Baba's house is 2,500 square feet in size and the workstation is in a room of about 500 square feet. The is also used as a den and guest room. Utility costs for the home for 2021 amounted to $1,500.

6. On November 11^th 2021 Jack was injured in a recreational fencing match and was unable to work for six weeks, but returned to work prior to Festivus Day. During this period, Jack received disability payments totalling $13,420 from Royal City Assurance Co. The $1,200 in disability insurance premiums were fully paid by Jack through payroll deduction.

7. While Benz values the image of its employees, they installed recreational facilities at its head office which allowed for proper distancing protocols to be followed. All employees are permitted to use these facilities free of charge. Jack used these facilities regularly. The equivalent value for similar facilities at a private club would be $1,800 per year, including applicable taxes.

8. Benz does not have a company pension plan. So, instead Benz paid $15,000 directly into Boba's personal RSP at the Mos Eisley Credit Union.

9. In August of 2021 Benz paid local CPA Manny DeLorean $500 in cash to complete Jack"s 2020 and 2019 personal tax returns as Boba had not previously filed them.

10. Jack utilized Benz counselling services for their 12 year old child who received mental health counselling valued at $850 in the 2021 year.

Required:

a. Determine Jack's employment income and taxable income for 2021 in accordance with the provisions of the Income Tax Act, CRA's administrative position and related announcements. Briefly explain why the items were included in the calculations. Include your legislated/administrative reference source for each item, referencing the page number in the text is not required.

b. For items that you have determined are not to be included in your employment and taxable income calculations from Part A, briefly explain why these items were excluded. Include your legislated/administrative reference source for each item, referencing the page number in the text is not required.

c. Lastly, in memo form of no more than 1 page, Jack is seeking tax advice that would be of benefit in future filings of their personal tax return as well as a possible career move into sales that will require travel outside of the office. make this memo to Jack.