Crow child Pipelines Corporation has offered Bing Lee a base salary of $65,000. Bing must choose one
(a) To receive a reasonable car allowance of $6,000 per year to compensate for the operating expenses and the depreciation of his Jeep, used to drive to remote work sites. The allowance is based on the kilometers to and from the remote location, multiplied by the number of workdays.
(b) To submit receipts for all of his operating expenses for full reimbursement. Bing estimates that his total operating expenses are $4,000 annually. However, this amount does not cover the wear and tear on his car. Bing will use his car approximately 65% of the time for employment and he will be able to claim capital cost allowance (tax depreciation) equal to $3,000.
Should Bing be indifferent to the choice between these two compensation packages? Explain. Assume a tax rate of 45%.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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