On September 1 of the current year, Teresa will have worked for A Ltd. for three years and will be entitled to a company car as of that date. For A Ltd. to purchase the car that
Teresa wants they will have to pay $48,000, including tax. If the car is leased, the monthly lease cost will be $950, including tax. In either case, A Ltd. will pay all of the operating costs for the car which are expected to be $2,500 annually. Teresa anticipates that she will drive the car 2,000 km per month of which 200 km will be for employment purposes. Income tax reference: ITA 6(1)(e), (k), 6(2).
A. Determine the amount to be included in Teresa’s employment income for the current year (i) if A Ltd. purchases the car, and (ii) if A Ltd. leases the car.
B. If in the following year, Teresa drives the car 12,000 km for employment purposes and 8,000 km for personal use, determine the amount to be included in her income for tax purposes, assuming the car is purchased by A Ltd.