Mr. Alex Otto acquired an automobile on July 1, 2016, to be used in connection with his duties of employment. Alex is required by contract to use his own car and to pay directly all the expenses. Alex does not have any commission income. The following information, some of which is estimated, relates to the newly acquired car:

Alex lives in a province which has an HST rate of 13%.

REQUIRED
Determine the amount deductible in the taxation year in respect of the car expenditures in the following situations, on the assumption that the above expenses were reasonable and ignoring the effects of any leap year:
(1) No kilometre allowance was received;
(2) A reasonable allowance of 38¢ per kilometre in respect of employment driving was received;
(3) An unreasonable allowance of 5¢ per kilometre in respect of employment driving was received;
(4) A reasonable allowance of 25¢ per kilometre in respect of employment driving plus a yearly allowance of $2,000 was received;
(5) An unreasonable allowance of $1 per kilometre in respect of employment driving was received.

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Cost of car (including HST) Total kilometres driven in the ownership period Total kilometres in respect of his employer's business Capital cost allowance rate (1/2 X 30%) 15% Interest paid on bank loan in respect of the car Gas and oil Maintenance Insurance Licences $37,290 25,000 15,000 $1,950 1,800 300 1,400 100