Bradley Jones, 44, has recently contacted Tara Holster, his tax accountant, for assistance. In April of 2020, Bradley completed his MBA at the University of Ottawa and immediately moved to Toronto in order to take on the role of sales consultant at Selling and Buying Ltd. (SBL), a Canadian-controlled private corporation, on May 1, 2020.

During Tara’s meeting with Bradley, he provided Tara with the following information pertaining to the 2020 taxation year:

1. Bradley’s T4 slip for the year indicates the following:

Salary $112,000 Commission 12,000 Canada Pension Plan deducted 2,898 EI deducted 856 Employee Registered Pension Plan contributions (employer makes equal contribution) 2,500 Charitable donations deducted 400 Union dues deducted 800 Income tax deducted 40,000

2. Bradley’s employer-provided the following medical benefits package: • A comprehensive private health services plan, which includes drug, dental, and vision coverage. The premiums in 2020 were $1,000 and were entirely paid for by SBL. • Sickness or accident insurance group plan with wage loss protection. In the event Bradley qualifies under this program, he will receive $5,000 per month. Under the terms of his contract, SBL paid the entire premium of $350. • A premium membership at a high-end fitness club near his condo. Bradley strongly believes that physical health is important and convinced SBL that he would perform better at his job with this membership due to fewer sick days and more energy. SBL paid for the membership, which was $1,000 in 2020.

3. Since the cost of housing was much higher in Toronto than Ottawa, Bradley was provided with an interest-free loan for $500,000 on September 1, 2020, which he used to buy a condo close to the SBL office.

4. Bradley was required to pay for his moving expenses up front, but he submitted receipts to SBL and was fully reimbursed. The costs were as follows: Moving company $1,500 Gas (500 kms) 100

5. In December, Bradley received a watch as an award, not a gift, for having the most sales during the fourth quarter. The watch was valued at $400.Taxation Page 5 Copyright © 2021 Chartered Professional Accountants of Canada. All rights reserved.

6. Under SBL’s policy, all employees are responsible for paying their own professional dues. Bradley paid $1,000 to the Professional Sales Consulting Organization.

7. SBL has a policy of reimbursing up to $500 a year for any courses or programs taken, regardless of their purpose. Bradley used this to take a cooking course worth $450 during 2020.

8. Bradley had the following capital transactions during the year: • On November 4, 2020, Bradley sold 300 shares of BLT Ltd. for $22,000. He had originally purchased these shares for $15,000. • In an effort to reduce his capital gains, Bradley sold 500 shares of Peach Ltd. on December 26, 2020, for $20,000. He had originally purchased these shares for $28,000. He repurchased 500 shares on January 5, 2021, for $19,500, as he still thinks that over the long term the share price will increase significantly. • Bradley had a net capital loss carryforward of $5,000 from prior years.

9. Bradley is required by his contract to pay for the expenses he incurred in earning his income and was provided with a travel allowance of $15,000. In 2020, he paid the following expenses related to his sales activities: Meals with customers $2,000 Tickets to local sporting events and theatre 3,000 Hotels 3,500 Airfare 4,000

Required: 

Determine Bradley’s net income for tax purposes and taxable income for 2020 in accordance with the aggregating formula. Be sure to explain all items that have been omitted. If there are any carryforward balances at the end of 2020, be sure to note them. Ignore the effect of the leap year and HST. Show calculations.

Answer rating: 100% (QA)

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