DETAILS OF EMPLOYMENT INCOME

The payroll clerk for Pet Value Supplies Limited neglected to include any taxable benefits in the gross earnings figure per the T4. However, Adam has provided the following information:

1. On January 2, 2019, Pet Value Supplies Limited issued an interest-free loan to Adam in the amount of $150,000 for the purposes of purchasing a new home in Kingston. The loan was repaid in full on May 31, 2019. Assume that the prescribed rates of interest in effect for the four quarters of 2019 were: 3%, 4%, 4%, and 5%. (I know these rates are not correct for 2019, but please use these rates for purposes of this assignment!)

2. On March 3, 2019, the company granted a stock option to Adam, which entitled him to purchase 3,000 common shares of the corporation at $6 per share. On this date, the shares were trading at $6 per share. On April 1, 2019, Adam exercised the option and purchased all of the 3,000 shares. On this date, the shares were trading at $8 per share. Adam deals at arm’s length with the company and the purchase of these shares by Adam did not result in him owning more than 10% of the voting shares of the company.

3. On April 1, 2019, Pet Value Supplies issued a loan to Adam, at an interest rate of 1%, for the full amount of the purchase price of the shares referred to in (b) above. Adam repaid the loan in full, plus interest, on August 31, 2019. Assume that the prescribed rates of interest in effect for the four quarters of 2019 were: 3%, 4%, 4%, and 5%. (Again, I know these rates are not correct for 2019, but please use these rates for purposes of this assignment!)

4. Pet Value Supplies provided a company-owned vehicle to Adam for both business and personal use. The capital cost of the vehicle was $20,000 plus HST of $2,600. The vehicle was driven 5,000 kilometers in the 5-month period of which 3,000 kilometers were for business use. The total operating costs for the 5 months were $3,600. Adam reimbursed the company a total of $150 for the personal use of the car.

5. Adam was required by the terms of his employment contract to travel out-of- town, for which the company paid him a total allowance of $1,500. The actual costs incurred and paid by Adam, from January 2, 2019 to May 31, 2019 were as follows:

Accommodations	$ 2,000
Train fares	$ 800
Meals, while out of town	$ 1,000

Adam also paid the following additional expenses for which he was not reimbursed. Training costs $ 1,600

Supplies $ 280

6. On December 15, 2018, Adam had exercised a stock option, granted to him by his previous employer, CCPC Limited, a Canadian-controlled private corporation. This stock option entitled Adam to purchase 1,000 common shares of the company at $8 per share. At the time the option was granted, the Fair Market Value of these shares was $10 per share and at the time he exercised the option, the Fair Market Value was still $10 per share. On May 15, 2019 he sold the 1,000 shares for $11 per share.

Make a .Schedule A: Calculation of Gross Earnings from Employment and Please provide supplementary schedules where necessary and show ALL calculations, where applicable. Make sure that all schedules and income calculations are completed in full. Ignore any taxable capital gains or allowable capital losses!

Answer rating: 100% (QA)

Adams income from employment with Pet Value Supplies ... View the full answer