Johnny Jones was recently promoted to the position of vice-president of sales and

marketing for Jennifer’s Education Resources Limited, a public company. Johnny is

looking for your assistance to understand what will be taxable and what will be deductible

to him in respect of his employment package. You just left a meeting with Johnny and he

provided you with the information below.

Remuneration package

Terms of Contract

You reviewed Johnny’s employment contract and took the following notes.

1. Johnny receives a base salary plus a commission based on new business generated.

Johnny’s sales territory includes all of the colleges and universities in the Greater

Toronto Area as well as Northern Ontario. His responsibility is to promote the

company’s products to universities and colleges within his territory.

2. Johnny is required to travel throughout his sales territory on a regular basis to visit

with instructors and demonstrate the company products to them.

3. Johnny is required to provide his own automobile and to pay all of his own automobile

and other travel costs.

4. Johnny must maintain his own physical office space and pay for his own office

expenses, including his own phone. He receives no allowance and no reimbursement

toward these costs.

Expenditures (all considered reasonable)

All of the expenditures below were made in 2020 and all include HST.

1Vehicle 1 was sold in June 2020. Johnny estimates that he drove 38000 km for employment purposes in

2020; his total mileage driven was 45000 km.

2These expenses are for the entire home, with the exception of the painting which was for Johnny’s office

only. Johnny’s office space represents 15% of the square footage of his home.

3Johnny is required by his contract to have a separate phone number for customers to call him. He uses

this cellular phone for that purpose, although he does use it for personal purposes as well.

REQUIRED

A. Calculate Johnny’s net income from employment for tax purposes for 2020. Show

all of your calculations and clearly explain any decisions you make.

B. List all items not included in your calculation and explain briefly why these items

were omitted.
 
 

Transcribed Image Text:

Base salary for the year Commission earned Allowance to cover automobile and travel expenses Less amounts deducted at source: Income tax, Canada Pension Plan and Employment Insurance plan premiums Long-term disability insurance premiums $50,423 600 $84,800 34,000 20,000 Base salary for the year Commission earned Allowance to cover automobile and travel expenses Less amounts deducted at source: Income tax, Canada Pension Plan and Employment Insurance plan premiums Long-term disability insurance premiums $50,423 600 $84,800 34,000 20,000

Answer rating: 100% (QA)

A Calculation of Johnnys net income from employment for tax purposes for 2020 Johnnys remuneration package for 2020 includes the following items Base ... View the full answer