Ms. Davis is the sales manager employed by Wize Products Inc. and has asked for your assistance
Question:
Ms. Davis is the sales manager employed by Wize Products Inc. and has asked for your assistance in preparing her 2019 income tax return. Ms. Davis informs you that she earned $135,000 salary and $45,000 commissions
in 2019, and has provided you with the following additional information:
(A) According to her contract, she must provide an automobile in order to carry out her duties of employment and must pay for all her expenses.
(B) Automobile:
She purchased a new car on Jan.6, 2019 at a price of $75,250. She borrowed the full amount from
Wize Products Inc. interest free on that day. The prescribed rate of interest for all of 2019 was 6% .
She drove a total of 40,000 km. during the year of which 10,000 km. were for personal use.
(C) Expenses:
Ms. Davis paid the following amounts to earn her commissions:
Airline tickets....................................... | $ 2,450 |
Golf club membership fees.................. | $ 4,700 |
Clients’ meals and entertainment......... | $ 1,600 |
Operating costs of car........................... | $ 8,000 |
Laptop computer.................................. | $ 600 |
(D) Home Office Costs
During the year Ms. Davis maintained a home office as none was provided by her employer, and incurred the following costs:
Utilities................................................. | $ 2,650 |
Home insurance................................... | $ 900 |
Property taxes....................................... | $ 2,500 |
Mortgage interest................................. | $13,000 |
Office furniture.................................... | $ 4,000 |
Telephone business calls..................... | $ 1,300 |
Office supplies..................................... | $ 650 |
The office space was 15% of the total living space
.
(E) Additional Information:
(1) Ms. Davis’s employer paid $350 in premiums on behalf of Ms. Davis for a group term life insurance policy which covered Ms. Davis for $125,000.
(2) One of her employer’s customers gave Ms. Davis a free vacation in Bermuda for 2 weeks
in recognition of the good service rendered to the customer. Value - $4,550.
(3) Ms. Davis incurred interest expense of $700 on a bank loan to buy the office furniture.
REQUIRED:
Determine Ms. Davis’s net employment income for the 2019 taxation year.
Jurisdiction, Canada
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson