Navdeep has been a salesperson for BT Products Inc. (BT Products) in Halifax since January 1, 2017. Before that time, he was the sales manager for a much smaller company, Small Sales Ltd. (Small), in Winnipeg. He decided to change jobs in order to receive a higher income. Small was paying him a salary only, while BT Products is paying him a base salary plus commission, plus the chance for share ownership. BT Products is a CCPC. Navdeep is having trouble calculating his income for tax purposes for 2018. He would like you to calculate it for him and explain any items you omit from your calculation. In 2018, BT Products paid Navdeep a salary of $6,000 per month and a commission of $12,500 based on his sales. In March 2018, BT Products gave Navdeep an option to purchase 3,000 shares of BT Products within the next three years at a price of $3 per share. At the time he was given the option, the share value was $3. Navdeep exercised his option in December 2018 when the share value had increased to $5 per share. Navdeep has no plans to sell the shares in the foreseeable future. Navdeep is required by his contract to pay for all of the expenses he incurred in earning his income. In 2018, he paid the following expenses related to his sales activities: Meals with customers $ 10,000 Tickets to local sporting events and theatre 2,200 Initiation fees for the local golf club 21,000 Annual membership dues to the local golf club 3,150 Capital cost of a computer for maintaining sales records 2,500 Capital cost of computer software 1,000 Interest on loan to buy computer 150 Navdeep is required to provide his own car for work. He bought a new car in Halifax on January 5, 2018, at a cost of $40,250. During the year, he spent the following amounts related to this car: Gas $ 3,198 Repairs and maintenance 2,460 Insurance 900 Licence 100 Interest on car loan 2,975 York CE Tax Principles Quiz 2 Page 5 of 5 Because Navdeep has another car that is used for family purposes, he uses the car described above 95% for business purposes. You have calculated 100% of the CCA on the car for the year to be $4,500. Because Navdeep spends most of his day on sales calls with customers, BT Products does not provide him with an office. Instead, he is required to maintain an office in his home. Navdeep renovated the basement of his Halifax home at a cost of $5,250 to create a separate office. His office furniture cost $2,875. Navdeep estimates that his office occupies 10% of the floor space of his house. His office expenses for the year are as follows: 

Required: 

Calculate Navdeep’s net employment income for tax purposes for 2018. Explain any items you omit from your calculation. Ignore HST. A good approach to this question is to list all the items included in the question and then use a system such as the following to identify the tax status of each item: 

I = Include in employment income. 

NI = Do not include in employment income. 

D = Deduction is available. 

ND = Expenditure is made, but no deduction is available. 

Once you’ve completed this process, calculate the amounts to be included in income, or to be deducted for the items you’ve identified. Always remember to provide an explanation for any amounts that you have excluded from your calculations.

Answer rating: 100% (QA)

To calculate Navdeeps net employment income for tax purposes for 2018 lets go through the list of items provided and categorize them as I include in employment income NI do not include in employment i... View the full answer