Pam Jones resides in Edmonton, AB, and has been employed by Abercrombie Ltd. for a number of years as their accountant.

• Pam’s T4 slip for the current year indicates the following amounts were deducted from her gross salary of $80,000:

Deductions

Amounts

CPP (maximum for the year)

$2,898.00

EI (maximum for the year)

856.36

RPP contributions

4,500.00

Pension adjustment

9,000.00

Income tax deducted

20,000.00

Union dues

300.00

Charitable donations

1,200.00

• The following amounts are paid by Abercrombie Ltd. and not included on Pam’s current year T4 slip:

Paid by Abercrombie Ltd.

Amounts

Private health insurance plan premiums

$1,800

Public health insurance plan premiums

1,500

Group term life insurance policy premiums

400

Allowance for incidental expenses ($400 per month)

4,800

• In the current year, her mother traveled with her to Montreal when Pam attended a five-day conference for accountants. Abercrombie Ltd. reimbursed her for the full cost of $5,000, of which $2,000 (including GST) was for expenses she incurred for her mother.

• On July 1 of the prior year, Abercrombie provided Pam with an employee loan in the amount of $10,000 at the annual interest rate of 1%. The loan requires annual principal repayments of $2,000 on June 30 of each year. Pam made the first annual repayment on June 30 of the current year.

• Canada Revenue Agency’s interest rates for the calendar quarters in the current year are:

Quarter

Rates

Quarter #1 (January 1 to March 31)

3%

Quarter #2 (April 1 to June 30)

2%

Quarter #3 (July 1 to Sept 30)

3%

Quarter #4 (Oct 1 to Dec 31)

3%

• In the current year, Pam paid the following amounts personally:

o CPA professional dues (annual) in the amount of $800 (paid on June 30)

o Employment expenses: Pam paid for supplies (used for employment purposes) in the amount of $1,250 (expenses occurred throughout the year). Abercrombie Ltd. has authorized these expenses and filed Form T2200 accordingly.

Answer the following:

1. For each amount paid by Abercrombie Ltd. that was not reported on Pam’s T4 slip, determine if there is a taxable benefit and give brief explanations to support your response (i.e., explain why the amount is a taxable or non-taxable benefit).

2. Calculate the total amount of taxable benefits for Pam in the current year (show all your calculations).

3. Calculate Pam’s net employment income for the current year, in accordance with sections 5 to 8 of the Income Tax Act. Round your calculations to the nearest dollar and provide appropriate references to the ITA.

Answer rating: 100% (QA)

1Private health insurance plan premiums taxable benefit The premiums paid by Abercrombie Ltd for Pams private health insurance plan are a taxable benefit Public health insurance plan premiums nontaxab... View the full answer