Clair Jordan, a registered dental hygienist, would like to file a Notice of Objection with the CRA for taxation years 2019 and 2020. The CRA has reassessed Claire as a resident in Canada for 2019 and as an employee for 2019 and 2020. Claire describes herself as an independent self-employed dental hygienist. For the past two years, Claire was employed by the Canadian Forces Dental Unit to work on a day-to-day basis. Generally, the Mobile Dental Unit contracts for her, in advance, depending on the regional demand for dental cleaning and examinations. In 2019, Claire contracted with the Canadian Forces Mobile Dental Unit to temporarily work at a Canadian Forces base in Saudi Arabia. The terms of the contract specified that she would work on a day-to-day basis depending on the demand for dental services over the next two years. Economically, the contract was very worthwhile because her room and board were provided by the government and her pay each day was $340. Despite the risk of no work, the pay she received was earned tax-free because she considered herself as a non-resident during her absence. Prior to leaving Canada, Claire sold her condominium and car and stored her furniture at her parents’ home. She also cancelled her membership at the YWCA in New Brunswick and put her engagement on hold for an indefinite period. Her plan was to stay away for the full two years, assuming that all went as planned. Unfortunately, after 12 months, the Mobile Dental Unit ceased operations and Claire was scheduled to return to Canada. The Department of Finance had severely reduced the budget for National Defence. Claire was happy to return home on January 1, 2020. She married three months after her return and resumed her work with the Mobile Dental Unit in Moncton, New Brunswick. Claire’s compensation package with the mobile dental unit differs from other employees of the Canadian Forces. Other employees are assistants and support staff who are paid monthly with fringe benefits. Claire does not receive any benefits or holidays. In Canada she is paid on a day-to-day basis ($280 per day with no deductions for EI, CPP, or tax). All dental clinics are headed by a dentist who is professionally responsible for overseeing the work of both contract and salaried dental hygiene ists and dental assistants. The Canadian Dental Association does not permit dental hygienists to administer anesthetic or work without supervision. The clinic provides all of Claire’s tools, supplies, and support staff. If a workday is not more than 60% booked, patients are rescheduled to another day and Claire does not work. It is not unusual for the contract dental hygienists to be temporarily laid off. This does create problems because the contract specifies that Claire must be available to work at least four days per week (so she cannot work elsewhere). This has not bothered Claire because she has claimed all of her laundry, uniforms, shoes, and travelling expenses as a deduction against her self-employed business earnings. Travelling expenses are justifiable because the mobile unit moves to various remote locations outside of Moncton. Advise Claire on the filing of a Notice of Objection in respect of 2016 and 2017. How would you treat the various expenses incurred by Claire Jordan in each of the taxation years? The following information for 2017 has been presented to you by Paula Promoter, the new vice-president of marketing for a public Canadian oil company, Overpriced Petroleum Limited. Paula, who is 52 years old and now lives in Calgary, travels extensively across Canada. Paula, whose duties involve the negotiating of contracts, began her employment with Overpriced Petroleum on January 1, 2019.

Receipts and Fringe Benefits — 2017

Salary — net of payroll deductions................................$ 50,450

Director fees................................................5,000

Receipt of an amount, not to compete, from former employer...........50,000

Termination payment from former employer........................8,000

Travel allowance (Note (1) below):

Accommodation and meals @ $200 per day for 150 days..............30,000

Car operating cost allowance @ 45¢ per kilometre plus $10 per day of travelling for business travel only (9,000 kilometres) for 150 days.....5,550

Income protection receipts received from Regal Assurance (Note (2) below)15,000

Benefits paid by the corporation:

Registered pension plan.............................$4,000

Extended health care — Liberty Mutual.................2,125

Group income protection premiums— Regal Assurance (Note (2) below).................1,050

Membership fee in Petroleum Club (membership required byall employees)—

initiation fee.................................1,000

— annual fee...................................2,500

Moving costs (Note (3) below)........................42,000

Group term life insurance (coverage is $300,000)..........600

Loans by company (Note (4) below)...................160,000 $213,275

$377,275

Payroll deductions and selected disbursements — 2017

Payroll deductions: Income taxes withheld..............................$ 41,001

Registered pension plan (defined benefit)

— current contribution...........................4,000

Canada Pension Plan contributions.....................2,749

Employment insurance contributions...................860

Group income protection premiums (Note (2))............1,050$ 49,660

Purchased 2,000 common shares on July 1, 2017 under a stock

option plan at a price of $25 per share. Fair market value of

shares at the date of purchase was $35. Fair market value of

the shares was $25 per share on the date when the option was granted...........................................50,000

Legal fees paid in connection with the collection of the $50,000 non-competition receipt from her previous employer.............5,000

Notes and Additional Information

:(1) Paula’s actual travelling and car expenses, which she is required to pay according to the terms of her employment contract, are as follows:

Meals......................................................$11,250

Accommodation...............................................23,750

Travel costs (other than car see below) reimbursed by company..........6,000

Car expenses (9,000 kilometres for business purposes out of total kilometres of 16,000):

Gasoline..........................................$1,700

Maintenance......................................800

Auto accident costs while on a business trip1,600

Insurance.........................................1,800

Licence..........................................90

Interest paid on car loan (see Note (4), below)............300$

6,290

(2) The company paid 50% of the premium to Regal Assurance re income protection payment. During 2017, Paula received $15,000 in periodic payments in respect of an eight-week illness.

(3) Although Paula started to work for Overpriced Petroleum on January 1, 2019, her family did not move to Calgary from Toronto until February 28, 2019. The company paid for all the moving costs of $12,000, an actual loss on the sale of Paula’s Toronto home of $25,000 and a disruption allowance of $5,000.

(4) Paula obtained two loans from the company as part of her employment contract:

(a) Loan of $150,000, dated July 1, 2019, to acquire a new home in Calgary. The loan bears annual interest at 2% and is repayable over a 25-year period in equal annual instalments on the anniversary date of July 1. Interest is payable on the same date.

(b) Loan of $10,000, dated January 1, 2019, to assist in the acquisition of a car acquired in early January 2017 for $35,000 (excluding GST; no PST in Alberta) to be used in connection with her duties of employment. The loan bears annual interest at 3%, and is repayable over the next three years in equal annual instalments. Interest is payable December 31 each year. Paula paid the interest for 2017 on time on December 31, 2019.

(NOTE: For simplicity you may assume that the prescribed interest rate is a constant 4% for all quarters.)Determine Paula Promoter’s employment income for 2017 in accordance with Subdivision a of Division B. Ignore the effects of a leap year in your answer. Indicate why you have excluded any of the above amounts from your answer.

Determine Paula Promoter’s employment income for 2017 in accordance with Subdivision a of Division B. Ignore the effects of a leap year in your answer.

Indicate why you have excluded any of the above amounts from your answer.

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