You have come out of a meeting with Lisa, one of your personal tax clients. She is about to start a job with a public company and, as part of the compensation package, she is offered the use of a company car. She is given the choice between two options and she wants your opinion on which she should choose. The make, model, and year of the car are the same in both cases. She expects to drive about 24,000 km per year. However, she is not sure how many personal versus business kilometres she will be driving. She expects it will be either 60 % business or 40% business. Assume that she is in the 419% combined (federal and provincial) marginal tax bracket. She has asked you to analyze the options below to determine which option minimizes her taxes payable on the automobile benefit.

Option 1: The company will provide a company-owned automobile that costs $35,000 (before HST of 13%). The company will cover the insurance and operating costs which will cost $8,000 per year.

Option 2: The company will provide a company-leased automobile that costs $750 per month (before HST of 13%) . The company will cover the insurance and operating costs which will cost $8,000 per year.

Answer rating: 100% (QA)

To determine which option minimizes Lisas taxes payable on the automobile benefit we need to calcula... View the full answer