You just had a meeting with your new personal taxation client, Irene. She has provided you with
Question:
You just had a meeting with your new personal taxation client, Irene. She has provided you with lots of tax information and supporting backup to complete her tax return.
Irene is interested in the tax impact of various transactions. Please review the information provided in the exhibit and determine the taxable benefit for Irene for the following items:
- Vehicle – includes the standby charge and the operating cost benefit.
- Shares – all tax implications for the current tax year.
- Loans – net impact for the current tax year.
Irene is working in Company ABC Ltd, a public corporation. The employer provided her with a vehicle to use for employment purposes for 2021. The employer had 2 options – either purchase the vehicle for $35,000 (ignore the impact of HST) or lease the vehicle for $500 / month (ignore the impact of HST). The employer decided to lease the vehicle at the end of 2020 (Dec 31). The vehicle operating costs for 2021 were $5,200, all of which was paid by the employer. Irene used the vehicle for approximately 11 months in 2021. When she submitted her kilometers to the employer, she calculated that the total kilometers driven was 39,000. Based on her detailed km log, the total personal kilometers were 12,500.
In 2021, the employer also provided Irene with options to purchase shares of the company’s common stock. She received 150 shares to purchase ABC Ltd. shares at $34/share. When she received the options, the shares were trading at $27/share. Irene exercised all 150 shares in 2021. At the time of exercise the shares were trading at $44/share. She also sold the shares on December 21 for $50/share.
Irene lived in an apartment until June 2021. At that time she purchased a new house. Under the terms of her employment, she received a $60,000 housing loan on May 15th at a stated interest rate of 1%. She pays interest on the loan monthly. The prescribed interest rates for this type of transaction are the following: Q1 – 3%; Q2 – 5%; Q3 – 6%; Q4 – 3%. Irene paid her December 2021 monthly interest payment on January 10, 2022.
Expert Answer:
Vehicle The taxable benefit for Irene for the vehicle is calculated as follows Standby Charge The st... View the full answer
