Question

Your client travels extensively with his company for work, to market new products throughout Canada. When your client travels, they are typically out of town for more than 12 hours. Your client has provided you with the following info on income and expenses incurred, for 2020:

Base salary (per month) of: $2,450

Commission rate as a % of gross sales: 5%

Total commission income earned in the year: $36,000

Hotel and airfare expenses: $17,000

Out of town meals: $7,000

Entertainment meals: $4,000

Professional dues: $200

Notebook computer: $1,700

Required: Compute the total eligible expenses under section 8 of the ITA

Answer 1

The total eligible allowable expenses under section 8 of the ITA are as follows,

Hotel and airfare expenses: $17,000

Out of town meals: (7000 X 0.5) $3,500

Entertainment meals: (4000 X 0.5)     $2,000

Professional dues: $ 200

TOTAL       $ 22,700

Rules under Section 8 of ITA are,

Hotel and air fare expense are allowed for all employees either salaried or commission .

Out of town meals are only allowable upto 50% for deduction for both type of employee .

Entertainment meals are only allowable upto 50% for deduction for commissioned employee .  

Professional Dues are allowed for all employees either salaried or commission .

Notebook computer may not be used totally for business, it could be used by him personally aswell, hence it is not an allowable deduction .