On January 02, 2016, Mr. Alex Brown moved from Victoria, B.C. to Vancouver, B.C., in order to begin employment with Superior Business Ltd. (SBL). His salary for 2016 was $ 150,000. SBL withheld the following amounts from his earnings:
Federal Income Tax $40,000
Registered Pension Plan Contribution 2,500
[SBL makes a matching contribution]
EI Premiums 955
CPP Contribution 2,544
United Way Donations 2,000
Professional Association Dues 1,400
Payments for Personal Use of Company Car 1,000
Other Information:
1. Mr. Alex Brown’s moving expenses totaled $ 5,000. SBL reimbursed Mr. Alex Brown for 100% of these costs.
2. For the year ending December 31, 2016, Mr. Alex Brown was awarded a bonus of $ 40,000. Of this total, $ 25,000 was paid during 2016, with the remainder payable in January, 2017. The bonus was not included in the $ 150,000 salary amount.
3. SBL provided Mr. Alex Brown with a car to be used in his employment activities and SBL paid the 2016 operating costs which were $ 7,000. The cost of the car was $ 40,000, which included PST and GST. The car was available to Mr. Alex Brown throughout 2016. He drove a total of 60,000 kilometers, which included 7,000 kilometers to be for personal use.
4. In discussions with SBL regarding executive fringe benefits, Mr. Alex Brown inquired about getting a $ 70,000 interest free loan. SBL would not agree to giving any interest free loan to Mr. Alex Brown. However, SBL agreed to advance $ 70,000 of his 2017 salary as of December 15, 2016.
5. During his employment related travels, Mr. Alex Brown has accumulated over 150,000 Aero plan points. During 2016, Mr. Alex Brown used 90,000 of these points for a trip to Halifax. The airline tickets would have cost $ 1,300, if Mr. Alex Brown had to pay personally for it.
6. SBL gave Mr. Alex Brown the following additional benefits: Allowance for Acquiring Business Clothing $5,000 Tennis Club Membership 3,000 (No employment related usage) Financial Advisor Fees 1,500
7. Mr. Alex Brown’s previous employer was a Canadian controlled private corporation. In 2015, Mr. Alex Brown was granted options to buy 1,000 of the company’s shares at $ 20 per share. This option price was higher than the estimated fair market value of the company’s shares at the time the options were granted. On January 02, 2016, Mr. Alex Brown exercised these options. At this time, the fair market value of the shares was $ 30 per share. Mr. Alex Brown immediately sold the shares for $ 30 per share.
8. SBL required Mr. Alex Brown to acquire a laptop computer to be used in his employment duties. At the beginning of 2016, Mr. Alex Brown purchased a computer at a cost of $ 1,500, which included PST and GST. During 2016, Mr. Alex Brown spent $ 300 on computer supplies.
Required: Determine Mr. Alex Brown’s net employment income for the year ending December 31, 2016.
| Net Employment Income of Mr. Alex Brown for Year ending Dec 31st 2016 | Amount | Total | Remarks | |
|---|---|---|---|---|
| Salary income for 2016 | $ 150,000.00 | |||
| Add: | Reimbursement of moving expenses | $ 5,000.00 | As it is a benefit to Alex | |
| Bonus amount | $ 40,000.00 | Eventhough 25,000 paid in 2016, the total 40,000 is to be considered as salary income for 2016 | ||
| Car used for personal purpose | $ 816.67 | Operation expenses in proportionate to personal usage: $ 7,000 *(7000 Kms/60000 Kms) | ||
| Salary advance received | $ - | Not the salary income of 2016 | ||
| Cost saved in airline tickets | $ 1,300.00 | Indierct benefit to Mr.Alex | ||
| Tennis club membership fee | $ 3,000.00 | As it is a benefit to Alex | ||
| Business Clothing | $ - | Business clothing is not for personal use, so not to be conseidered as benefit | ||
| Financial advisory fee | $ 1,500.00 | As it is a benefit to Alex | ||
| Income on sale of shares | $ - | Not to be considered as Salary income | ||
| Gross Total Income | $ 201,616.67 | |||
| Less: | Computer and Computer supplies cost | $ 1,800.00 | cost incurred for Business purpose | |
| Registered Pension Plan Contribution | $ 2,500.00 | Statutory deductions | ||
| EI Premiums | $ 955.00 | |||
| CPP Contribution | $ 2,544.00 | |||
| United Way Donations | $ 2,000.00 | |||
| Professional Association Dues | $ 1,400.00 | |||
| Payments for Personal Use of Company Car | $ 1,000.00 | Personal expenses deducted by company | ||
| Federal Income Tax | $ 40,000.00 | Statutory deductions | ||
| $ 52,199.00 | ||||
| Net Employment income | $ 149,417.67 |
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