Employment Income

Question 1

Employment income

Answer 1

• all salary and wages received on a cash basis by employees as a result of employment

Question 2

Bonuses

Answer 2

• bonuses may be deducted by the corporation in a different period than when included in employee income because employment income is cash based and business income is accrual

Question 3

Common Taxable Benefits

Answer 3

• allowances
• automobile benefit
• traveling expenses and motor vehicle allowances
• BOD payments
• counselling services
• discounts
• employee loans
• frequent flyer points
• gifts and awards (not taxable if non-cash less than $500, immaterial, or for length of service award)
• Health care premium (public is taxable, private plan not taxable)
• Life insurance (premium taxable unless the company is a beneficiary)
• Rec fees/club dues (for personal use is taxable, for business use 50% taxable)
• severance pay
• signing bonus
• stock options
• tuition payments

Question 4

Automobile benefit

Answer 4

• 2 components:
  1) Standby charge
  2) operating benefit

Question 5

Standby Charge

Answer 5

• when employee can use for personal purposes
• if automobile used less than 50% for employment:
  1) employer owner: 2% of the cost of the vehicle for each month available to employee
  2) employer leased: 2/3 of lease payments (net if insurance)
• reduction to standby charge if: personal kms in the year less than 20,004 and automobile is used for 50% or more employment purposes
• reduction is = personal use kms / (1667 x (total days employer leased or owned vehicle / 30))

Question 6

Operating cost

Answer 6

• benefit when employer pays for operating costs on the vehicle provided to the employee (fuel, insurance, registration, maintenance)
• if automobile used less than 50% for employment = personal kms x $0.27/km
• if automobile used more than 50% for employment = lesser of… personal kms x 0.27/km & 1/2 standby charge

Question 7

When employee owns vehicle but employer pays operating costs

Answer 7

(personal kms/total kms) x actual operating costs paid by employer

Question 8

Employee loans

Answer 8

• loans for home purchase or home relocation: taxable amount determined by calculation which takes interest paid and prescribed rate choice into account
• loans not for home purchase or home relocation: taxable amount if higher than the loan for home purchase because it does not take a lower prescribed rate
• Forgiveness of loan = employment benefit

Question 9

Stock options

Answer 9

• benefit = the extent that the FV of the shares on the exercise date is greater than exercise price
• however, this benefit is only on exercise date for public company shares – private company shares do not have this benefit until selling date
• On selling date: there is a CG for both public and private shares

Question 10

Deductions

Answer 10

• legal expenses
• sales person expenses
• travel expenses
• motor vehicle expenses
• professional dues and fees
• CCA
• workspace in home
• employee RPP