Assignment Problem
Comprehensive Employment Income
Ms. Matilda Bracken is a Certified Financial Planner (CFP) with many years of successful experience. In 2016, she decided that she was not adequately appreciated in her current position with a large financial institution in Windsor, Ontario. Given this, she resigned on November, 2016.
After several months of investigation, she decided to take a position with Retirement Planner Ltd. (RPL), a Canadian controlled private corporation located in London, Ontario. She commenced working for RPL on May 1, 2017.
She owned a home in Windsor which she had acquired several years ago for $375,000. Because of the depressed real estate market in this area, she was eventually forced to sell the property for $275,000 in October, 2017, resulting in a $100,000 loss on this property.
Because of the uncertainty surrounding the sale of her Windsor property, she moved into an apartment when she arrived in London on May 1, 2017. The apartment was rented on a monthly basis until November 30, 2017. After she accepts an offer to purchase her Windsor house, she finds a home in London that she purchases on November 1, 2017 for $420,000. She moves into this new home on December 1, 2017.
Other Information:
Other information relevant to 2017 is as follows:
1. Because of her strong professional reputation, RPL paid her a signing bonus of $12,000. The signing bonus was paid on June 1, 2017.
2. During the period May 1, 2017 through December 31, 2017, Matilda earned salary of $124,000. Of these earnings, $120,125 was paid during this period with the remainder paid in the first pay period of 2018. The Company withheld the following amounts from her salary:
| Income Taxes |
$18,650 |
| CPP |
2,564 |
| El |
836 |
| RPP Contributions |
3,700 |
| Payment For Personal Use Of Automobile |
880 |
3. RPL contributed $3,500 on Matilda's behalf to the Company's RPP.
4. RPL provides group medical coverage to all of its employees. The private health plan premiums paid by RPL on Matilda's behalf cost $562 for the year.
5. On December 12, 2017, a bonus of $10,600 was accrued for Matilda. Matilda received j. $5,300 of this bonus on December 29, 2017, with the remainder being paid on January 17, 2018.
6. During the year, Matilda received two non-cash gifts, a birthday gift worth $350 and a Christmas gift worth $300.
7. Because of the need to invest some of her additional income, RPL provided Matilda with financial counseling services. The value of these services was $1,200.
8. In order to assist her move, RPL agreed to compensate her for one-half of the $100,000 loss on the sale of her Windsor home. The $50,000 payment was made on December 1, 2017.
9. In order to help Matilda with financing her new London residence, RPL provided her with a $220,000 interest free housing loan. The funds are provided to Matilda on November 1, 2017. Assume that the prescribed rate for all of 2017 is 2 percent.
10. RPL has a stock option plan for its employees. Under this plan, employees are permitted to acquire a limited number of option shares at 10 percent below their fair market value on December 1 of each year. The company hires valuators to determine the fair market value at each of those dates. Matilda acquires 200 shares on December 1, 2017 for cash of $7,200. On December 15, she sells 100 of these shares for $4,100.
11. Matilda paid $1,600 in CFP dues in 2017. RPL's policy is to reimburse 50 percent of such professional dues. RPL reimbursed her $800 in December, 2017.
12. RPL provides its professional employees with a membership in the London Curling Club. They believe this is a useful venue for entertaining clients of the Company. The cost of this annual membership was $1,300.
13. RPL provides Matilda with a vehicle that was purchased in 2017 for $45,200, including HST. The vehicle was used by Matilda for all months during the period May 1, 2017 through December 31, 2017. During this period, she drove the vehicle a total of 52,000 kilometers, of which 40,000 were related to her employment duties. RPL pays all oper-ating and maintenance costs, a total of $8,900 during the period that Matilda used the car. RPL withheld $110 per month from her salary to pay for her personal use of the vehicle.
14. Matilda's new job requires her to meet with clients outside of regular office hours throughout the week. RPL will sign form T2200 stating that she is required to pay for certain employment expenses without reimbursement and use a portion of her home for work.
Matilda has set aside a separate room in her apartment to be used exclusively to meet with clients. She used this office space between May 1 and November 30, 2017. This home office occupied 150 square feet of the 1,250 square feet available in her apartment. The home office in the residence she moved into on December 1, 2017 will not be available for use until 2018. RPL has agreed to let Matilda use head office space as needed during December.
| Home office related costs are as follows: |
|
|
Monthly Rent
|
$2,200
|
|
Office Furniture
|
3,400
|
|
Computer Purchase
|
896
|
|
Stationery And Office Supplies Purchased
|
147
|
|
Monthly Phone Line Charge (For 7 Months)
|
210
|
|
Employment Related Long Distance Calls (For 7 Months)
|
110
|
|
Electricity Charge (For 7 Months)
|
350
|
|
Paint For Apartment
|
165
|
|
Property Insurance (7 Months)
|
175
|
15. Matilda received an allowance of $325 per month for 7 months to cover the costs of main, taining a workspace in her home.
Required: Determine Matilda's net employment income for 2017.