Ahmed has Recently been Appointed VP of Sales and Marketing for HTH Publishing Ltd: Accounting Assignment, CU, Canada
|University||Carleton University (CU) Canada|
Ahmed has recently been appointed VP of sales and marketing for HTH Publishing Ltd., a public company. Ahmed has come to you for advice regarding the tax implications of his new position. During your meeting you were able to determine the following information:
HTH Publishing Ltd. requires Ahmed to use his personal vehicle in order to carry out his duties of employment. Ahmed is responsible for automobile expenses. On January 2, 2019, he acquired a new car, financing part of the acquisition through a bank loan arranged for the same date. He drove 38,000 kilometers in the course of his employment. His total kilometers on the vehicle for the year was 45,000. The car and employment use are reasonable for his position and work requirements. Ahmed has receipts for at least $6,500 of moving expenses related to his move to work for HTH Publishing Ltd.
Ahmed’s contract also requires that he maintain an office in his home since no other office is provided. He is responsible for all costs related to the operation of the office. He does not receive an allowance or reimbursement related to any of these costs. Ahmed has estimated that the office occupies approximately 15% of his home. This estimate is based on square footage. If he had to rent a comparable amount of space, he would have to pay $850 per month plus utilities.
Ahmed received an employee loan of $38,000 on January 15, 2019, at 1% interest to furnish his new home. The interest was payable on each anniversary date of the loan (assume Ahmed will pay the interest owing on the loan on the due date in 2020).
- Calculate Ahmed’s employment income for 2019, assuming that all expenses incurred were reasonable in the circumstances and documented.
- Briefly describe why any amounts above were omitted from your calculations.
For each of the scenarios below, calculate:
- income for tax purposes (Division B income),
- taxable income,
- federal taxes on taxable income (using the 2019 tax brackets).
- Show the activity and balances of the capital and non-capital loss carryovers.
Use the computation of income structure we learned in class (3(a), 3(b), etc., and identify what type of income each item is (e.g. employment, property, etc.). If you choose not to use any amount in your calculation, explain why not.
For each of the scenarios below,
- Identify by when the tax return is due to be filed.
- Identify by when the tax balance owing is due.
- Calculate the amount of interest and/or penalty owing as a result of the late tax file or late payment.
Use the 2019 CRA prescribed rates
Harry Potter is a sole practitioner running a yarn store. He filed his 20×4 tax return on June 1, 20×5, and paid the balance owing of $2,700 on June 20th, 20×5. He has never late filed in the past.
Dumbledore Co. is a CCPC. It filed its tax return for the November 30, 20×4 fiscal year-end on August 5th, 20×5, and paid the balance owing of $12,300 on the same date. It made the minimum required installments during the year. Dumbledore late-filed its tax return for the 20×2 year-end.
Hermione Granger passed away on December 16th, 20×4. Hermione was single and had no business income in 20×4. The tax return was filed on August 31st, 20×5 and a refund was owing to Hermione’s estate of $4,800
QuestCo. (an eligible CCPC) is unsure whether it needs to be making installments for 2019 and has come to you for advice. Its actual tax liability for the last few years is detailed below:
The owner has informed you that he believes the company will owe $6,000 upon filing its 2019 return
- Explain to QuestCo. why installments are required for 2019.
- Calculate the minimum amount of installments required (showing all alternatives and making the appropriate selection).
- Briefly explain to QuestCo. the consequences of not making installments (no calculations required).
On March 1, 20×2, Jack received compensation in the way of stock options. He was provided with options to purchase 300 shares of his employer’s shares at a price of $45 each. At the time, the shares were trading for $50.
On November 17, 20×3, Jack exercised the options when the fair market value of the stock was $60/share. He sold the shares on May 10, 20×6 when the share price reached $80/share.
Calculate and explain the tax consequences to Jack for 20×2, 20×3, and 20×6 of the above transactions (show your work) assuming:
- The employer is a CCPC
- The employer is a public corporation
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