56 Introduction to Federal Income Taxation in Canac Problem 14 Your best friend, Mitch, was at a sales conference recently. During one of the breaks, he entered into a conversation with one of the other attendees, Darly, regarding the perks provided by their respective employers. In both eases, the emplover provides a car. However, Darly commented on the significant tax advantage available to her since her employer instead of buying the cae Mitch was able to obtain all of the information from Darly regarding her car Mitch has come to you for some “free” tax advice. He has asked you to compare the tax position {sin currently with the employer-owned ear to the position that Darly is in with the leased ca Mitch ital cost of the ear including HST $38,7 apital cost allowance claimed by the employer 6375 Dperating casts paid by the employer (including HST 4.250 Kilometres (as calculated from Mitch's log Employmen 8,000 Personal 0,000 Amount reimbursed to the company’ for the personal use at 14 cents per kilometre $1,400 Darly ase cost including $1,650 of insurance and HS Dperating costs paid by the employer (including HST Kilometres (as calculated from Darly’s log) Employment 23,000 Personal 9,000 Amount reimbursed to the company’ for the personal use at 9 cents per kilometre $ 810 Mitch wants you to calculate the minimum ear benefit that woul oyment income for 2017 for both hirn and Daly Problem 15, ras rowchild Pipelines Corporation fas offered Bing Lee a base salary of $68,000. Bing must choo one of the following compensation packages for the use of his personal automobile reasonable car allowance of $6,000 per year to compensate for the operating ‘expenses and the depreciation of his Jeep, used to drive to remote work sites, The allowance is based on the kilometres to and from the remote location, multiplied by the number of workdays (@) To rece! (0) To subrait receipts forall of his operating expenses for full elmbursement. Bing estimates that his total operating expenses are $4,000 annually. However, this amount. daes not caver the wear and tear on his car, Bing will use his car approximately 654 of the time for employment and he will be able to claim capital cost allowanee (tax depreciation) equal to $3,000, He has asked you to determine, with explanation, whether by ¢hese two compensation packages’ Bing has a marginal tax rate of 45% ‘would be indifferent to the choice betwe Problem 16 ma: 6,60 thrisa had been an employee of David Hardware, a hardware product distributor, for 18 ye CChrisa sold the David hardware products directly to hardware stores. She was a salesperson and she » 4 100% by commission. Chrisa was personally responsible for all of her business expenses, Expenses, for example, tor office supplies, stamps, telephone, parking, entertainment, promotion and saraples, ‘were supported by receipts and she deducted there During the years that Cheisa was employed by David, she sold products and developed the hard- ware market in her geographic area, One of the ways in which she developed the market was by snting” Noor spaee in various stores to display the David produets. However, no receipts were received from the various stores, because in many ways th eda “tip” by the managers of the hardware stores, Christ did not deduct these expenses. Through this process, Chrisa had significant Increased David's sales in her sales region and she had developed a loyal following in the hardware 13,875