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Assignment 1

Comprehensive Analysis
Personal Taxation
Mr. Strange is a commissioned and salaried employee. He sells products throughout Canada. Given the
situation, his income inclusions are dictated by ITA section 5 Salary, Wages, and Gratuities received and
Section 6 Other Income inclusions arising from employment. By the virtue of ITA section 8 he will be able
to deduct expenses related to employment, only those that are listed in the act. Assuming he is an
employee and meets all the tests we can apply the applicable inclusions and deductions for employees.

Mr. Strange has received $25,800 as base salary and commission of $47700 on a cash basis. So, as per ITA
5 these incomes will be included as taxable benefit. Furthermore, Group term life insurance paid by
employer is not a taxable benefit so it will not have any impact on either employment income or tax
payable. And, private health service plan premiums are exempted from income inclusion.

Mr. Strange received an all expenses paid vacation by the supplier. So, this is an indirect benefit that arose
from virtue of employment. Consequently, it has been included in employment income.

Employee Discount of $1300 on Company merchandise is not taxable if it is available for all employees.
We have deemed it as a non-taxable benefit. Furthermore, he has purchased a laptop, however it is not
tax deductible because it is a capital cost and mandatorily required for employment. And CCA in this
equipment can not be claimed because CCA for employment is only limited to Cars and Aircrafts.

Mr. Strange is a travelling sales man and he incurs travelling expenses which includes meals and
entertainment of clients. His costs also include office supplies and hipping costs and operating cost of car.
His employer do not provide him with any allowance or reimbursements. If the allowance were deemed
unreasonable then it would have been included as a taxable benefit.

According to section 8 (1) (f) Mr. strange can deduct all of his travel expense, 50% of meals and client
entertainment cost, office and shipping cost, and operating cost of car maintenance as it relates to the
earning of employment income. However, he will not able to deduct CCA on his car under section 8 (1) (f).
However, other expense like CCA on vehicle can be deducted under ITA 8.1.i. If the expenses are incurred
for earning employment income they may be deducted. As he is a sales person, he may deduct under 8.1.f
or 8.1.h and h.1 but not both. Deductions under 8.1.i and j are available for all employees. When travel
expenses exceed the amount of commission it beneficial to use deductions under 8.1.h.

If we consider Mr. Strange as an ordinary employee his deductions under 8.1.h will include traveling
expenses other than motor vehicle expense and under 8.1.h.1 motor vehicle expenses.

We will select the highest deduction as per Sec 8 deductions, because it will minimize his taxable income.

As per 2019 Federal income tax bracket, Tax payable before tax credit is $ 10,892.05 Mr. Strange is eligible
for personal tax credits and Employment tax credit. After adjusting for his tax credits his total Federal tax
payable amount is $ 8942.05

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