Assignment 2: Chapter 3 Problems [Part II]
Question 1
Robby has been appointed VP of sales for Lori’s Books Ltd. Robhy has come to you for advice
regarding the tax implications of his new position. He has provided you with the following
information:
Reimbursement of media advertising costs…………………………………………2,000
The vehicle allowance was a flat allowance.
Robby has summarized the following expenses related to his employment:
Media Advertising costs…………………………..................................................... 3,200
Membership dues to the Canadian Sales Association……………………………… 900
Robby’s spouse was hired as an assistant to support his employment activities.
Robby is required to have an automobile in order to carry out his employment duties, and he is
responsible for traveling expenses. On March 1st 2025, he acquired a new car for $50,000
including 13% HST. Assume that, in 2025, the CCA of his car will be calculated at 30%
multiplied by the capital cost of the car (subject to any deduction limitations).
He estimates that he will drive 38,000 kilometres in the course of his employment, out of a total
of 45,000 kilometres.
Robby’s contract also requires him to maintain an office in his home, since no other office is
provided. Robby estimates his office occupies approximately 15% of his home (based on square
footage).
REQUIRED
Calculate Robby’s employment income for tax purposes in 2025, assuming all expenses are
reasonable and will be documented with receipts. Please justify any omissions you have made in
the calculations.
Question 2
Anita is a skilled tool and die worker employed with Car Parts Inc. Anita rents a home in north
Toronto, and Car Parts Inc. pays the $1,200 monthly rent on Anita’s behalf. Anita reimburses the
company for 25% of this amount ($300 per month).
Anita’s 2025 pay stub showed the following totals for the year:
Anita was also provided some fringe benefits from the company.
Anita’s work requires extensive travel, and she has owned an automobile since 2021. On April
1st 2021, her company provided her with an interest-free loan of $32,000 to purchase the
automobile, to be repaid annually over four years. She made her last repayment of $8,000 on
April 1st 2025. Assume the prescribed rate for employee loans was 5% during 2025.
During 2025, she drove her car for a total of 20,000 kilometres, of which 17,500 are
employment-related. Total operating costs of the vehicle was $7,280 and CCA on the vehicle
was $2,800.
REQUIRED
a) Calculate Anita’s employment income for tax purposes in 2025, assuming all expenses
are reasonable and will be documented with receipts. Please justify any omissions you
have made in the calculations.
b) If Anita received a $0.66/km allowance for her motor vehicle expenses with respect to
her employment-related travel, which is considered reasonable by the CRA, how would
this change your answer in part a)?
Question 3
Sylvanna is a national sales manager at Merche Tools Inc., a public corporation. In 2025, she
earned $78,000 in gross salary and $10,000 in commissions. From her paycheque, she deducted
$150 of charitable contributions to the Heart Foundation.
She incurred the following costs during the year with respect to her employment:
Sylvanna established an office in her home which she uses exclusively to meet with her
customers. The office represents approximately 10% of the square footage of her home.
Expenses incurred on her home include: Insurance of $1,000, Utilities of $1,500, and Property
Tax of $3,000.
Merche Tools Inc. provided her with a new van last year. The cost of the van (including HST)
was $36,000. The company paid $2,400 for 100% of the operating cost. Total kilometres driven
were 18,000 of which 9,900 were for personal use.
Merche Tools Inc. paid $150 in life insurance premiums for Sylvanna.
REQUIRED
Calculate Sylvanna’s employment income for tax purposes in 2025, assuming all expenses are
reasonable and will be documented with receipts. Please justify any omissions you have made in
the calculations.