Question

Irene is interested in the tax impact of various transactions. Please review the information provided in the exhibit and determine the taxable benefit for Irene for the following items: You MUST show your detailed calculations in excel. Do NOT copy and paste from a past excel. Exhibit I Part a: Irene has been provided with an automobile owned by her employer. She uses the vehicle for both employment and personal purposes. • The original cost = $36,000. • The employment kilometers driven = 12,000. • The personal kilometers driven = 5,600. • The automobile was available to Irene for eleven months of the year. Irene wishes to know the amount of any taxable benefits associated with her use of the automobile for 2022. Part b: Irene was granted an option to acquire 11,000 of her employer's shares on January 1, Year 1, when the exercise price was $41, and the fair value was $43 per share. During Year 2, Irene exercised her option to acquire all 11,000 shares. At the time she exercised her option, the shares were trading at $50 per share. In Year 3, Irene sold 5,000 of the shares at a selling price of $56 per share. Scenario I Assume Irene's employer is a Canadian public company. Determine the impact of these transactions on Irene's net income for tax for each year. Scenario II Assume Irene's employer is a CCPC. Determine the impact of these transactions on Irene’s net income for tax for each year. Part c: Irene purchased a new house in May of 2022. Under the terms of her employment, she received a $300,000 housing loan on April 1st at a stated interest rate of 2%. She pays interest on the loan monthly. The prescribed interest rates for this type of transaction are the following: Q1 – 4%; Q2 – 5%; Q3 – 4%; Q4 – 6%. Irene paid her December 2022 monthly interest payment on January 15, 2023. Determine the taxable benefit associated with the employer loan.

Answer 1

To determine the taxable benefit for Irene in each scenario, calculations for the standby charge and operating cost benefit for an employer-provided automobile, the employment benefit of a stock option grant, and the imputed interest on an employer loan must be made.

Step-by-step explanation:

In Part a, to determine the taxable benefit for Irene for her use of the automobile, we need to calculate the standby charge and operating cost benefit. The standby charge is calculated by multiplying the original cost of the automobile by 2% per month for eleven months.

The operating cost benefit is calculated by multiplying the total personal kilometers driven by the prescribed rate per kilometer for the year. The sum of the standby charge and the operating cost benefit is the taxable benefit for Irene for 2022.

In Part b, to determine the impact of the share transactions on Irene's net income for tax, we first need to calculate the employment benefit of the option grant. This is calculated by multiplying the fair value of the shares at the time of exercise by the number of shares.

The difference between the fair value of the shares at the time of exercise and the exercise price is included in Irene's income for tax purposes. In Year 3, the sale of the shares will result in a capital gain or loss, which will also impact Irene's net income for tax.

In Part c, to determine the taxable benefit associated with the employer loan, we need to calculate the imputed interest on the loan.

This is calculated by multiplying the loan amount by the difference between the prescribed interest rate for each quarter and the stated interest rate of 2%. The sum of the imputed interest for each quarter is the taxable benefit for Irene.