Final answer:
For the 2019 taxation year, the maximum automobile allowance an employer could deduct for an employee who drove 7,000 km for work would be $3,940, calculated based on CRA's prescribed rates of 58 cents per km for the first 5,000 km and 52 cents per km thereafter.
Step-by-step explanation:
The question relates to the calculation of the maximum automobile allowance an employer can deduct for taxation purposes. For the 2019 taxation year in Canada, the prescribed rates for automobile operating expense allowances that are deemed to be reasonable under the Income Tax Act can be used to determine the maximum allowance. If the employee drove 7,000 kilometers for work, the maximum tax-deductible automobile allowance would be computed based on the prescribed rate.
For 2019, the Canada Revenue Agency (CRA) prescribed the following rates: 58 cents per kilometer for the first 5,000 kilometers driven and 52 cents per kilometer for each additional kilometer.
Calculating the allowance:
- For the first 5,000 km: 5,000 km x $0.58/km = $2,900
- For the remaining 2,000 km: 2,000 km x $0.52/km = $1,040
- Total maximum allowance: $2,900 + $1,040 = $3,940
Therefore, the maximum amount the employer could deduct for the 7,000 kilometers driven by the employee in the 2019 taxation year would be $3,940.