FMGT 2325 – Mid-Term Exam

Fall – 2010 – FMGT 2325 – Mid-Term Exam

Question: 1
Ms. Marcy Van Horne is employed by a large public corporation and her 2010 salary is $126,000. In addition to her annual salary, she received a performance bonus of $25,000, one­half of which will be paid in 2010, with the remaining one­half not due until July 1, 2011. In addition to her salary, she earns commissions of $32,000 during 2010.
During 2010, Ms. Van Horne’s employer withheld the following amounts from her compensation:
EI Premiums
$ 747
CPP Contributions 2,163
RPP Contributions 7,400
Life Insurance Premiums (Employer Makes
A Matching Contribution)550
Ms. Van Horne is divorced and has custody of her two children. They are aged 12 and 17. The 12 year son has 2010 income of $2,500. The 17 year old daughter is in full time attendance at a university during 8 months of the year. Ms.
Van Horne pays her annual tuition of $7,000. The daughter has summer income of $4,500 and has agreed to transfer her education related credits to her mother. Also living with Ms. Van Horne is her 68 year old father who helps with maintenance of the house. Although his Net Income For Tax Purposes for 2010 totals only $8,000, he has supplemented his income for years with his casino winnings.
Other Information:
1.

Ms. Van Horne is provided with an automobile by her employer. During 2010, it is driven 48,000 kilometres, of which
42,500 are employment related. The automobile is leased by the employer at a monthly rate of $728, including GST of $30 and PST of $48. The monthly rate also includes a payment for insurance of $50 per month. The automobile is available to Ms. Van Horne for 11 months during 2010.

2.

Ms. Van Horne incurred the following employment related expenses during 2010:
Advertising $5,600
Entertainment
9,000
Meals
2,400
Hotels
8,400
Airline Tickets
3,400
Total Expenses

$28,800

Ms. Van Horne’s employer reimburses all of her meal costs and one­half of her hotel bills. No other expenses were reimbursed. 3.

During 2009, Ms. Van Horne was granted options to acquire 5,000 shares of her employer’s common shares at an option price of $25 per share. This was also the market value of the shares at this time.
During July, 2010, Ms. Van Horne exercises all of the options at a point in time when the shares were trading at $31 per share. She is still holding the shares at the end of the year.

4.

Ms. Van Horne buys monthly transit passes for both of her children during the school year. The cost is $45 per month per child. Passes were purchased for 9 months during 2010.

5.

During 2010, Ms. Van Horne gives total cash of $1,800 to a variety of registered charities.

6.

Also during 2010, Ms. Van Horne donates $300 to each of the three federal political parties.

Fall – 2010 – FMGT 2325 – Mid-Term Exam
7.

During 2010, Ms. Van Horne pays for the following eligible medical costs:
For Herself $ 850
For Her Two Children
For Her Father
3,940

1,480

Total Medical Costs $6,270
Required:
A. Determine Ms. Van Horne’s minimum Net Income For Tax Purposes for the 2010 taxation year.
B. Determine Ms. Van Horne’s minimum Taxable Income for the 2010 taxation year.
C. Based on your answer in Part B, determine Ms. Van Horne’s federal Tax Payable for the 2010 taxation year. Indicate any carry forwards available to her and her dependants and the carry forward provisions. Ignore any amounts that might have been withheld by her employer or paid in instalments.