Question1 Paiva uses a company credit card, under which loyalty points are earne

Question

Question1

Paiva uses a company credit card, under which loyalty points are earned. The company receives the bill and pays the credit card charges. The employer allows Paiva to redeem the points for her personal use. This year, Paiva redeemed these points for an airline ticket worth $1,000 in the open market. Which of the following statements is true?

1)

2)

3)

4)

Employees are not allowed to use loyalty points collected on an employer's credit card.

Question 2

Tad is working for a Canadian public company. In 2013, he was given an option to buy 100 shares at a price of $10 per share. He exercised his options in 2015 and bought 100 shares. In 2018, he sold all these shares for $20 per share. The market price of the shares was $12 in 2013 and $15 in 2015. What will be the tax implication in 2018?

1)

2)

3)

4)

Taxable capital gain - $250

Question 3

ABC Inc. provides Kelly with a company car. The car is leased for 500/month (including 13% HST and excluding insurance) and was made available to her for eight months. ABC pays all of the operating costs which amounted to $3,500. Kelly drove 13,000 kilometres of which 8,000 were for business. What is the minimum taxable benefit that Kelly must include on her personal tax return?

1)

2)

3)

4)

1)

Employers must include and report the $1,000 as a taxable benefit on Paiva's T4 slip.

2)

It is Paiva's responsibility to determine the fair market value of this benefit received and include it in income.

3)

CRA no longer requires these benefits to be included in an employee's income, as long as these points are not converted to cash.

4)

Employees are not allowed to use loyalty points collected on an employer's credit card.

Question 2

Tad is working for a Canadian public company. In 2013, he was given an option to buy 100 shares at a price of $10 per share. He exercised his options in 2015 and bought 100 shares. In 2018, he sold all these shares for $20 per share. The market price of the shares was $12 in 2013 and $15 in 2015. What will be the tax implication in 2018?

1)

Employment income -$500

2)

No implication

3)

Taxable capital gain - $500

4)

Taxable capital gain - $250

Question 3

ABC Inc. provides Kelly with a company car. The car is leased for 500/month (including 13% HST and excluding insurance) and was made available to her for eight months. ABC pays all of the operating costs which amounted to $3,500. Kelly drove 13,000 kilometres of which 8,000 were for business. What is the minimum taxable benefit that Kelly must include on her personal tax return?

1)

$2,200 rounded

2)

$4,850 rounded

3)

$3,517 rounded

4)

$1,500 rounded

Explanation / Answer

Answer 1. Statement 1) is True.

As per CRA, if the company control the points such as when an employee uses a company credit card, then it has to report on their T4 slip the fair market value of any personal rewards he or she received from redeeming the points.

Answer 2. Statement 3) is True.

As per CRA, in case of taxation of Stock options of Public companies,

On the date that you are granted or receive stock options in an employer that is a publicly listed company, you do not have a personal tax consequence. However, on the date that you purchase the shares, you will get a taxable benefit equal to the difference between the exercise price of the shares and the market value of the shares on that date.(i.e. 100 * (15-10) = $500)

After buying the shares, you have two choices: (A) You can immediately sell the shares or (B) You can hold onto them if you believe they will increase in value in the future. If you choose to hold onto the shares and sell them in the future for a profit, the profit made from the sale will be classified as a capital gain and subject to tax.

So in this case Taxable capital gain : 100 * (20-15) = $500

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