Kate Bell was employed by The Tea Shop (a Canadian controlled private corporation)from January December of 20x4. She earned a gross salary of $72,000.
She had the following deductions from her pay during the year: The following amounts were paid by The Tea Shop in 20x4 on Kate's behalf: Additional information:
On January 15, 20x2, Kate was given an option to purchase 500 shares of The Tea Shop for $5.00 pe The market value of the shares on that date was $5.50. Kate exercised her option on June 1, 20x3 wh shares were valued at $7.00. She then sold the shares on March 17, 20x4 when the market value was share.
Kate pays $50 a month for her cell phone which she uses to keep in touch with friends and family. S pays $80 a month to dry-clean her suits, and she purchases a new suit for $200 every three months. K purchased $300 worth of merchandise (at cost)from her employer during the year. The retail value o merchandise was $500.
Kate contributed $1,000 to her RRSP during the year. Required:

Question

Kate Bell was employed by The Tea Shop (a Canadian controlled private corporation)from January December of 20x4. She earned a gross salary of $72,000.
She had the following deductions from her pay during the year:  The following amounts were paid by The Tea Shop in 20x4 on Kate's behalf:  Additional information:
On January 15, 20x2, Kate was given an option to purchase 500 shares of The Tea Shop for $5.00 pe The market value of the shares on that date was $5.50. Kate exercised her option on June 1, 20x3 wh shares were valued at $7.00. She then sold the shares on March 17, 20x4 when the market value was share.
Kate pays $50 a month for her cell phone which she uses to keep in touch with friends and family. S pays $80 a month to dry-clean her suits, and she purchases a new suit for $200 every three months. K purchased $300 worth of merchandise (at cost)from her employer during the year. The retail value o merchandise was $500.
Kate contributed $1,000 to her RRSP during the year. Required:

Quizplus · Accepted Answer

The Answer is A)

A) Omitted items: Employer's portion of CPP, EI Income tax deducted Employer's contribution to RPP - specifically exempt Kate's CPP, EI - deduction not allowed, eligible for non-refundable tax credit Cell phone, dry-cleaning, suits - not deductible - personal expenses Merchandise at cost-tax-exempt benefit B)The shares are from a Canadian controlled private corporation. Therefore, Kate either has to hold the shares for two years after acquisition, or the option price must be equal to or greater than the fair market value at the option date. Neither of these requirements has been met. Therefore, Kate will not be able to deduct the stock option deduction in arriving at her taxable income.

Omitted items:

Employer's portion of CPP, EI Income tax deducted
Employer's contribution to RPP - specifically exempt

Kate's CPP, EI - deduction not allowed, eligible for non-refundable tax credit Cell phone, dry-cleaning, suits - not deductible - personal expenses
Merchandise at cost-tax-exempt benefit
B)The shares are from a Canadian controlled private corporation. Therefore, Kate either has to hold the shares for two years after acquisition, or the option price must be equal to or greater
than the fair market value at the option date. Neither of these requirements has been met.
Therefore, Kate will not be able to deduct the stock option deduction in arriving at her taxable income.

Kate Bell Was Employed by the Tea Shop (A Canadian