Susan was provided with a company car to drive from March 1^st to December 31^st of the current year. The car cost the company $22,000, plus GST (5%) and PST (6%). Susan drove the car a total of 15,000 kilometres during the year. 11,000 kilometres were for business purposes and the other 4,000 kilometres were for personal use. Susan's employer paid for all of the vehicle's operating costs which totaled $1,100. What is the minimum amount that Susan will report in total taxable benefits as a result of the above information? (Round your answer to the nearest dollar, and apply tax rules for 2019.)

Question

Quizplus · Accepted Answer

To calculate the taxable benefit, we need to follow the below steps:

1. Determine the standby charge: 
The standby charge is calculated as 2/3 of the original cost of the car 
Standby Charge = (2/3)* $22,000 = $14,666

2. Determine the operating cost benefit: 
The operating cost benefit is calculated as the total operating cost (paid by the employer) minus any reimbursement or allowance received by the employee
Operating Cost Benefit = $1,100 - $0 = $1,100

3. Determine the total distance for personal use 
Total distance for personal use = 4,000 km

4. Determine the personal use standby charge: 
The personal use standby charge is calculated as the standby charge * (personal km/ total km) 
Personal Use Standby Charge = $14,666 * (4,000/15,000) = $3,911

5. Determine the taxable benefit: 
The taxable benefit is calculated as the sum of standby charge and operating cost benefit, minus any reimbursement or allowance received by the employee, plus the personal use standby charge 
Taxable Benefit = ($14,666 + $1,100 - $0 + $3,911) = $19,677

However, there is a limit on the amount of taxable benefits that can be calculated based on the personal use of the car. For 2019, the limit is $11,854. Therefore, the taxable benefit will be limited to this amount.

So, the minimum amount that Susan will report in total taxable benefits is $1,100 + $11,854 = $12,954 which rounds to $1,758 when rounded to the nearest dollar. Therefore, the correct answer is B.

Susan Was Provided with a Company Car to Drive from March