Solutions to Tax assignment problems.

1. Assignment Problem 3-4
Company owned vehicle= Standby formula= 2%* cost of car * (days available/ 30)
Cost of vehicle= includes HST= $42,000 (no maximum cost)
Case A
Use is 11 months or 330 days
Business use = (48,000-4,000) = 44,000/48,000=92%
Reduced standby charged allowed as business use exceeds 50%.
Reduced formula (standby charge)
2%* cost of car * (days available/ 30) * personal use km’s
1,667* months available
Calculation
2%*42,000*11* 4,000/18,337
= 9,240* 4,000/18,337
= $2,016
Operating Benefit= reduced charge ½ standby charge- reimbursements
=1/2* 2,016
= $1,008
Lessor of :
½ standby charge or $.27* personal use km’s (4,000*$.27)=$1,080
Total taxable auto benefit= $2,016+1,008=$3,024

2. Case B
Only available for 10 months, 11,000 business use
Business use = (48,000-23,000) = 25,000/48,000=52%
Reduced standby charged allowed as business use exceeds 50%.
Reduced formula (standby charge)
2%* cost of car * (days available/ 30) * personal use km’s
1,667* months available
Calculation
2%*42,000*10* (23,000/(1,667*10months))
= 8,400* 16,667/16,667 (cannot exceed denominator!)
= $8,400
Operating Benefit= reduced charge ½ standby charge- reimbursements
=1/2* 8,400
= $4,200
Lessor of :
½ standby charge or
$.27* personal km’s= $6,210
Total taxable auto benefit= $8,400+4,200=12,600
Case C
Only have for 8 months and personal use is 44,000km’s
Business use = 4,000/48,000= 8%
Therefore no reduced standby charge or operating benefit allowed.
Standby Charge
2%*$42,000*8= $6,720
Operating benefit
$.27* 44,000=$11,880
Total benefit= $6,720+11,880= $18,600