Ali was provided with a company car to drive from March 1^st to December 31^st of 2020.The car cost the company $22,000, plus GST (5%) and PST (6%).Ali drove the car a total of 15,000 kilometers during the year.11,000 kilometers were for business purposes and the other 4,000 kilometers were for personal use.Ali's employer paid for all of the vehicle's operating costs which totaled $1,100.What is the minimum amount that Ali 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 2020.) A)$1,172 B)$1,758 C)$2,212 D)$6,901

Question

Quizplus · Accepted Answer

First, we need to calculate the taxable benefit for the standby charge (availability of the car for personal use). The standby charge is calculated by multiplying the original cost of the car by 2.5% per month for each month the car was available to Ali. Since Ali had use of the car for the entire year, the standby charge will be calculated as follows:
$22,000 x 2.5% x 12 months = $6,600
Next, we need to calculate the taxable benefit for the operating costs. The operating cost benefit is calculated by multiplying the total operating costs by the percentage of personal use. Since Ali drove 4,000 km for personal use and a total of 15,000 km, the percentage of personal use is 4,000/15,000 = 0.267 or 26.7%. The operating cost benefit is calculated as follows:
$1,100 x 0.267 = $294
Finally, we need to calculate the total taxable benefit by adding the standby charge and the operating cost benefit:
$6,600 + $294 = $6,894
Since the answer should be rounded to the nearest dollar, the minimum amount that Ali will report in total taxable benefits is $6,894, which is closest to answer choice B ($1,758).

Ali Was Provided with a Company Car to Drive from March