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Question #3Ms

Finance

Question #3Ms. Latricia Mode has worked diligently for a small company in Edmonton for several years, but has becomeincreasingly dissatisfied with her progress in the organization.  After the president’s totally incompetent daughterwas promoted, she resigned as of May 1, 2019.She had already been searching for a new position and, after a much needed vacation in Europe, she found a positionin Winnipeg that offered her outstanding opportunities for promotion.  After some negotiation about benefits, sheagreed to accept the position at a starting salary of $4,000 per month.  She assumed her new duties on November 1,2019.After accepting the job, Latricia listed her Edmonton house for sale and flew to Winnipeg in order to find livingquarters.  After 3 days she purchased a suitable house that would be available on October 28.  In order to acquirefurnishings, she remained in Winnipeg an additional 4 days after the acquisition.  Her expenses for this 7 day tripwere as follows:Air Fare (Edmonton - Winnipeg, Return) $  586 Car Rental (7 Days At $45) 315 Hotel (7 Nights At $122) 854 Food (7 Days - Total) 455 Her house proved difficult to sell because a safe injection site had opened across the street and many homes in herneighbourhood were for sale. The one offer she received wanted possession on October 1. Reluctantly, she acceptedthe offer.On October 1, Latricia supervised the final packing of her property and its removal from the old house.   She thenspent 2 days in an Edmonton hotel while she finalized arrangements for her departure.  Expenses during these 2 dayswere as follows:Hotel (2 Nights At $115) $230 Food (2 Days - Total) 26 On   October   3,   she   leaves   Edmonton   by   automobile,   arriving   in   Winnipeg   on   October   7.   The   trip   is   1,304kilometers.   As her new residence is not yet available, she lives in a hotel in Winnipeg until October 28.   Herexpenses for the period October 3 through 28 are as follows:Gasoline Purchased During The Trip $  297Hotel (4 Nights En Route+21 Nights In Winnipeg At $135) 3,375Food (25 Days - Total) 1,820She received the following statements from her attorney:Real Estate Commission - Old Home  $ 16,800 Legal Fees - Old Home 1,800 Unpaid Property Taxes On Old Home To Date Of Sale  1,350 Legal Fees - New Home 1,950 On moving into the new residence, Latricia is required to pay the moving company a total of $2,850.    This feeincludes $725 for the 23 days of storage required because the new home was not available when the furnishingsarrived.Latricia’s only income for 2019 was employment income and the net amounts to be included in her Net Income ForTax Purposes are as follows:Old Job (4 Months) $14,000 New Job (2 Months) 8,000 Net Employment Income $22,000

Latricia’s new employer did not provide any reimbursement for moving expenses.  Latricia will use the simplifiedmethod of determining vehicle and food costs in calculating her moving expenses.  Assume that the relevant flat ratefor vehicle expenses is $0.58 and the flat rate for meals is $51 per day

 

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Costs for food and lodging at or near an old or new residence are limited to a maximum period of 15 days.  Only thecost of meals and lodging that were incurred in the 4 days after the acquisition of the new residence would beeligible.  The airfare, the cost of car rentals, and the cost of meals and lodging prior to the acquisition of the newresidence would not be deductible.  Latricia has a total of 27 eligible days:  4 days on her first trip to Winnipeg, the 2 days in Edmonton and 21 daysduring which she lived in a hotel on arriving in Winnipeg.  Note that the 4 days spent travelling to Winnipeg are notincluded in the 15 day total.As the hotel in Winnipeg in October is the most expensive, she will deduct all 15 days using a $135 per night rate.The allowable moving expenses can be calculated as follows:First Trip Hotel And Food  Nil Selling Costs Of Old Residence ($16,800 + $1,800)  $18,600 Acquisition Cost Of New Residence   1,950 Edmonton Hotel And Food  Nil Expenses Of Travel To Winnipeg:Alberta Vehicle Rate [(1,304 @ $0.58) $756 Hotel (4 Nights At $135) 540 Food (4 Days At $51 Flat Rate)   204       1,500 Moving Company Fees 2,850 Hotel And Food In Winnipeg [15 Days/Nights At $186 ($135 + $51)] 2,790 Total Allowable Expenses  $27,690 Employment Income In New Location (  8,000)Carry Forward Of Moving Costs  $19,690 Notes:1. The vehicle flat rate used is the one for the province from which the move began.2. The taxes on the old home to the date of sale would not be an allowable moving expense.3. The storage costs are deductible.4. The unused moving cost balance of $19,690 can be carried forward and applied against employment incomeearned at the new location in a subsequent year.

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