Your roommate John is an employee at a property management company. His employer asks him to travel to a remote town in Yukon to meet with a prospective client.
A. Accommodation
Not knowing what type of accommodation would be available, John and his employer agree in
advance to pay John $300 for the 3-night accommodation in Yukon. Because of the high cost of living
in Yukon, John actually spends $400.
B. Parka for Extreme Cold
Yukon happens to be experiencing a record cold period, with temperatures as low as -40C. Since John
does not have any outerwear suitable for such severe weather, his employer also gives him $200 to
buy a a very warm parka jacket. After receiving the $200, John manages to find one on sale for
$198.99 that is perfect for the business trip. Assume John is very adverse to cold weather and plans
never to go to any place that cold or wear that jacket again after this business trip.
Required:
Explain to John the tax effects of the two events on his employment income. Note that your grade is
based on how you explain the tax treatment, demonstrating your understanding of the tax framework
and relevant provisions. Almost no mark is given just on comments such as "include $x" or "deduct
$y".