Mortgage Calculation and Taxation

Mortgage Calculation and Taxation

Case Study Analysis 

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Question #1 (5 marks)

Using the four tests, analyze Matt’ situation.  Do you think Matt should be considered an employee or an independent contractor?  Why?

When a customer applies for a mortgage, the lender (financial institution) requires a real estate appraisal to determine the value of the property and, therefore, how much money they are willing to lend.  The appraiser visits the property and looks at the quality of the construction, the size of the home and the neighbourhood, among other things, to determine the value.  This value forms the basis for the lending agreement.

Matt has been working as a real estate appraiser for 25 years. Because of his years of experience, Matt is very good at his job.  He has been self employed the entire time.  All of Matt’s work comes from a long time friend and colleague , Ty, who runs a mortgage brokerage business.  Ty knows he can depend on Matt.  Since the referrals from Ty keep him as busy as he can manage, Matt does not advertise his services.  Matt has young children and likes to help around the house in the mornings before school and sometimes pick his kids up from school in the afternoon.  Matt schedules the appointments himself and uses his own car to travel to the houses for appraisals. He purchased a Ford Explorer since he brings a large ladder to the appraisals.

Matt has his own bookkeeper and maintains office space in his home where he writes up the appraisal reports before sending them to Ty.  Other than office equipment and supplies, his only other expense has been the purchase of several pairs of work boots over the years.  Once a month, Matt sends an invoice to Ty to bill $500 for each completed appraisal.  When Ty goes on vacation, Matt is less busy with referrals and uses the time to tackle projects around the house.

Ty’s mortgage brokerage relies on real estate appraisals in order to complete lending contracts with home buyers.  Ty works with a few independent real estate appraisers in a similar arrangement to the one he has with Matt.



Question #2 (10 marks)

Using the information about Lydia provided below, please calculate Lydia’s Employment Income for the tax year 2022 using the formula studied in class.  For items not included, explain your reason for not including them.

Your mother told her friend Lydia that you are taking a tax planning course.  It is now December 31, 2022.  Lydia works for a publicly traded software company and has generous salary and benefits.  Lydia is not very good with her finances and has some questions about her employment income for 2022.  She has asked you for help.  Here is the information Lydia has provided.

  • Lydia’s salary for 2022 was $84,363.
  • Her bonus for 2022 was $12,000 – half was paid November 1st, 2022. The balance will be paid on January 1st, 2023.
  • She received an Amazon gift card worth $400 for completing a deal.
  • She drove 76 km to deliver something for her boss and was compensated with $70 for mileage and lunch.
  • She was granted stock options for 80 shares in 2020. The exercise price was $22 and the market value of the company’s shares was $26.  She exercised the options in 2022 when the share price was $31.
  • Lydia receives a car allowance of $800 per month.
  • She is a member of the company pension plan and makes contributions in 2022 of $4,218.
  • The company has an onsite gym for use by employees. The fair market value of the gym membership is $660/year.
  • Lydia’s employer pays the premiums for group life insurance ($30 per month) and for health insurance ($42 per month)


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