John Wilson is an insurance executive, employed by a quoted company – Carib Insurance Limited (CIL). His basic salary is $70,000 per month. In January 2013, his commissions were $20,000. Rent of $25,000 per month was paid directly to his landlord. John contributes 10% of his basic salary to a pension scheme operated by CIL. He drives a car owned by CIL which was purchased three years ago at a cost of $1,600,000. John’s private usage of the car outweighs his business usage. John received a loan of $2 million from CIL to purchase a lot of land on which he intends to build a home for himself. The interest rate on the loan is 7.5% and the applicable prescribed rate is 14%.
CIL has an approved ESOP. In June 2012 the employees of CIL agreed to purchase 5% of the share capital of 15 million shares of $1 each, that is, 750,000 shares. There are 70 employees in the plan. Each employee agreed to purchase 10,714 shares for $10,714. The shares are to be paid by monthly salary deductions over a period of 18 months ending December 2013.
Prepare a Schedule for January 2013 showing John Wilson’s
a. Total Emoluments (5 Marks)
b. Total Deductions (5 Marks)
c. Tax Computation (5 Marks)
Tax rate is 25%
Sample Solution