Exam 1: Tools for Financial Planning - Using Tax Concepts for Planning

Ralph has total income of $53 000.He has business expenses of $18000,made a $5000 RRSP contribution and incurred $4000 in tuition expenses for his daughter,who did not work and is a freshman at a local community college.Personal basic exemptions of $11 138 and a marginal tax rate of 26 percent apply.Compute Ralph's taxable income for the current year.

An investor who receives $10 000 interest will pay higher taxes than one who receives $10 000 from eligible dividends.

For people in the highest marginal tax bracket,which would save them the largest financial benefit?

Which would reduce taxes the most for a high income earner (income over $100000)?

Organizing your records to take advantage of tax credits and deductions and investing in tax sheltered accounts like RRSPs and TFSAs are the best ways to avoid taxes.

Which of the following is an acceptable method of reducing your tax bill for the current year?

Interest expense paid on home loans and car loans is deductible from your income tax.

You have a salary of $30 000,an RPP deduction of $2 000,paid $1 000 interest on your mortgage and paid union dues of $800.If the basic personal amount is $11 635 and the federal tax rate is 15 percent,what federal tax do you owe?

Which of the following is not taxable income?

Interest income would come from earnings on

John has been told that he should not take any overtime because it will push him into the next tax bracket.Which of the following is true?

When considering allocating funds to a TFSA account versus an RRSP account,which of the following is least critical?

Which of the following is not typically a legitimate tax deduction in Canada?

Interest paid on a qualified student loan can be used to reduce tax owing through a tax credit.

A capital gain results from profit on the sale of capital assets.

Even if you haven't paid any tax during the year (i.e.through withholdings or directly),it is beneficial to file a tax return because

You are being paid on a base pay,commission,and bonus incentive compensation package.The economy can have a lot to do with how much you earn in a year as well as your personal efforts to improve sales and increase your customer base.Your employer is very flexible as to when and how it makes incentive payments to you.For instance,it can have a profit sharing plan which involves stock options and is flexible on when it will distribute profits and bonuses. Recent forecasts indicate that the economy will slow down next year and you have a sizable commission cheque and bonus payments owed to you this year.Under these circumstances,what would be your tax planning tactics to reduce taxes?

List your total income,deductions,taxable income,number of deductions,and tax credits to arrive at taxable income and taxes payable.Make up an example if you don't want to supply your own figures.Explain the overall process.

If George is 65 and in a combined marginal tax bracket of 42 percent,then

Knowledge of individual income taxes is somewhat relevant to financial planning.