(Get Answer) – TVM and Tax questions TVM and Tax questionsAssignment 1Instructions:Each group must submit the assignment to the instructor at the beginning of class on the date the assignmentis due. When completing your assignment, please observe the following rules and guidelines:1. Textual portions must be typed and double-spaced. This does not include variables, labels and brief notesof explanation. Use at least one inch margins all around.2. Double-sided is preferred, if you can do it with your printer.3. Use 8 ½ X 11 paper only.4. Do not use report covers.5. Staple your assignment prior to handing it in.6. Be sure to write clearly your names, student numbers, section, and due date on the cover page.7. Spelling and grammar will affect your marks.8. No assignments will be accepted after the last class.Problem #1: Tax Planning (40 marks)You will need to find specific information, including basic personal tax credit amounts, specific tax creditallowances and 2014 tax brackets from the Canada Revenue Agency website (http://www.cra-arc.gc.ca). Thefollowing information is for Monique Cadieux, a single mom with two children (ages 6 and 9) who lives inCollingwood, Ontario. Monique is a grade 5 teacher at a local French immersion school earning an annualsalary of $72,000 a year. She would like some help filing her taxes and has documented everything she thinksshould be included below:• She received child support payments from the children’s father totaling $9600.• She received spousal support pursuant to a separation agreement totaling $12,000 for the year.• She contributed $8,000 to her RRSP in 2014; her total RRSP account has $77,590.• In her investment account, she sold her shares in the Canadian Banks because she was concernedabout their heavy involvement in mortgage lending and oil.o She sold 500 shares TD $50.76. The costs basis for these shares was $44.50.o She sold 200 shares RY $75.52. The costs basis for these shares was $65.55.o She sold 300 shares BNS $60.58. The costs basis for these shares was $50.01.o She sold her 500 shares in ENB at a loss. The cost basis for the shares $56.90 and she soldthem for $52.55o Before selling her bank stocks, each paid out dividends as follows: TD paid $1.50/share, RYpaid $2.00/share, BNS paid $.95/share and ENB $.60.• She has a non-registered savings account with TD. She earned $260 in interest during the year. Shealso has a TFSA that earned $120 in interest2• She made a charitable contribution to United Way for $500.• Both of her children played in a hockey league for which she paid $600 for the year ($300 per child).Her daughter took up skate skiing which cost $800 for the year. Her son took cello lessons for whichshe paid $400. There were also both enrolled in art camp for the summer which cost $1000 ($500 foreach child). In addition, tennis lessons for both children cost her $400 ($200 per child). Assume all ofthese expenses are “eligible” for the purposes of the CATC (http://www.craarc.gc.ca/gncy/bdgt/2011/qa01-eng.html) and the Children’s Fitness Amount (http://www.craarc.gc.ca/fitness/)• She paid $4500 in child care expenses for the year.• Her son got braces for which she paid $1800 to the orthodontist and daughter needed new eyeglassesfor which she paid $325.1) Using the information above, answer the following questions:a) What is her total taxable income (not including investments)? (3 marks)b) What is the total amount of her federal tax credits? You can use Form T1, Schedule 1 (Appendix Aof this assignment) to calculate her tax credits. Note that you can use the form, but it is not required.(10 marks)c) What is the total amount of her federal taxes paid (excluding investments)? (4 marks)d) What is her marginal federal tax rate? (1 mark)2) Calculate her provincial taxes. You do not have to calculate her provincial tax credits, but assume theytotal $1400 for the year.a) What are her total provincial taxes paid? (4 marks)b) What is her marginal provincial tax rate? (1 mark)3) How much tax does she pay on her investment income and interest in 2014? (15 marks)4) What is the total amount of taxes she paid for the year? (1 mark)5) What is her average tax rate? (1 mark)3Problem 2: Retirement Planning (25 marks)Muhammad Sheikh has taken a personal finance class so he knows the benefits of saving early for retirement.He wants to know how much he should be saving each year from his paycheck so that he will be ready forretirement at in 40 years. He has no savings to speak of and makes $60,000 a year. He expects raises of 2%each year for the next 7 years at which point he thinks he will be promoted to middle management whichcomes with a 25% pay raise. After that, he expects to continue with his 2% raises until he retires (last day ofyear 40). His company has a forced 10% retirement savings plan, so he will contribute 10% of his salary eachyear. He estimates that he will need 70% of his final year salary to live on in retirement and expects to live for20 years after he retires. Assume his savings deposits occur each year at the end of the year and his retirementwithdrawals occur each year at the start of the year. This means he makes his last retirement deposit the dayhe retires (last day of year 40), and then makes his first withdrawal on the first day of year 41. He then makes20 withdrawals at the start of each year until he hopes he dies with not a penny to his name. He earns 3%nominal on his investments before tax, and everything in this problem is calculated in nominal pre-tax dollars.Assume inflation in his retirement years will be 1.5%a) How much does Muhammad need to have saved by his retirement date at Age 68? (8 marks)b) How much will Muhammad have saved by the time he is 68? (8 marks)c) Will Muhammad achieve his goal? If not, provide Muhammad with three alternatives to help himachieve his goal. The alternatives must be both reasonable and specific. (9 marks)4Question 3: Car Financing (25 marks)Use the following information to find the best deal on a new car. You are interested in buying a Honda Civicand have looked around for the best financing deals. For each of the scenarios below, calculate the totalfinance charges and total cost of ownership. Assume you have an investment account earning an 8% EAR,where you can invest any money that is not going to car payments. Note that for each option, the totalamount financed is the price of the car plus the destination charge. You must also include HST (13% in allcalculations where HST is applicable – and it’s pretty much applicable on all charges).1. A financed price of $18,750, plus $1,495 destination charge. The dealer will offer financing at .99%EAR, compounded monthly, for 36 months. At the time of the loan you also owe $147.85 in fees,which will not be financed but due at the time you take the car off the lot. Payments are due at thestart of the month.2. A cash purchase price of $17,795, plus $1495 destination charge. Assume you do not have the cashset aside to pay for this, so will need to get financing from a bank at a rate of 6.5% EAR,compounded monthly and will finance the car over 3 years (36 months). At the time of the loan youalso owe $147.85 in fees. Payments are due at the start of the month.3. You can choose to lease the car with the same purchase price as the financed option ($18,750). Feesassociated with the lease include the same destination change ($1,495), a lien registration fee ($27.85),and license/transfer fee of $120. The monthly payment will be $321.56 for 36 months and theresidual value is $11,085.20.Find the total cost of each option (show your analysis), choose one of the options and justify youranswer.Protected B when completedT1-2014 Federal Tax Schedule 1Complete this schedule, and attach a copy to your return.For more information, see the related line in the guide.Step 1 – Federal non-refundable tax creditsBasic personal amount claim $11,138 300 1Age amount (if you were born in 1949 or earlier) (use the federal worksheet) (maximum $6,916) 301+ 2Spouse or common-law partner amount (attach Schedule 5) 303+ 3Amount for an eligible dependant (attach Schedule 5) 305+ 4Amount for children born in 1997 or later366Number of children for whom you are not claimingthe family caregiver amount × $ = 5352Number of children for whom you are claimingthe family caregiver amount × $ = + 6367 7 Add lines 5 and 6. = +Amount for infirm dependants age 18 or older (attach Schedule 5) 306+ 8CPP or QPP contributions:308 •9through employment from box 16 and box 17 of all T4 slips(attach Schedule 8 or Form RC381, whichever applies) +on self-employment and other earnings (attach Schedule 8 or Form RC381, whichever applies) 310+ •10Employment insurance premiums:through employment from box 18 and box 55 of all T4 slips (maximum $913.68) 312+ •11on self-employment and other eligible earnings (attach Schedule 13) 317+ •12Volunteer firefighters’ amount 362+ 13Search and rescue volunteers’ amount 395+ 14363 15Canada employment amount(If you reported employment income on line 101 or line 104, see line 363 in the guide.) (maximum $1,127) +Public transit amount 364+ 16Children’s fitness amount 365+ 17Children’s arts amount 370+ 18Home buyers’ amount 369+ 19Adoption expenses 313+ 20Pension income amount (use the federal worksheet) (maximum $2,000) 314+ 21Caregiver amount (attach Schedule 5) 315+ 22Disability amount (for self) (claim $7,766 or, if you were under 18 years of age, use the federal worksheet) 316+ 23Disability amount transferred from a dependant (use the federal worksheet) 318+ 24Interest paid on your student loans 319+ 25Your tuition, education, and textbook amounts (attach Schedule 11) 323+ 26Tuition, education, and textbook amounts transferred from a child 324+ 27Amounts transferred from your spouse or common-law partner (attach Schedule 2) 326+ 28330 29Medical expenses for self, spouse or common-law partner, and yourdependent children born in 1997 or laterEnter $2,171 or 3% of line 236 of your return, whichever is less. – 30Line 29 minus line 30 (if negative, enter “0”) = 31331 32Allowable amount of medical expenses for other dependants(do the calculation at line 331 in the guide) +332 33 Add lines 31 and 32. = +Add lines 1 to 4, 7 to 28, and line 33. 335= 34Federal non-refundable tax credit rate × 35Multiply line 34 by line 35. 338= 36Donations and gifts (attach Schedule 9) 349+ 37Total federal non-refundable tax credits 350 38Add lines 36 and 37.Enter this amount on line 50 on the next page. =Go to Step 2 on the next page.5000-S12,2554,31315%Protected B when completedStep 2 – Federal tax on taxable incomeEnter your taxable income from line 260 of your return. 39Complete the appropriate columndepending on the amount on line 39.Line 39 is$43,953 or lessLine 39 is morethan $43,953 butnot more than$87,907Line 39 is morethan $87,907 butnot more than$136,270Line 39 is morethan $136,270Enter the amount from line 39. 40– – – – 41Line 40 minus line 41 (cannot be negative) = = = = 42× × × × 43Multiply line 42 by line 43. = = = = 44+ + + + 45Add lines 44 and 45. = = = = 46Go to Step 3. Go to Step 3. Go to Step 3. Go to Step 3.Step 3 – Net federal taxEnter the amount from line 46. 47Federal tax on split income (from line 5 of Form T1206) 424+ •48404 49 Add lines 47 and 48. =350 50Enter your total federal non-refundable tax creditsfrom line 38 on the previous page.Family tax cut (attach Schedule 1-A) 423+ •50AFederal dividend tax credit 425+ •51Overseas employment tax credit (attach Form T626) 426+ 52Minimum tax carryover (attach Form T691) 427+ •5354 Add lines 50 to 53. = –Line 49 minus line 54 (if negative, enter “0”) Basic federal tax 429= 55Federal foreign tax credit (attach Form T2209) 405– 56Line 55 minus line 56 (if negative, enter “0”) Federal tax 406= 57409 58Total federal political contributions(attach receipts)410 •59Federal political contribution tax credit(use the federal worksheet) (maximum $650)Investment tax credit (attach Form T2038(IND)) 412+ •60Labour-sponsored funds tax creditNet cost 413 Allowable credit 414+ •61416 62 Add lines 59, 60, and 61. = –417 63Line 57 minus line 62 (if negative, enter “0”)If you have an amount on line 48 above, see Form T1206. =415 •64Working income tax benefit advance payments received(box 10 of the RC210 slip) +Special taxes (see line 418 in the guide) 418+ 65Net federal tax 420 66Add lines 63, 64, and 65.Enter this amount on line 420 of your return. =5000-S1 See the privacy notice on your return.0.00 43,953.00 87,907.00 136,270.0015% 22% 26% 29%0.00 6,593.00 16,263.00 28,837.00PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT ?
