Test bank solutions personal finance 6th canadian edition

Test Bank Solutions Personal Finance 6th Canadian Edition Kapoor Dlabay Hughes Ahmad Fortino 03 Student: The main purpose of taxes is to A B C D E create jobs reduce the chances of inflation generate revenue for funding government programs discourage use of certain goods and services decrease competition from foreign companies The use of legitimate methods to reduce one's taxes is tax A B C D E evasion avoidance exemptions deferred techniques reductions The A B C D E property tax is based on the value of land and buildings personal real estate direct proportional regressive An exemption affects a person's tax situation by: A B C D E increasing the standard deduction increasing the taxpayer's marginal tax rate decreasing itemized deductions reducing the taxpayer's taxable income increasing tax-exempt income Taxable income is used to compute a person's A B C D E exemptions income tax deductions tax credit exclusions Which of the following would result in a reduction of taxable income? A B C D E portfolio income tax credits union dues business income earned income Money received by an individual for personal effort is A B C D E earned or employment investment investment portfolio excluded capital gains Money received in the form of dividends or interest is A B C D E income business income earned or employment excluded capital gain investment Earnings from a limited partnership would be an example of A B C D E income income earned investment portfolio net business income excluded 10 Income that is not subject to income tax includes: A B C D E the GST/HST rebate the Canada child tax benefit gifts lottery winnings GST/HST rebates, Canada Child Tax benefits, gifts, and lottery winnings are not subject to income tax 11 Which of the following would be excluded from total income to obtain net income? A B C D E contributions to RPPs mortgage interest child support payments foreign income exclusion charitable contributions 12 Phillip Marnier had earnings from his salary of $40,000, interest on savings of $700, and a contribution to a registered retirement saving plan of $1,500 Phillip's net income would be A B C D E $39,200 $40,000 $39,300 $38,500 $41,500 13 Jack sold $20,000 worth of stocks that were purchased one year ago for $15,000 He is in a 22% tax bracket Jack's capital gains taxes are: A B C D E $500 $550 $1,100 $2,500 $4,400 14 Reductions from gross income for such items as registered retirement account contributions and RESP payments will result in A B C D E business income taxable income earned income net income total exclusions 15 Winning the lottery affects a person's tax situation by A B C D E increasing the standard deduction increasing the taxpayer's marginal tax rate decreasing itemized deductions increasing tax-exempt income having no influence at all on taxable income 16 Which of the following is a standard tax credit? A B C D E 17 A B C D E itemized deductions withholding an earned tax credit the basic personal amount capital gains are expenses that a taxpayer is allowed to deduct from total income Exemptions Exclusions Deductions Tax credits Passive income 18 An expense that would be included in the deductions of a taxpayer is A B C D E travel to work life insurance premiums union and professional dues a driver's license fee tuition fees 19 The basic personal amount is A B C D E the standard deduction a tax credit an itemized deduction an exclusion an exemption 20 A tax A B C D E is an amount subtracted directly from the amount of taxes owed credit exemption deduction exclusion shelter 21 Which of the following is an example of a tax credit? A B C D E mortgage interest amounts withheld for social insurance individual retirement account contributions caregiver and medical expenses net business income 22 A tax credit of $50 for a person in a 28 percent tax bracket would reduce a person's taxes by A B C D E $10 $28 $14 $50 $35 23 Most people pay federal income tax by A B C D E paying the total amount owed by April 15 filing quarterly tax payments having amounts withheld from source earning tax credits for various deductions cashing in their saving 24 Estimated quarterly tax installments must be made by those who A B C D E are employed in a foreign country receive dividends work for the government owe year-end taxes of over $2,000 for both the current year and either of the two preceding y years have been caught committing fraud 25 Which of the following people is least likely to have to file a federal income tax return? A B C D E a person earning $8,750 a person earning $10, 750 a person earning less than $9,600 a person over age 65 a college student 26 A person with a total tax liability of $4,350 and withholding of federal taxes of $3,975 would: A B C D E receive a refund of $4,550 owe $8,325 owe $375 receive a refund of $8,325 receive a refund of $375 27 The financial planning objective is to: A B C D E evade taxes minimize taxes maximize income maximize after-tax cash flows maximize tax credits 28 Jennifer made $2,000 worth of charitable donations Her total income is $36,000 and she is in the 22% federal tax bracket What is her charitable donations tax credit? A B C D E $320 $440 $552 $2,000 $5,760 29 Which type of tax expert would be of most value when you have a difference of opinion with the tax department? A B C D E an enrolled agent a nationally-chartered tax preparer a CA a tax accountant a tax attorney 30 Making use of legitimate methods to reduce one's taxes is called tax A B C D E evasion planning exemptions deferred techniques reductions 31 An example of a non-refundable tax credit is A B C D E interest on a credit card or charge account certain job-related travel expenses the cost of commuting to work life insurance premiums student loan interest fees 32 An example of a tax-exempt investment is A B C D E interest on Canada savings bonds dividends from corporate stock a gain on the sale of your home earnings from a mutual fund interest on corporate bonds 33 Capital gains refer to A B C D E tax-exempt investments profits from the sale of an investment asset gains from the sale of capital assets earnings from investments such as dividends or interest tax-deferred investments 34 Sheira Harvey worked in Poland for part of the year and earned $50,000 while she was there This income will not be included in her income for the year This represents: A B C D E A deduction An exclusion An exemption A tax credit An increase of income 35 An RPP differs from an RRSP in that A B C D E earnings on the RPP are tax free after five years contributions may exceed $2,000 in the RRSP an RRSP is set up by an employer for an employee An RPP is set up by an employer for an employee funds are only to be used for education expenses 36 An RRSP, RPP, and IPP are examples of A B C D E tax-exempt retirement plans tax-deferred retirement plans capital gains self-employment insurance programs job-related expenses that are tax deductible 37 "Grossed-up" Canadian dividends are multiplied by what amount in order to determine the level of taxable dividends? A B C D E 15% 18.97% 45% 50% 60% 38 Which of the following is a non-refundable tax credit? A B C D E Tuition and education amount GST and PST paid on purchases Moving expenses Life insurance premiums Basic personal amount 39 Jeffrey is a self-employed carpenter He bills his clients $60,000 a year Total business expenses amount to $10,000 a year His only eligible income tax deduction is $5,000 for an RRSP contribution If the first $36,000 of taxable income is taxed by the Federal Government at a rate of 15% and levels up to approximately $70,000 are taxed at 22%, what is his federal tax liability before considering tax credits? A B C D E $5,760 $6,750 $7,380 $9,900 $12,500 40 Identify the correct statements I Tax deductions are more valuable to a high income earner than tax credits II RESPs are excellent income splitting vehicles for families with young children III Students can deduct moving expenses when they move back home to take up a summer job A B C D E I and II, only II and III, only I and III, only I, II and III I only 41 To help you cope with taxes, common goals related to tax planning include all the following except: A Knowing the current tax laws and regulations that affect you B Maintaining complete and appropriate tax records C Making employment and purchase decisions that leave you with the greatest after-tax cash flows and net wealth D Making investment decisions that leave you with the greatest after-tax cash flows and net wealth E Minimizing taxes 42 Tax Freedom Day occurs: A the time in the year when your income has paid the portion of taxes imposed by all levels of government B there is no Tax Freedom Day C the time in the year when your income has paid the portion of taxes imposed by the federal government D the time in the year when your income has paid the portion of taxes imposed by the provincial government E Any time you not pay GST or PST 43 Anne had earnings from her salary of $40,000 and a contribution to a registered retirement saving plan of $1,500 Anne's' net income would be A B C D E $39,250 $40,000 $39,300 $38,500 $41,500 44 Chelsea had earnings from her salary of $50,000, interest on savings of $2,000, and a contribution to a registered retirement saving plan of $2,000 Chelsea's net income would be A B C D E $50,000 $48,000 $52,000 $46,000 $49,500 45 Richard sold $20,000 worth of stocks that were purchased one year ago for $18,000 He is in a 22% tax bracket Jack's capital gains taxes are: A B C D E $220 $440 $2,000 $110 there is no tax on capital gains 46 Winning a $10,000 the lottery affects a person's tax situation by A B C D E increasing the standard deduction by $10,000 increasing the taxpayer's marginal tax rate to 50% is taxed at the same rate as capital gains is not taxed is added to income and taxed accordingly 47 A tax credit of $100 for a person in a 28 percent tax bracket would reduce a person's taxes by A B C D E $100 $28 $72 $50 $35 48 Tax records should be kept for a minimum of notice of assessment A B C D E rears from the date you receive your you are not required to keep your tax records until age 65 three years for all records six years for all records three years, six years, or indefinitely, depending on the type of record 49 Beginning in 2009 Canadian residents 18 and older are allowed to contribute Tax Free Savings Account: A B C D E per year to a $1,000 $2,000 $3,000 $4,000 $5,000 50 Contributing $2,000 to an RRSP changes the Tax Free Savings Account (TFSA) contribution by A B C D E reducing the limit by $1,000 reducing the limit by $2,000 reducing the limit by $3,000 does not reduce the TFSA contribution limit Increases the TFSA limit by $2,000 51 The Tax Free Savings Account (TFSA) contribution limit A B C D E is fixed at $5,000/year will increase at a rate of 10% per year is indexed to the CPI and increases in multiples of $500 varies by an individual's income decreases with increased RRSP contributions in the same year 25 (p 91) Which of the following people is least likely to have to file a federal income tax return? A B C D E a person earning $8,750 a person earning $10, 750 a person earning less than $9,600 a person over age 65 a college student Difficulty: Hard Gradable: automatic Kapoor - Chapter 03 #25 Learning Objective: 26 (p 83) A person with a total tax liability of $4,350 and withholding of federal taxes of $3,975 would: A B C D E receive a refund of $4,550 owe $8,325 owe $375 receive a refund of $8,325 receive a refund of $375 Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #26 Learning Objective: 27 (p 93) The financial planning objective is to: A B C D E evade taxes minimize taxes maximize income maximize after-tax cash flows maximize tax credits Difficulty: Hard Gradable: automatic Kapoor - Chapter 03 #27 Learning Objective: 28 (p 96) Jennifer made $2,000 worth of charitable donations Her total income is $36,000 and she is in the 22% federal tax bracket What is her charitable donations tax credit? A B C D E $320 $440 $552 $2,000 $5,760 Difficulty: Hard Gradable: automatic Kapoor - Chapter 03 #28 Learning Objective: 29 (p 103) Which type of tax expert would be of most value when you have a difference of opinion with the tax department? A B C D E an enrolled agent a nationally-chartered tax preparer a CA a tax accountant a tax attorney Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #29 Learning Objective: 30 (p 94) Making use of legitimate methods to reduce one's taxes is called tax A B C D E evasion planning exemptions deferred techniques reductions Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #30 Learning Objective: 31 (p 81) An example of a non-refundable tax credit is A B C D E interest on a credit card or charge account certain job-related travel expenses the cost of commuting to work life insurance premiums student loan interest fees Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #31 Learning Objective: 32 (p 75) An example of a tax-exempt investment is A B C D E interest on Canada savings bonds dividends from corporate stock a gain on the sale of your home earnings from a mutual fund interest on corporate bonds Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #32 Learning Objective: 33 (p 76) Capital gains refer to A B C D E tax-exempt investments profits from the sale of an investment asset gains from the sale of capital assets earnings from investments such as dividends or interest tax-deferred investments Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #33 Learning Objective: 34 (p 76) Sheira Harvey worked in Poland for part of the year and earned $50,000 while she was there This income will not be included in her income for the year This represents: A B C D E A deduction An exclusion An exemption A tax credit An increase of income Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #34 Learning Objective: 35 (p 96- An RPP differs from an RRSP in that 97) A B C D E earnings on the RPP are tax free after five years contributions may exceed $2,000 in the RRSP an RRSP is set up by an employer for an employee An RPP is set up by an employer for an employee funds are only to be used for education expenses Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #35 Learning Objective: 36 (p 96) An RRSP, RPP, and IPP are examples of A B C D E tax-exempt retirement plans tax-deferred retirement plans capital gains self-employment insurance programs job-related expenses that are tax deductible Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #36 Learning Objective: 37 (p 93) "Grossed-up" Canadian dividends are multiplied by what amount in order to determine the level of taxable dividends? A B C D E 15% 18.97% 45% 50% 60% Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #37 Learning Objective: 38 (p 84) Which of the following is a non-refundable tax credit? A B C D E Tuition and education amount GST and PST paid on purchases Moving expenses Life insurance premiums Basic personal amount Difficulty: Hard Gradable: automatic Kapoor - Chapter 03 #38 Learning Objective: 39 (p 87) Jeffrey is a self-employed carpenter He bills his clients $60,000 a year Total business expenses amount to $10,000 a year His only eligible income tax deduction is $5,000 for an RRSP contribution If the first $36,000 of taxable income is taxed by the Federal Government at a rate of 15% and levels up to approximately $70,000 are taxed at 22%, what is his federal tax liability before considering tax credits? A B C D E $5,760 $6,750 $7,380 $9,900 $12,500 Difficulty: Hard Gradable: automatic Kapoor - Chapter 03 #39 Learning Objective: 40 (p 93) Identify the correct statements I Tax deductions are more valuable to a high income earner than tax credits II RESPs are excellent income splitting vehicles for families with young children III Students can deduct moving expenses when they move back home to take up a summer job A B C D E I and II, only II and III, only I and III, only I, II and III I only Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #40 Learning Objective: 41 (p 72) To help you cope with taxes, common goals related to tax planning include all the following except: A Knowing the current tax laws and regulations that affect you B Maintaining complete and appropriate tax records C Making employment and purchase decisions that leave you with the greatest after-tax cash flows and net wealth D Making investment decisions that leave you with the greatest after-tax cash flows and net wealth E Minimizing taxes Difficulty: Hard Gradable: automatic Kapoor - Chapter 03 #41 Learning Objective: 42 (p 72) Tax Freedom Day occurs: A the time in the year when your income has paid the portion of taxes imposed by all levels of government B there is no Tax Freedom Day C the time in the year when your income has paid the portion of taxes imposed by the federal government D the time in the year when your income has paid the portion of taxes imposed by the provincial government E Any time you not pay GST or PST Difficulty: Hard Gradable: automatic Kapoor - Chapter 03 #42 Learning Objective: 43 (p 78) Anne had earnings from her salary of $40,000 and a contribution to a registered retirement saving plan of $1,500 Anne's' net income would be A B C D E $39,250 $40,000 $39,300 $38,500 $41,500 Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #43 Learning Objective: 44 (p 78) Chelsea had earnings from her salary of $50,000, interest on savings of $2,000, and a contribution to a registered retirement saving plan of $2,000 Chelsea's net income would be A B C D E $50,000 $48,000 $52,000 $46,000 $49,500 Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #44 Learning Objective: 45 (p 79) Richard sold $20,000 worth of stocks that were purchased one year ago for $18,000 He is in a 22% tax bracket Jack's capital gains taxes are: A B C D E $220 $440 $2,000 $110 there is no tax on capital gains Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #45 Learning Objective: 46 (p 80) Winning a $10,000 the lottery affects a person's tax situation by A B C D E increasing the standard deduction by $10,000 increasing the taxpayer's marginal tax rate to 50% is taxed at the same rate as capital gains is not taxed is added to income and taxed accordingly Difficulty: Hard Gradable: automatic Kapoor - Chapter 03 #46 Learning Objective: 47 (p 80) A tax credit of $100 for a person in a 28 percent tax bracket would reduce a person's taxes by A B C D E $100 $28 $72 $50 $35 Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #47 Learning Objective: 48 (p 77) Tax records should be kept for a minimum of notice of assessment A B C D E rears from the date you receive your you are not required to keep your tax records until age 65 three years for all records six years for all records three years, six years, or indefinitely, depending on the type of record Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #48 Learning Objective: 49 (p 92) Beginning in 2009 Canadian residents 18 and older are allowed to contribute year to a Tax Free Savings Account: A B C D E per $1,000 $2,000 $3,000 $4,000 $5,000 Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #49 Learning Objective: 50 (p 92) Contributing $2,000 to an RRSP changes the Tax Free Savings Account (TFSA) contribution by A B C D E reducing the limit by $1,000 reducing the limit by $2,000 reducing the limit by $3,000 does not reduce the TFSA contribution limit Increases the TFSA limit by $2,000 Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #50 Learning Objective: 51 (p 92) The Tax Free Savings Account (TFSA) contribution limit A B C D E is fixed at $5,000/year will increase at a rate of 10% per year is indexed to the CPI and increases in multiples of $500 varies by an individual's income decreases with increased RRSP contributions in the same year Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #51 Learning Objective: 52 (p 92) Tax Free Savings Accounts have all the following characteristics except A B C D E The contribution limit is $5,000 per annum regardless of any amounts contributed to an RRSP/RPP The $5,000 limit is indexed to the CPI and increases in multiples of $500 Contributions to a TFSA are tax deductable Any unused contribution room can be carried forward Amounts can be withdrawn at any time and any amounts withdrawn can be re-contributed in the same year if one still has contribution room left over Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #52 Learning Objective: 53 (p 93) In 2009, Glenn is allowed to contribute $5,000 to a TFSA He contributes $2,000 for that year If he withdraws $1,000 the same year from the TFSA account, the following year: A B C D E $3,000 contribution room is added to the 2010 TFSA limit the TFSA limit for 2010 is unchanged the TFSA limit for 2010 is reduced by $1,000 $4,000 contribution room is added to the 2010 TFSA limit $1,000 is added to taxable income for 2010 Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #53 Learning Objective: 54 (p 80) A tax credit of $50 for a person in a 28 percent tax bracket would reduce a person's taxes by A B C D E $10 $28 $14 $50 $35 Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #54 Learning Objective: 55 (p 74) Taxes are not only considered in financial planning in April TRUE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #55 Learning Objective: 56 (p 74) The principal purpose of taxes is to control economic conditions FALSE Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #56 Learning Objective: 57 (p 74- A province may impose a personal property tax 75) TRUE Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #57 Learning Objective: 58 (p 74- Real-estate property taxes are significant but not a major source of revenue for local 75) governments FALSE Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #58 Learning Objective: 59 (p 80) A tax credit is an amount subtracted directly from the amount of taxes owed TRUE Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #59 Learning Objective: 60 (p 74) A tax on the value of automobiles, boats, or furniture can also be referred to as an investment tax FALSE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #60 Learning Objective: 61 (p 75) An estate tax is imposed on the value of an individual's property at the time of his or her death FALSE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #61 Learning Objective: 62 (p 76) Taxable income is the total earnings of a person FALSE Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #62 Learning Objective: 63 (p 83) There is a withholding on tax paid to Canadian residents on interest, dividends, rent and royalties FALSE Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #63 Learning Objective: 64 (p 76) Income from a partnership is included under net business income TRUE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #64 Learning Objective: 65 (p 78) Deductions are amounts that a taxpayer is allowed to deduct from taxable income FALSE Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #65 Learning Objective: 66 (p 78-There is no significant difference between a federal tax credit and a federal tax deduction 80) FALSE Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #66 Learning Objective: 67 (p 85) Most taxpayers have to file quarterly payments of estimated amounts owed for taxes FALSE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #67 Learning Objective: 68 (p 103) Tax assistance from an attorney is less common than using a tax service TRUE Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #68 Learning Objective: 69 (p 104) A field audit requires that a taxpayer visit an auditing agent to clarify some aspect of his or her tax return FALSE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #69 Learning Objective: 70 (p 105) Several courses of appeal are available to taxpayers who disagree with a revenue service ruling on their tax return audit FALSE Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #70 Learning Objective: 71 (p 93) Tax evasion refers to illegal actions to reduce one's taxes FALSE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #71 Learning Objective: 72 (p 84) If you are a self-employed individual, you have to make both employee and employer contributions to the CPP or QPP TRUE Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #72 Learning Objective: 73 (p 96) Tax-exempt income has a greater financial benefit than tax-deferred income TRUE Difficulty: Medium Gradable: automatic Kapoor - Chapter 03 #73 Learning Objective: 74 (p 80) A tax credit is an amount subtracted directly from the amount of taxes owed TRUE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #74 Learning Objective: 75 (p 74) Taxes are only considered in financial planning in April FALSE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #75 Learning Objective: 76 (p 74) About one-third of each dollar you earn goes towards income taxes FALSE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #76 Learning Objective: 77 (p 96) One of the legitimate methods to reduce one's taxes is tax evasion FALSE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #77 Learning Objective: 78 (p 96) One of the legitimate methods to reduce one's taxes is tax avoidance TRUE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #78 Learning Objective: 79 (p 92) Contributions to a Tax Free Savings Account are tax deductible FALSE Difficulty: Easy Gradable: automatic Kapoor - Chapter 03 #79 Learning Objective: 80 (p 75- How is taxable income computed? 76) Taxable income is a result of subtracting exclusions to income and deductions from total income to arrive at net income, followed by subtracting losses carried over from previous years and other allowable deductions Difficulty: Medium Gradable: manual Kapoor - Chapter 03 #80 Learning Objective: 81 (p 101- Cameron Nelson wants to complete his own federal income tax return He has several questions about the tax form to use and what items should be reported as income What sources of assistance would you recommend for Cameron? 102) Both the CCRA and the Québec Ministère du Revenu offer comprehensive guides to tax returns You may surf their sites at www.ccra-adrc.gc.ac and www.revenu.gouv.gc.ca respectively There are also a large number of related publications available in libraries and bookstores Internet resources include CANTAX at www.cantax.com, the Fraser Institute at www.fraserinstitute.ca, and the Canadian Taxpayer Federation at www.taxpayer.com, and others Difficulty: Medium Gradable: manual Kapoor - Chapter 03 #81 Learning Objective: 82 (p 80) What is the difference between the marginal tax rate and the average tax rate? In most cases, which rate is less? If your taxable income in 2004 was $50,000, what would be your federal taxes, marginal tax rate and average tax rate? Marginal tax rate is the rate of tax paid on the next dollar of taxable income The average tax rate is total tax divided by total taxable income Except for those in the 16% tax bracket, the average tax rate is less than the marginal tax rate Federal taxes = 16% of $35,000 + 22% of $15,000 = $8,900 Marginal tax rate = 22% Average tax rate = 8,900 divided by 50,000 = 17.8% Difficulty: Hard Gradable: manual Kapoor - Chapter 03 #82 Learning Objective: 83 (p 96- What is the benefit of the Home Buyer's Plan? 97) The Home Buyer's Plan allows first time buyers to withdraw up to $20,000 from their RRSPs free of tax and pay it back within 15 years Difficulty: Medium Gradable: manual Kapoor - Chapter 03 #83 Learning Objective: 84 (p 94- Why are capital losses important? 95) They are important because they reduce one's taxable capital gains Capital losses incurred in any year can be subtracted from capital gains earned in the same year to compute net capital gains If capital losses exceed the gains in any year, then the net capital loss can be carried back three years to offset any capital gains already declared and taxed Net capital losses can also be carried forward and applied to reduce capital gains earned at any time in the future Difficulty: Medium Gradable: manual Kapoor - Chapter 03 #84 Learning Objective: 85 (p 77) List the components that should be included in a good tax recordkeeping system Tax Returns and Tax Filing Information • Current tax returns and instruction booklets • Reference books on current tax laws and tax-saving techniques • Social insurance numbers of household members • Copies of federal tax returns from previous years Income Records • T4 slips reporting salary T4 slips reporting pension income and taxes withheld at source • T5 slips reporting interest, dividends, and capital gains and losses from savings and investments • Other slips for Employment Insurance benefits, royalty income, retirement, and other support payments Expense Records • Receipts for medical, dependant care, charitable donations, and employment-related expenses • Business, investment, and rental-property expense documents Difficulty: Hard Gradable: manual Kapoor - Chapter 03 #85 Learning Objective: 86 (p 93) According to the textbook, for which groups would a TFSA be particularly beneficial and why? • Canadians with below-average incomes—TFSAs allow them to avoid the heavy clawback rates applicable to modest withdrawals from RRSPs and RPPs after the age of 65 • Canadians with high incomes who need to save more than the current RRSP limit ($20,000), and who, until now, had no tax effective way to so • Senior citizens, many of whom continue to save through their retirement years for medical emergencies, custodial care and/or to accumulate funds destined for charities or their children, and who, until now, had no tax-effective place to put these savings • Working Canadians who want to set money aside for post-retirement medical costs • Young Canadians who are trying to accumulate a down payment for their first home • Middle-aged Canadians who have paid off their mortgages and are looking for a flexible savings way to help them purchase a vacation/retirement home, pay for a "once in a lifetime" vacation, or supplement their post-retirement income Difficulty: Hard Gradable: manual Kapoor - Chapter 03 #86 Learning Objective: 03 Summary Category # of Questions Difficulty: Easy Difficulty: Hard Difficulty: Medium Gradable: automatic Gradable: manual Kapoor - Chapter 03 Learning Objective: 22 16 48 79 86 Learning Objective: Learning Objective: Learning Objective: 53 21 More download links: personal finance kapoor 6th edition test bank personal finance 6th canadian edition solutions manual pdf personal finance kapoor 6th edition pdf personal finance 6th canadian edition test bank personal finance 5th canadian edition kapoor pdf personal finance pdf kapoor personal finance kapoor 6th edition pdf download personal finance 5th canadian edition pdf ... links: personal finance kapoor 6th edition test bank personal finance 6th canadian edition solutions manual pdf personal finance kapoor 6th edition pdf personal finance 6th canadian edition test bank. .. edition test bank personal finance 5th canadian edition kapoor pdf personal finance pdf kapoor personal finance kapoor 6th edition pdf download personal finance 5th canadian edition pdf ... savings • Working Canadians who want to set money aside for post-retirement medical costs • Young Canadians who are trying to accumulate a down payment for their first home • Middle-aged Canadians who