For each scenario below identify 3 tax planning strategies (ie. 3 tax planning strategies for parts a, b, and c) and explain why they would be useful from a tax perspective. (10 marks each)
- Paul is an independent contractor working in construction. His employment is seasonal so his earnings fluctuate throughout the year. His overall average annual income is $95,000 gross. He is taxable and has to pay upon filing each year.
Paul has an emergency fund invested in a high-interest bank account with 5 months’ worth of income to cover expenses. He has always ensured that he had this emergency fund given the instability of his income. He has no other investments but is starting to worry about his retirement.
Paul’s wife recently immigrated to Canada and has worked some odd jobs under the table. She went to school to be a teacher but her education does not translate the same in Canada so she will have to go back to school.
Adam and his partner Steven have 3 adopted children ages 3, 7, and 12. Adam and Steven both work as dentists and earn $140,000 gross. They are taxable. They have maximized their TFSA accounts and have made small contributions to their RRSPs. They have sizable investments in each of their own non-registered accounts. They want to ensure they have enough savings for all the kids’ post-secondary education. They currently rent a house in Milton but want to move closer to the city because that is where all their friends and family are located.
Debra is a single mom with an 18-year-old child that has a mental impairment. The child will not be able to reside independently as he requires 24-hour supervision and is unable to work. Debra is a law clerk. She earns $55,000 gross. She also receives support payments from her former spouse as well as child support. She has an RRSP for herself and opened an RESP for the child but he will not be pursuing post-secondary education. She is worried about helping finance the child’s lifetime without negatively impacting any social benefits he may qualify for. She heard about trust accounts and is thinking of setting one up.
