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4561 Lecture 10 Feb 25

4561 Lecture 10 Feb 25 - 1 LECTURE 10 Personal Tax Planning...

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1 LECTURE 10: Personal Tax Planning: Case Studies – updated February 25, 2010 This lecture contains Case Studies, Review Questions and Research Questions which look at various tax planning and compliance issues. There is also some new Technical Material on Death of a Taxpayer. Changes in the law since the beginning of term will also be discussed. You must bring your Act to this class. A. Technical Material 1. Marriage Breakdown 2. RDSPs 3. Estate Planning 4. Personal Tax and Financial Planning Checklists (a) Income splitting (b) Change of Employment (including Moving Expenses) (c) Retirement Planning (d) Estate Planning (e) Other B. Case Study (question in notes and solution posted on web) Emigration – Mr. Black C. Discussion Questions (question in notes and solution posted on web) 1. Personal Tax Planning for Families with Young Children 2. Special Provisions for Taxpayers with Disabilities D. Technical and Discussion Question (question in notes, solution not posted on web) Pension Income Splitting E. FIT Chapter 9 Problems Problem 8 (Len and Nina) on child care expenses for a two income couple – Entire problem Problem 10 (Elaine Matthews) – Just compute her deduction for her RRSP contributions (hint: consider s. 60(i) and 60(j.1) Joanne Magee [[email protected]]
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2 A. Technical Material 1 Marriage Breakdown: Division of Assets and Spousal and Child Support The rules that govern how assets are divided and how much child and spousal support must be paid on the breakdown of a marriage are governed by provincial family law. On a marriage breakdown, there are several tax planning issues: - Support payments. Lecture 8 discussed the tax treatment of child support and spousal support payments that are negotiated by the parties or awarded by the courts . - Division of Assets (married couples only) Assets (including RRSPs) transfer on a rollover basis but the after-tax proceeds on realization must also be considered: e.g. the difference between getting $1 million cash or principal residence (no tax) and $1 million RRSP (up to 50% tax cost on realization) If there is > one principal residence owned by a couple, there should be some agreement as to which years are to designated to which principal residence if each spouse is to end up with a principal residence. - Attribution When spouses are living separate and apart income attribution automatically stops. They must elect jointly to have capital gains attribution stop. No attribution when divorced (not spouses) - Deductions/credits for the parent not paying child support The parent with custody of a child who is not paying child support can claim - child care expenses as a single parent - one child as spousal equivalent - legal fees to collect child support (child support amounts are established under provincial legislation so ANY fees re child support are really regarding collection).
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