Diana Homes is a management consultant by profession, and she works as a freelance consultantfor 3 prominent corporations in British Columbia.Following are some personal details of Diana Homes1. Full...

Diana Homes is a management consultant by profession, and she works as a freelance consultantfor 3 prominent corporations in British Columbia.Following are some personal details of Diana Homes1. Full Name – Diana Jones Homes2. Date of birth - January 14th, 19883. Status in Canada – Canadian CitizenDiana is married to David and the Homes family has one child; marie who is currently 3 monthsold. (In this assessment your focus will be on Diana and her annual income). For the year 2021,Diana recorded a total income of $132,000 and qualifies for both the federal and provincial taxcredits (the federal basic personal amount $13,808 applied at a 15% tax rate, the provincial basicpersonal amount $11,070 applied at a 5.06% tax rate). Furthermore, Diana donated $15,000 to achurch located in Burnaby, BC.( Diana plans to claim all donations to reduce her effective taxrate)Diana banks with the Royal Bank of Canada (RBC), in which she maintains a chequing and asavings account. On the day of filing tax Diana’s bank details were as follows;Chequing account balance - $ 6,500Savings account balance - $ 82,000The marginal tax rate for each tax bracket is as follows.2021 Taxable Income 2021 Combined Marginal Tax Rate$0 to $42,184 20.06%$42,184 to $49,020 22.70%$49,020 to $84,369 28.20%$84,369 to $96,866 31.00%$96,866 to $98,040 32.79%$98,040 to $117,623 38.29%$117,623 to $151,978 40.70%$151,978 to $159,483 44.02%$159,483 to $216,511 46.12%$216,511 to 222,420 49.80%$222,420 + 53.50%Source – taxtips.caFurthermore, Diana uses a visa credit card from RBC and her average spending per monthamounts to $2000. Diana currently lives on rent, and she plans to purchase her first apartment inthe year 2028. Considering her forecasted income, she plans to purchase an apartment within aprice range of $500,000 - $600,000 from the lower mainland.
Diana is currently looking for options to grow her funds as well as defer her tax through low-riskinvestment options. (She expects her income to grow every year). Hence, she is looking for youradvice. Now, Diana is considering two options for her former objective• Registered Retired Savings Plan (RRSP)• Tax-Free Savings Accounts (TFSA)Diana has an RRSP contribution limit of $12,200 and a TFSA contribution limit of $10,600 for2021.Assume you are a financial consultant and you have received all the above information regardingDiana, and she wishes to clarify the following from you. An extract from her email to you is asfollows:“To – Financial ConsultantFrom – Diana HomesDear Financial Consultant,Considering my financial situation and future plans, can you please compile a report whichaddresses the following;1. The amount of tax I will pay to the CRA (without any contributions to RRSP or TFSA).Please ignore my husband’s income since I wish to know the amount I will pay to theCRA individually. For knowledge purposes, please show me workings for each step ofthe former calculation
2. I am planning to invest $10,000 in an RRSP with a rate of return of 3% per annum whichwould mature in 5 years’ time (Guaranteed Investment Certificate). If I go ahead withthis initiative.a. Calculate the revised tax payable ( for me individually) to the CRA along with theformer contribution to the RRSP.b. Advise/Recommend me, when my investment grows, how will this defer my taxwhile in the RRSP?c. Considering my annual income and my current financial status, is it a good moveto purchase my first house? If so, how do you think I should invest in the former?justify your arguments as to why you think it is both feasible and beneficial forme.d. Advise/Recommend me of the implications if I access funds in the RRSP to buymy first home. ( what government benefits can I get, please quantify youralternatives with suitable justifications
3. I am also interested in a TFSA; can you please advise me on the following;a. How does a TFSA differ from an RRSP?b. Recommend me as to how does the TFSA fit into my portfolio? What should Iinvest in?c. Recommend me, how much should I invest in a single TFSA investment?considering my financial situationBest Regards,Diana Homes”Requirement;Considering the above, you are required to compile a report which would address the abovequestions posted to you from Diana Homes making assumptions where necessary.






Mar 12, 2022
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