Financial Planning & Taxation

COURSE TITLE: RISK, INSURANCE AND FINANCIAL PLANNING COURSE NUMBER: COMM 323-3

SEMESTER: January 2013 INSTRUCTOR: Patrick Barrette E-MAIL: [email protected]   Assignment  #1  Financial  Planning  &  Taxation  (15%)       Chapter  #  1,  Financial  Planning     End  of  Chapter  problem  #1     “Where  Does  all  the  Money  Go?”    (page  33  of  your  textbook)  

a. Prepare  a  net  worth  statement  for  this  couple.  Analyze  their  net  worth  position  and   make  a  list  of  issues  you  would  raise  in  a  discussion  with  the  couple  if  you  were  a   financial  planner.    

b. Make  a  summary  cash  flow  statement  for  Jan  and  Dave,  analyze  their  cash  flow   situation.  Do  any  expense  categories  seem  to  be  missing?  

c. Evaluate  this  couples  financial  security,  how  well  prepared  are  they  for  a  financial   emergency?  

d. Do  you  think  this  couple  should  be  saving  more?  What  do  you  suggest?  What  future   difficulties  do  you  foresee  for  them  if  they  continue  as  present?  

e. Evaluate  this  couple’s  financial  management  strategies  in  terms  of  the  basic  steps  of   financial  planning.  If  they  were  really  motivated  to  make  a  change,  where  might  they   begin?  

  Chapter  #2  Introduction  to  Personal  Income  Tax   End  of  Chapter  problems  #5,  #6  &  #7  (page  57)     5.   Assume  that  you  have  a  mortgage  at  6%  and  also  have  $6000  that  can  be  used  to   either  reduce  the  mortgage  or  to  invest  at  5%.  Should  you  (i)  reduce  your  mortgage  by  $6000   and  borrow  to  invest,    (ii)  invest  the  $6000,  or  (iii)  simply  reduce  the  mortgage  by  $6000?     Assumptions:  the  mortgage  company  will  not  charge  a  penalty  if  you  decide  to  reduce  your   mortgage;  your  combined  federal  and  provincial  marginal  tax  rage  is  39%;  if  you  borrow  to   invest,  the  interest  will  be  tax  deductible,  but  the  interest  paid  to  your  mortgage  is  not   deductible.       6.   Question  6  per  text,  excluding  (d)  How  much  income  tax  does  she  owe  or  will  she  

receive  back?     7.   Suggest  some  ways  to  reduce  a  family’s  income  tax.  For  each  approach,  indicate  

whether  it  would  be  considered  tax  avoidance  or  tax  evasion.