Calculate the net federal tax for the following hypothetical

Calculate the net federal tax for the following hypothetical

Question 1Calculate the net federal tax (line 420 on the T1 General form) for the following hypothetical individualsusing the 2014 tax forms: T1 General, Schedule 1 and Schedule 11. Those forms are available at on:http://www.cra-arc.gc.ca/formspubs/t1gnrl/bc-eng.htmlMary has an employment income of $60,000.Tom has an employment income of $60,000, Eligible Tuition fees of $5000, and was in school full time for 8months.Patrick has an employment income of $7,200, Eligible Tuition fees of $5000, and was in school full time for8 months.How might the results be different for Tom and Patrick if tuition, education and textbook amounts were adeduction instead of a non-refundable credit?There are provisions to carry forward tuition, education and textbook amounts to future years. Which of thehypothetical individuals would benefit from this most?To simplify your calculations, make the following assumptions:1) The individual has no eligible deductions (item 207 to 232 on T1 General).2) Other than 1) the basic personal amount (item 300 on Schedule 1), 2) EI premiums (item 312 on Schedule1), 3) CPP contributions (item 308 on Schedule 1) and/or 4) tuition, education and textbook amounts (item323 on Schedule 1), the individual has no other eligible amounts for the federal non-refundable tax credits.3) The individual is single and does not transfer the credits to his/her parents.4) The individual does not have any unused federal tuition, education and textbook amounts amounts fromprevious years (line 1 on Schedule11).5) The individual is not self-employed and has no other form of income.Note: In the real world, you have to do the same tax calculations for the provincial personal incometax as well.Question 2Alfred, who has personal income tax rate of 40%, holds an oil stock that appreciates in value by 10% eachyear. He bought the stock one year ago. Alfred’s stock broker now wants him to switch the oil stock for agold stock that is equally risky. Alfred has decided that if he holds on to the oil stock, he will keep it onlyone more year and then sell it. If he sells the oil stock now, he will invest all the after-tax proceeds of the salein the gold stock and then sell the gold stock one year from now. What is the minimum rate of return the goldstock must pay for Alfred to make the switch? Relate your answer to the tax on capital gains.Question 3Property tax is a tax administered at the local government level in Canada. Is the property tax a regressivetax or a progressive tax in Canada? Explain your answer.Question 4In January 2000, delegates at the founding convention of the Canadian Alliance (a predecessor to the currentConservative Party) voted to make a 17 percent “flat-rate” tax the cornerstone of the new party’s electionplatform. The shift would reduce the top marginal rate applied to high-income individuals. Part of therationale was to give highly productive Canadians renewed incentives for work. Use the graphical model ofleisure-income decisions to analyze the rationale.Question 5Use the life-cycle model to evaluate whether a rational saver would follow this piece of advice: “Tocompensate for falling interest rates, aim to save more every month.”Question 6On July 1, 2006, the federal government reduced the GST rate but raised the income tax rate in the lowesttax bracket to help make up for the lost revenues. Discuss the possible effects of this reform on the incentivesto save and to work.Question 7The inverse demand P(Q) for bowling balls is given by P = 100 – 5Q where P is the price of bowling ballsand Q is the consumption of bowling balls. One store sells bowling balls, the supply is given by P = 50 + 5Q.a) What is the total quantity of bowling balls consumed and what is the price per unit. What is the consumersurplus and the producer surplus.b) The government set a tax of $10 on bowling balls, what is the total quantity of bowling balls consumed,the price paid by consumer and the price received by the store. What is the consumer surplus, the producersurplus, the tax revenue and the deadweight loss. What is the share of the tax paid by the consumer and theone paid by the producer.Question 8For each of the following two markets, describe who between the consumer and the producer will be themost opposed to a tax increase. Also comment on the size of the deadweight loss in each of those market.a) The BC market for natural gas is characterized by a very inelastic demand (at least in the short run).Moreover, since it is supplied by a monopoly the supply is very inelastic.b) The demand for Donair on Commercial drive is very elastic since there are many other competing foodoptions. Due to the low cost of starting a Donair restaurant, close to free entry implies that the supply forDonair is also very elastic.


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