Ellie: We were hoping you could help our son Russell. His spouse Kevin went back to university last fall since their son Dug is now in Grade $7.$ They used an after$-$school day care program while Russell was working and Kevin was at school. However, a friend told Russell that they won$$t be able to claim any childcare expenses because Kevin had no income. Is that true?

You answer that you will explain how the childcare expense deduction is determined and conclude on whether Russell or Kevin can claim anything for Dug.

Ellie: That would be helpful. Also, we gave Russell $$50,000$ from the house proceeds so he and Kevin could invest it$.$ However, they don$$t know what tax plan would be best for their needs. Russell gave me a note on their financial situation $($Exhibit $2).$ We were hoping you would be able to provide a recommendation.

$$

You state that this is common request and you will be happy to do this.

Carl: Great. Finally, would you mind coming up with an estimated of the taxes we are going to owe in April when we file our $2023$ tax returns? It would really help

Exhibit $2$

Russell Information

Kevin enrolled full time at Mount Royal University for the $16$ weeks fall $2023$ semester. Prior to that he was a stay at home parent for Dug. I manage a recreational center. Kevin has no income while I earned $$98,000$ employment income in $2023.$ We$$re lucky to have a neighbour who operates a day care home close to us$.$ Dug goes there after school until one of us comes home. We paid the neighbor $$1,000$ in spring when Kevin and I took a trip for our anniversary and another $$3,600$ in the fall for the after school program. It would be really helpful if we could expense the full $$4,600$ for tax purposes. But our friend told us because Kevin doesn$$t have any income, we aren$$t allowed to claim any of it$.$ If this is incorrect, can you please calculate the amount I can claim.

Dug is the center of our universe and our number one priority is to ensure that he is happy and successful in life. By the time Dug starts post$-$secondary school in $6$ years, I should be in the $3$rd federal tax bracket. While obviously we need to save for retirement, that$$s decades away so it$$s a low priority for us right now. I was just going to buy a GIC with the money my parents gave us$.$ But mom said we should consider a RESP or RRSP$.$ I was hoping you could briefly explain the difference between these two plans. I would also appreciate your overall conclusion on which is the best plan for us$.$

Exhibit $3$

Personal Tax Information for Carl and Ellie

Carl retired on October $31,2023.$ We received his T$4$ slip for the year which showed his employment income of $$129,000$ with deductions of $$3,754$ for CPP$,$ $$1,002$ for EI and $$19,800$ for federal taxes. His monthly pension is $$4,400$ less federal income tax of $$860,$ which started in November. Carl also had a $$43,000$ net capital loss carry forward from $2020.$

Ellie received $$12,000$ of CPP benefits and $$900$ of Old Age Security in $2023.$ Ellie also has the following assets.

$3$ year Bonds $-$ Ellie purchased $$10,000$ face value of bonds for $$10,900$ on September $1,2023.$ The bonds have a stated rate of $9\%$ and an effective rate of $8\mathrm{.}75\%.$ Interest is paid annually each September $1.$

Helium Shares $-$ Ellie owned $600$ shares of Helium, a Cdn public company, with an ACB of $$15,000$ on January $1,2023.$ On March $1,$ she gave $300$ shares to Carl, $200$ shares to Russell and $100$ shares to Dug. The shares were trading for $$32$ per share on that day. On July $1,$ a dividend of $$4\mathrm{.}25$ per share was paid to shareholders. Carl, Russell and Dug sold all their shares on November $18$ when the shares were trading at $$45$ per share.

Balloon Shares $-$ Ellie owned $10,000$ shares with an ACB of $$25,000$ in her brother$$s qualified small business corporation on January $1,2023.$ The company was

Part D

Explain how the childcare expense deduction is determined and prepare an analysis to determine if Russell and$/$or Kevin will be able to claim it$.$

Part E

Prepare a critical thinking analysis that determines whether a RESP or RRSP would be best for Russell and Kevin.

Part F

Determine minimum Net Income for Tax Purposes, Taxable Income, Federal Taxes Payable and Net Federal Taxes Owing for the $2023$ taxation year for Carl and Elliee. Ignore any Alternative Minimum Tax, GST or PST considerations. For any amounts provided but excluded from your calculations explain why they have been excluded. Also, provide any carryover amounts, if any, at the end of the year.