Chapter 6 RRSP & other

Question 1

What RRSP related expenses are not tax deductible?

Answer 1

1) Interest paid on funds borrowed to make an RRSP contribution
2) Administrative charges on self directed RRSP
3) Brokerage fees to buy and sell funds in a self directed RRSP

Question 2

Withdrawal from an RRSP

Answer 2

fully taxable at the marginal tax rate + withholding tax of:
- 10% on the first 5,000
-20% on the next 10,000
-30% over 15,000
RRSP contribution room is lost

Question 3

Max RRSP contribution

Answer 3

the lesser of:
-18% of prior year’s income
-Prior year money purchase limit
+ unused contribution room

Question 4

Earned income

Answer 4

Employment income (commission, royalties, research grant, unemployment benefit, profit sharing plan) + Disability payment + Net income + Net rental income + Taxable support payment

Question 5

What income are NOT included in employment income

Answer 5

1) Investment income
2) Pension benefit
3) Retiring allowance
4) Severance pay
5) Death benefit
6) business income earned as a limited partner

Question 6

Transfers that do not affect RRSP contribution room

Answer 6

1) from an unmatured RRSP from the same individual
2) Commutation payment from RPP, DPSP or RRSP
3) Excess amount from a RRIF
4) Spousal rollover (from a deceased spouse)
5) retiring allowance and/or severance pay

Question 7

Severance pay

Answer 7

Entitlement that may be payable to an employee of the public service upon termination of employment

Question 8

RRSP pension income splitting

Answer 8

must be over 65 or split payment from a annuity as the result of the death of the original annuitant. Pension eligible for splitting includes: lifetime annuity from RRSP, RPP, DPSP, RRIF and LIF

Question 9

RRSP overcontribution

Answer 9

Up to 2000 without penalty, over that amount 1%/month + the entire over contribution is not tax deductible

Question 10

Home Buyer Plan

Answer 10

Can borrow up to $25000 to buy a “qualifying home” for “first time buyer” that must be repaid that must be repaid in no more than 15y. No tax or withholding tax on the withdrawal

Question 11

First time buyer for HBP

Answer 11

person who with or without a spouse or common law partner did not own a home and occupy it as principal residence during 4 y before the withdrawal

Question 12

after withdrawal from HBP

Answer 12

taxpayer must buy the qualifying home before october 1st of the year after exept:

1) written agreement to buy by the deadline + purchase by october 1st of the second year + Canadian resident
2) has payed an amount at least = withdrawal by octobler 1st

Question 13

Repayment of HBP

Answer 13

Must be repaid no less than 1/15 of the amount borrowed each year, but can be repaid faster which will reduce the amount to be repaid each year in the future. if any repayment is less than required amount, the shortfall = taxable income

Question 14

Lifelong Learning Plan (LLP)

Answer 14

Allows RRSP holder to borrow up to 10000 a year up to 20000 for full time training education for them self or their spouse. Amounts are repayable over 10y. No tax or withholding tax on the withdrawal

Question 15

Registered Education Saving Plan (RESP)

Answer 15

Contributions are not tax deductible but DO grow tax free. Lifetime contribution limit of 50000 with 1%/month penalty over it.

Question 16

RESP Individual plan

Answer 16

no age limit, the beneficiary does not have to be related to the subscriber. A replacement beneficiary can be named. The subscriber makes the investment decisions

Question 17

RESP Family plan

Answer 17

Can have more than one child as beneficiary. Funds are pulled or investment purpose. Lifetime limit to CESG applies to each child. Funds do not have to be shared equally Subscriber decides on investments

Question 18

RESP group plan

Answer 18

Require regular contribution. Only one possible beneficiary who does not have to be related to the beneficiary. Group plan dealer makes the investments decisions

Question 19

Canada Learning Bond (CLB)

Answer 19

Family net income is under 43500$ > first deposit = 500 + 25. Then 100/y up to 2000.

Question 20

Edication Assistance Payment (EAP)

Answer 20

CESG + income earned on both contribution and CESG can be disbursed as EAP to beneficiaries who are enrolled in a qualifying education program. It is considered taxable income to the student

Question 21

RESP: Accumulated Income Payment

Answer 21

Income from the contributions (not CESG or CLB) can be payed to the subscriber if: resident of canada, original beneficiary is not elligible for EAP and RESP has exested for at least 10y.

Question 22

RESP: Tax on Accumulated Income Payment

Answer 22

Regular tax on income + additional 20% tax

Question 23

Tax Free Savings Account (TFSA)

Answer 23

started on January 2009. It is indexed to the nearest 500. Offered by the same financial institutions as RRSP, they are savings accounts whose earnings are never taxed. Any unused contribution can be carried forward and withdrawal can be replaced later. Withdrawal do not affect income tested benefits

Question 24

Pooled Registered Pension Plan (PRPP)

Answer 24

It is a DCPP offered by a financial institution where employee’s contributions are pooled together to reduce cost and benefit from economies of scale;

Question 25

Registered Disability Savings Plan (RDSP)

Answer 25

Contributions are not tax deductible and income on contributions is not taxed. No annual limit and a lifetime limit of 200,000 >> Disability Assistance Payment

Question 26

Canada Disability Saving Grant (CDSG)

Answer 26

Matches contributions by; | family income 87,123$ 100% on first 1000$

Question 27

Canada Disability Saving Bond (CDSB)

Answer 27

Up to 1000 a year is available to low income families to a lifetime max of 20,000$