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Assignment Problem Ten – 4 (RRSP Contributions)
Carla Goodman has been employed by Army Brake Productions (ABP), a Canadian controlled private corporation, since 2010. The following information pertains to her income over the past two years:
|
2012 |
2011 |
|||
|
Salary before benefits |
$120, 000 |
|||
|
Employee Stock option benefit |
8, 000 |
5, 000 |
||
|
Benefit On Interest Free Loan |
6, 000 |
|||
|
Registered pension plan contributions |
(4, 000) |
(3, 000) |
||
|
Deductible Employment Expenses |
(4, 500)
|
|||
|
Interest income |
(1, 800) |
1, 600 |
||
|
Taxable Capital Gains |
(15, 000) |
10, 000 |
||
|
Business Income |
34, 000 |
35, 000 |
||
|
Royalty Income |
7, 000 |
|||
|
Rental Loss |
(5, 000) |
(10, 000) |
||
|
Spousal Support payment |
(12, 000) |
|||
|
Non- Eligible Dividends on ABP stock |
900 |
1, 000 |
||
|
Totals |
$ 164, 200 |
$ 153, 600 |
The royalty income listed above is 2 percent of the sales of the “Handy Shopper,” a gadget Ms. Goodman invented three years ago. The business income listed above is earned from selling leather goods.
Ms. Goodman had no Earned Income for RRSP purposes prior to 2009. While in 2009 and 2010, she had sufficient Earned Income to enable her to deduct the maximum allowable RRSP contribution for 2010 and 2011, she made no RRSP contributions in either of these years.
Beginning in 2011, Ms. Goodman participates in ABP’s employee money purchase Registered Pension Plan. ABP contribute twice the amount contributed by an employee to the plan. Her Pension Adjustment for 2011 is $9,000.
Required: Ignore all GST considerations.
A.
Calculate Ms. Goodman’s Earned Income for the purpose of determining her maximum 2012 RRSP contribution by listing the items and amounts that would be included in her Earned Income. List separately the items that are not included in the Earned Income calculation.
B.
Calculation Ms. Goodman’s maximum deductible RRSP contribution for 2012.
Assignment Problem Four – 4 (Tax Payable With Employment Income)
Extension of Assignment Problem Three- 10
For the past five years, Mr. Brooks had been employed as a financial analyst by a large Canadian public firm located in Winnipeg. During 2012, his basic gross salary amounts to $53, 000. In addition, he was awarded an $ 11, 000 bonus based on the performance of his division. Of the total bonus, $6, 500 was paid in 2012 and the remainder is to be paid on January 15, 2013.
During 2012, Mr. Brooks’ employer withheld the following amounts from his gross wages:
Federal Income Tax
$3,000
Employment Insurance Premiums
840
Canada Pension Plan Contributions 2,307
Registered Pension Plan Contributions 2,800
Donations to the United Way
480
Union Dues
240
Payments For Personal Use of Company Car 1, 000
Other Information:
1.
Due to an airplane accident while flying back from Thunder Bay on business, Mr. Brooks was seriously injured and confined to a hospital for two full months during 2012. As his employer provides complete group disability insurance coverage, he received a total of $4, 200 in payment during this period. All of the premiums for this insurance plan are pain by the employer. The plan provides periodic benefits that compensate for lost employment income.
2.
Mr. Brooks is provided with a car that the company leases at a rate of $ 678 per month, including both GST and PST. The company pays for all of the operating costs of the car and these amounted to $3, 500 during 2012. Mr. Brooks drove the car a total of 35, 000 kilometers during 2012, 30,000 kilometers of which were carefully documented as employment related travel. While he was in the hospital (see item 1), his employer required that the car be returned to company premises.
3.
On January 15, 2011, Mr. Brooks received options to buy 200 shares of his employer’s common stock at a price of $23 per share. At this time, the shares were trading at $20 per share. Mr. Brook exercised these options on July 6, 2012, when the shares were trading at $20 per share. He does not plan to sell the shares for at least a year.
4.
In order to assist Mr. Brook in acquiring a new personal residence in Winnipeg, his employer granted him a five year, interest free loan of $125, 000. The loan qualifies as a home relocation loan. The loan was granted on October 1, 2012 and, at this point in time, the interest rate on open five year mortgages was 5 percent. Assume the relevant ITR 4301 rate was 2 percent on this date. Mr. Brooks purchase a house for $ 235, 000 on October 2, 2012. He has not owned a home during any of the preceding four years.
5.
Other disbursements made by Mr. Brooks include the following:
Advanced financial accounting course tuition fees $1, 200
Music history course tuition fees
(University of Manitoba one week intensive course) 600
Fees paid to financial planner 500
Payment of premiums on life insurance 642
Mr. Brooks’ employer reimbursed him for the tuition fees for the accounting course, but not the music course.
6.
Mr. Brook is a widower. His wife was killed in a car accident in 2009 that injured his 8 year old son, Harold, so badly that he qualifies for the disability tax credit. Mr. Brooks’ mother, Grace, lives with Mr. Brook and takes care of Harold. Harold has no Net Income for Tax Purposes. Grace is 67 years old and her Net Income for Tax Purposes is $7, 500. Grace refused to take any payments for caring for Harold as she received a large inheritance in the previous year. As a result, Mr. Brook did not pay any child care or attendant costs for Harold.
7.
Mr. Brooks paid the following eligible medical costs:
For Himself $7, 300
For Harold $4, 450
For Grace $1, 265
Total $13, 015
8.
Mr. Brook buys public transit passes for his son, his mother and himself. The monthly cost of these passes is $26 (son), $50 (mother), and $60 (himself). He purchased these passes for 10 months of the year.
Required: Calculate, for the 2012 taxation year, Mr. Brook’ maximum Taxable Income and fedral Tax Payable (Refund).
Assignment Problem Ten – 4 (RRSP Contributions)
Carla Goodman has been employed by Army Brake Productions (ABP), a Canadian controlled private corporation, since 2010. The following information pertains to her income over the past two years:
|
2012 |
2011 |
|||
|
Salary before benefits |
$120, 000 |
|||
|
Employee Stock option benefit |
8, 000 |
5, 000 |
||
|
Benefit On Interest Free Loan |
6, 000 |
|||
|
Registered pension plan contributions |
(4, 000) |
(3, 000) |
||
|
Deductible Employment Expenses |
(4, 500) |
|||
|
Interest income |
(1, 800) |
1, 600 |
||
|
Taxable Capital Gains |
(15, 000) |
10, 000 |
||
|
Business Income |
34, 000 |
35, 000 |
||
|
Royalty Income |
7, 000 |
|||
|
Rental Loss |
(5, 000) |
(10, 000) |
||
|
Spousal Support payment |
(12, 000) |
|||
|
Non- Eligible Dividends on ABP stock |
900 |
1, 000 |
||
|
Totals |
$ 164, 200 |
$ 153, 600 |
The royalty income listed above is 2 percent of the sales of the “Handy Shopper,” a gadget Ms. Goodman invented three years ago. The business income listed above is earned from selling leather goods.
Ms. Goodman had no Earned Income for RRSP purposes prior to 2009. While in 2009 and 2010, she had sufficient Earned Income to enable her to deduct the maximum allowable RRSP contribution for 2010 and 2011, she made no RRSP contributions in either of these years.
Beginning in 2011, Ms. Goodman participates in ABP’s employee money purchase Registered Pension Plan. ABP contribute twice the amount contributed by an employee to the plan. Her Pension Adjustment for 2011 is $9,000.
Required: Ignore all GST considerations.
A. Calculate Ms. Goodman’s Earned Income for the purpose of determining her maximum 2012 RRSP contribution by listing the items and amounts that would be included in her Earned Income. List separately the items that are not included in the Earned Income calculation.
B. Calculation Ms. Goodman’s maximum deductible RRSP contribution for 2012.
Assignment Problem Four – 4 (Tax Payable With Employment Income)
Extension of Assignment Problem Three- 10
For the past five years, Mr. Brooks had been employed as a financial analyst by a large Canadian public firm located in Winnipeg. During 2012, his basic gross salary amounts to $53, 000. In addition, he was awarded an $ 11, 000 bonus based on the performance of his division. Of the total bonus, $6, 500 was paid in 2012 and the remainder is to be paid on January 15, 2013.
During 2012, Mr. Brooks’ employer withheld the following amounts from his gross wages:
Federal Income Tax
$3,000
Employment Insurance Premiums 840
Canada Pension Plan Contributions 2,307
Registered Pension Plan Contributions 2,800
Donations to the United Way 480
Union Dues 240
Payments For Personal Use of Company Car 1, 000
Other Information:
1. Due to an airplane accident while flying back from Thunder Bay on business, Mr. Brooks was seriously injured and confined to a hospital for two full months during 2012. As his employer provides complete group disability insurance coverage, he received a total of $4, 200 in payment during this period. All of the premiums for this insurance plan are pain by the employer. The plan provides periodic benefits that compensate for lost employment income.
2. Mr. Brooks is provided with a car that the company leases at a rate of $ 678 per month, including both GST and PST. The company pays for all of the operating costs of the car and these amounted to $3, 500 during 2012. Mr. Brooks drove the car a total of 35, 000 kilometers during 2012, 30,000 kilometers of which were carefully documented as employment related travel. While he was in the hospital (see item 1), his employer required that the car be returned to company premises.
3. On January 15, 2011, Mr. Brooks received options to buy 200 shares of his employer’s common stock at a price of $23 per share. At this time, the shares were trading at $20 per share. Mr. Brook exercised these options on July 6, 2012, when the shares were trading at $20 per share. He does not plan to sell the shares for at least a year.
4. In order to assist Mr. Brook in acquiring a new personal residence in Winnipeg, his employer granted him a five year, interest free loan of $125, 000. The loan qualifies as a home relocation loan. The loan was granted on October 1, 2012 and, at this point in time, the interest rate on open five year mortgages was 5 percent. Assume the relevant ITR 4301 rate was 2 percent on this date. Mr. Brooks purchase a house for $ 235, 000 on October 2, 2012. He has not owned a home during any of the preceding four years.
5. Other disbursements made by Mr. Brooks include the following:
Advanced financial accounting course tuition fees $1, 200
Music history course tuition fees
(University of Manitoba one week intensive course) 600
Fees paid to financial planner 500
Payment of premiums on life insurance 642
Mr. Brooks’ employer reimbursed him for the tuition fees for the accounting course, but not the music course.
6. Mr. Brook is a widower. His wife was killed in a car accident in 2009 that injured his 8 year old son, Harold, so badly that he qualifies for the disability tax credit. Mr. Brooks’ mother, Grace, lives with Mr. Brook and takes care of Harold. Harold has no Net Income for Tax Purposes. Grace is 67 years old and her Net Income for Tax Purposes is $7, 500. Grace refused to take any payments for caring for Harold as she received a large inheritance in the previous year. As a result, Mr. Brook did not pay any child care or attendant costs for Harold.
7. Mr. Brooks paid the following eligible medical costs:
For Himself $7, 300
For Harold $4, 450
For Grace $1, 265
Total $13, 015
8. Mr. Brook buys public transit passes for his son, his mother and himself. The monthly cost of these passes is $26 (son), $50 (mother), and $60 (himself). He purchased these passes for 10 months of the year.
Required: Calculate, for the 2012 taxation year, Mr. Brook’ maximum Taxable Income and fedral Tax Payable (Refund).
