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Accg_Tax_Notes_C9 - CHAPTER NINE OTHER INCOME AND...

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CHAPTER NINE - OTHER INCOME AND DEDUCTIONS (Div B, Subdiv d,e,g, S56-66, 81, 146-8) OTHER SOURCES OF INCOME S56 - This includes miscellaneous taxable amounts not attributable to sources previously studied: Benefits in the nature of pensions : Old Age Security benefits, Canada Pension Plan benefits, Death Benefits (received from former employer on or after death of employee; $10,000 exemption), Employment Insurance Act benefits. Pension Income Splitting with a spouse who is in a lower tax bracket (for tax reduction): 1. CPP – 50% of combined CPP benefits may be paid to a spouse (some additional restrictions) – this requires application to HRDC. 2. Pension Income which qualifies for the pension tax credit – effective 2007, where both parties agree , up to 50% of eligible pension income may be allocated to a spouse. Retiring allowances and other payments on termination of employment which are not included in employment income under S6(3), are generally taxable as a retiring allowance. This includes payments in recognition of long service or compensation for loss of office, including court- awarded damages. Specific exclusions include amounts such as pensions, death benefits, and other amounts otherwise required to be included in income under other sections of the ITA. (Note the possibility to “rollover” qualifying amounts of a Retiring Allowance to an RRSP, to defer the income tax consequences.) Family support payments resulting from marital splits are taxable to the recipient only if the payments are deductible to the payor. Pre-April 30, 1997 agreements: both spousal and child support are taxable to the recipient (and deductible by the payor). Post-April 30 1997 agreements (new or revised): spousal support (if specifically identified in the agreement) remains taxable to the recipient (and deductible by the payor), but child support is no longer taxable (or deductible). (Result of Thibaudeau v The Queen decision by Supreme Court) Annuity payments are included in other income when received. An offsetting deduction for the principal portion of the annuity payment is available under S60 below, where the annuity was acquired with after-tax funds rather than with funds from deferred income plans. Receipts from deferred income plans (RRSP, RRIF, DPSP,) are generally included in income 100%, whether the amounts are lump sums or periodic payments, since neither the original contributions nor the income earned has been subjected to taxation. RESP benefits representing income and CESG grants are taxable on receipt, usually by the student. The capital portion is returned tax free, since no deduction was allowed on the contribution. (See page 418-420) Education assistance payments including scholarships, bursaries, fellowships and research grants in excess of research costs are taxable, subject to an annual exemption of $500 for scholarships and bursaries if the student cannot claim an education credit with respect to the program of study.
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