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Unformatted text preview: 3520-4: 9/15/091-61Lecture 4: Other Income and DeductionsThe lecture will cover parts of CTP chapter 8 and CTP 9 (mainly on RRSP contributions)The designated problems are:Moving Expenses: Exercise 8-1, Self-study Problem 8-1Child Care Expenses: Exercise 8-2, Self-study Problem 8-2Support Payments: Exercise 8-5Annuity Payments: Exercise 8-6CESG: Exercise 8-7RRSP Contributions - Chapter 9, Exercises 9-1,2, 3 2Pension Benefits [8-14 to 8-15]ITA 56(l)(a)(i) = Inclusion section for employers registered pension plans (RPP) and governments Old Age Security (OAS) and Canada Pension Plan (CPP) payments received3Retiring Allowances [8-16 to 8-18]ITA 56(l)(a)(ii) = inclusion section for retiring allowances receivedRetiring allowances = payment(s) by employer for long service or loss of office whether or not ordered by a court judgment [ITA 248(l)]the eligible portion of retiring allowances can be transferred tax-free to an RRSP based on a formula, i.e. the income inclusion is offset by a special limited registered retirement savings plan (RRSP) deduction (formula covered in ADMS 4561)4Death Benefits [8-19 to 8-22]ITA 56(l)(a)(iii) = inclusion section for death benefits for a deceased employees surviving spouse or common-law partner as defined in ITA 248(l): 1st $10,000 is tax-free and is not a death benefit, the rest is taxable5Income Inclusions from Deferred Income Plans [8-23 to 8-24]RRSPs, Deferred Profit Sharing Plans (DPSPs) and Registered Retirement Income Funds (RRIFs) and RPPs are registered plansThey are registered with the federal governmentIn order to be registered they must meet certain conditionsThe advantage of registration is3520-4: 9/15/092-6that contributions into the plan are either tax-free benefits (e.g., employer RPP and DPSP contributions) or tax-deductible individual contributions (e.g. RRSPs, RPPs) or tax-free transfers (RRSPs to RRIFs)income grows tax-free in the planPayments out of the following plans are included in income when received:RRSP withdrawals, payments etc are taxable [ITA 56(l)(h)]DPSP payments received [ITA 56(l)(i)]RRIF withdrawals [ITA 56(l)(t)]6Educational Assistance Payments and Research Grants [8-25 to 8-26]2007 onwards: scholarships and bursaries are fully exempt from tax [ITA 56(1)(n) and 56(3)]ITA 56(1)(o): research grant net of (unreimbursed) expenses must be included in income7Social Assistance and Workers Compensation Payments [8-27 to 8-28]ITA 56(1)(u) and (v): include in calculation of net income for tax purposes for means testing (i.e., for determining certain tax credits etc.) but deducted in the calculation of taxable income as exempt income for policy reasons (i.e., not taxable)8Universal Child Care Benefit [8-29 to 8-31]Universal Child Care Benefit Act: $100 a month for each child under the age of 6 (i.e., 5 and under)ITA 56(6): include in income of lower-income spouse or common-law partner9CPP Contributions on Self-employed Earnings [8-32 to 8-35]...
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- Spring '09