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Lecture 5 - 3520-5 1 Lecture 5 Other Income and Deductions...

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3520-5: 9/14/11 1-7 1 Lecture 5: Other Income and Deductions The lecture will cover parts of CTP chapter 9 and CTP 10 (mainly on RRSP contributions) The designated problems are: Moving Expenses: Exercise 9-1, Self-study Problem 9-1 Child Care Expenses: Exercise 9-2, Self-study Problem 9-2 Support Payments: Exercise 9-5 Annuity Payments: Exercise 9-6 CESG: Exercise 9-7 RRSP Contributions - Chapter 10, Exercises 10-2, 10-3, 10-6 2 Pension Benefits [9-14 to 9-15] ITA 56(l)(a)(i) = Inclusion section for employer’s registered pension plans (RPP) and government’s Old Age Security (OAS) and Canada Pension Plan (CPP) payments received 3 Retiring Allowances [9-16 to 9-18] ITA 56(l)(a)(ii) = inclusion section for retiring allowances received Retiring 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) 4 Death Benefits [9-19 to 9-22] ITA 56(l)(a)(iii) = inclusion section for death benefits for a deceased employee’s 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 taxable 5 Income Inclusions from Deferred Income Plans [9-23 to 9-24] RRSPs, Deferred Profit Sharing Plans (DPSPs) and Registered Retirement Income Funds (RRIFs) and RPPs are registered plans They are registered with the federal government In order to be registered they must meet certain conditions The advantage of registration is that 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 plan Payments out of the following plans are included in income when received: Jason Fleming [[email protected]]
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3520-5: 9/14/11 2-7 RRSP withdrawals are taxable [ITA 56(l)(h)] DPSP payments received [ITA 56(l)(i)] RRIF withdrawals [ITA 56(l)(t)] 6 Educational Assistance Payments and Research Grants [9-25 to 9-27] 2007 onwards: most scholarships and bursaries are fully exempt from tax [ITA 56(1)(n) and 56(3)] Starting in 2010 and thereafter: 1) post-doctoral fellowships are taxable; and 2) scholarships and bursaries related to a part-time program are only tax-free up to the tuition paid plus the costs of program related materials o This limitation does not apply to students who are entitled to the disability tax credit and who can’t be full-time students because of a mental or physical impairment ITA 56(1)(o): research grant net of (unreimbursed) expenses must be included in income 7 Social Assistance and Workers’ Compensation Payments [9-28 to 9-29] 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
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