10%20-%20Retirement%20Savings%20and%20Other%20Special%20Income

If the plan is registered contributions to the plan

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If the plan is registered, contributions to the plan are tax deductible, subject to the limits set in the Act. Funds can be borrowed to make a contribution, but interest on the debt will not be tax deductible.
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RRSP - Withdrawals Most amounts withdrawn must be included in income, as regular income (even if dividend or capital gain income is withdrawn from the RRSP) Some withdrawals can be made tax free Home Buyers’ Plan Lifelong Learning Plan Withdrawals are subject to withholding tax, and this should be kept in mind by someone needing a certain amount of cash after tax from their RRSP
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Investment Options Managed RRSP Financial institution manages the investment of the funds Self administered RRSP Investment of the funds is managed by the taxpayer Can transfer securities already owned into the plan (may result in TCG’s as this is a deemed disposition) An individual can have multiple RRSP’s Potential investments are broad main limitations are investments in shares of private companies and direct investments in real estate.
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Some Taxation Problems Capital Gains Will be treated as ordinary income when withdrawn from the plan If an investment is held for a long time, the capital gain is essentially earned tax free until the time the investment is disposed of Eligible Dividends Dividends also lose their favourable tax treatment inside a registered plan This has become a larger issue with the introduction of eligible dividends, which reduces the effective tax rate on this source of income Non-deductible financing costs Interest paid on borrowing to finance an RRSP contribution is not tax deductible, but if borrowing to finance a non-registered investment, the interest is deductible Complete Exercise Ten-1 on Pg. 449
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