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Cash dividends received from Amazon, a U.S. public Corp...........$5,100
(15% withholding taxes)
Interest paid on money borrowed to buy shares of Amazon............._..$4.000
xi.
In 2019, Ram gave to each of his two children, aged 5 and 7, $2,000 each of Ontario Savings bonds
paying interest at 2% annually.
Required:-Following $3 of the ITA, calculate Ram's Net Income for the year.
(Show all your work papers)
QUESTION #3 (20 MARKS):
You are a pension adviser for the Bank of Montreal in Toronto. One of your duties is to meet with valued
clients (portfolios over $1,000,000) to discuss and answer any questions the clients may have relating to their
pensions.
You will be meeting with Jim Kim next week who has sent you by e-mail a number of questions he would like
to discuss with you relating to pensions generally.
Below is the list of questions he has sent to your
What is meant by a contribution and deduction limit for R.R.S.P.
ii.
What is the advantage of having a R.R.S.P. as opposed to having a T.F.S.A.
III.
What are the advantages and disadvantages of having a spousal R.R.S.P.
iv.
What are the tax implications if a withdrawal is made under the Home Buyers' Plan.
Required:-
For each of the above situations, provide 5 bulleted points for you to discuss when you meet with the client.
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QUESTION #2
Ram Singh is employed by OM Inc., a public corporation, as an internal auditor. Information relating to his
employment for the year 2019 is as followsi-
In 2019 Ram received a salary of $130,000. The employer withheld $33,000 for income taxes, $2,700
for Canada pension contributions and $750 for Employment insurance. Other withholdings from the
paycheck were $6,000 for contribution to the Company's Registered Pension Plan, $600 for contributions to
the Group Term Life Insurance, $1,400 for contribution to the Group Disability Plan.
The employer also contributed $6,000 to Ram's RPP and $600 to the Group Term Life Insurance Plan.
ii.
Because Ram had to travel to various Company's locations away from his regular workplace, the
employer provided him with a yearly travelling allowance of $7,000.
ifi.
OM provides three of its senior executives with an allowance to attend conventions of their choice. In
2019, Ram received $2,000 for this allowance and was not required to account for the costs. He attended one
convention and incurred costs of $2,200
iv.
Ram was provided with a car by the employer for use in business. The car was purchased in 2019.
Details relating to this car are as followsi-
Cost of car (including all taxes ).......... .:1545454595::":..:$41,000
Operating cost paid by employer (including HST ]... . 8,400
Total kilometres driven.....
ww......15,000
Kilometres driven for employment purposes....
..* *:.: 10,000
vi.
Re-imbursement to Company for use of car........
In June 2019, OM announced a new employee stock option plan. The plan allowed each employee to
purchase 2,000 shares of OM at $14 per share. At the time of the announcement the shares were trading at
$15 per share. On July 1st, Ram purchased 1,000 of the shares when the shares were trading at $18 per
share. On October 15th of the same year, Ram exercised his rights and purchased the remaining 1,000 shares
when the shares were trading for $20 per share.
In December Ram and his spouse wanted to go to Europe for Xmas and he sold 500 of the shares at $25 per
share so that he can have funds for this trip.
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Re-imbursement to Company for use of car ........mmm......wwwwwww.$2,400
vi.
In June 2019, OM announced a new employee stock option plan. The plan allowed each employee to
purchase 2,000 shares of OM at $14 per share. At the time of the announcement the shares were trading at
$15 per share. On July 1st, Ram purchased 1,000 of the shares when the shares were trading at $18 per
share. On October 15th of the same year, Ram exercised his rights and purchased the remaining 1,000 shares
when the shares were trading for $20 per share.
In December Ram and his spouse wanted to go to Europe for Xmas and he sold 500 of the shares at $25 per
share so that he can have funds for this trip.
Also, at the time of granting the option, the employer arranged with a local credit union to make loans
available to the employees who wanted to buy the shares at a rate of 4% (fair market value of interest rates
for the year 2019 was 5%). Ram took the opportunity and bought the shares.
vii.
OM introduced a holiday cruise award for executives who gave special service to the Company. Ram
qualified and won the award in 2019. In March 2020, he and his spouse went on the cruise which cost
$2,150. The value of the award was $3,000.
x.
Other non-cash perks received from the employers
Contributions to the R.P.P....
....$6,000
Contributions to a group R.R.S.P...
.......$2,000
Dental Plan valued at...
...* *..$1,500
Mandatory employer-paid provincial health tax.......$1,700
Membership in the local golf club..
viii.
Hard hat and safety glasses..
Ram and his spouse were provided with the company's condo in the Bahamas for one week holiday
during the winter. Such accommodation during this peak period would have cost them $400 as opposed to
$100 actually paid by him.
ix.
OM paid $1,000 to the Certified Public Accounting Association for Ram's professional fees for the
year. They also paid $600 for him to attend a conference on new accounting standards to be implemented in
the current year.
X.
Ram also had income from investments as followsi
Interest earned on a joint bank account with his spouse.................mum$3,000
Interest on his R.R.S.P, account..
....$1,500
Interest earned on his 2018 personal tax assessment...
.EARN$ 2000
Interest on Govt. of Cda. Treasury Bills . ...... .....
009 ....
Cash dividends received from investments in a Canadian resident Corp.......$3,000
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