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Mini-Case A (8 marks)  Monir and Jackie, both in their 40s, own a new 2-story house in Pointe Saint-Charles. Jackie is expecting their first child in September. Monir is the co-owner of a real estate company and receives income in the form of dividends from his share ownership.  Jackie is a salaried employee of the company with the usual deductions at source. Jackie earned $76,0

Mini-Case A (8 marks)

 Monir and Jackie, both in their 40s, own a new 2-story house in Pointe Saint-Charles. Jackie is expecting their first child in September.

Monir is the co-owner of a real estate company and receives income in the form of dividends from his share ownership.  Jackie is a salaried employee of the company with the usual deductions at source.

Jackie earned $76,000 in salary and $7,500 in bonuses in 2021.  Monir received a $2.00 dividend per share on his 200,000 shares.  Because the company is a Canadian controlled private corporate (CCPC), his dividends are non-eligible.

Jackie made $10,000 of RRSP contributions throughout 2021, and a $6,000 TFSA contribution in December.  Monir’s income is not considered to be earned income for determination of the RRSP contribution limit, thus his only contribution was to his TFSA of $6,000, also in December.

Monir purchased 2,000 shares of the Royal Bank at $105 early in 2021, and sold them later in 2021 for $135 per share.  He also purchased 5,000 share of iShares Global Clean Energy ETF, which he later sold for a capital gain of $32,400.  The ETF was held in his TFSA, while the Royal Bank shares were held in a non-registered account.  Monir also incurred a small non-registered capital loss of $5,250 on some long-term bonds he had purchased.

Monir had major dental work done in 2021 amounting to $25,000.  Their other medical expenses were negligible.

Part 1 (4 marks)

Calculate total income for federal tax purposes (line 15000) and net income (line  23600) for Monir and Jackie in 2021.  For each income/deduction type, indicate the line number on the T1 form.  Add lines as required to the table below.  Round to the nearest dollar.

Refer to the 2021 Federal Income Tax and Benefit Return for residents of Quebec at:

https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/5005-r/5005-r-21e.pdf

Jackie Monir
 

Line #

Income/Deduction

And Calculation

 

$

 

Line #

Income/Deduction

And Calculation

 

$

   

 

 

 

     

 

         

 

 
   

 

       
     

 

     
   

 

       

Part 2 (2 marks – 1 mark each)

  1. Both Monir and Jackie made their TFSA contributions in December. What would you say to them about the timing of this contribution?
  2. Assume Monir has maxed out his TFSA. If he had withdrawn $5,000 on December 31, 2021, what would have been his TFSA contribution room as of January 1, 2022?
Part 2(I) Recommendation

 

 

 

Part 2(ii) Contribution room calculation

 

 

 

 

 

Part 3 (2 marks – ½ mark each)

 

Identify 4 additional federal non-refundable tax credits the couple could claim.  Identify the credit, who can claim it, and why.

 

Non-Refundable Tax Credit Who can claim Rational
Basic personal amount Both Available to all tax filers
     
     
     
     
     

 

 

The End

TABLE A

2020 Combined Federal and Quebec Personal Income

Tax Brackets and Tax Rates

2020 Taxable Income 2020 Tax Rates 2020 Taxable Income 2020 Tax Rates
first $44,545 27.53% over $97,069 up to $108,390 45.71%
over $44,545 up to $48,535 32.53% over $108,390 up to $150,473 47.46%
over $48,535 up to $89,080 37.12% over $150,473 up to $214,368 50.15%
over $89,080 up to $97,069 41.12% over $214,368 53.31%

                                                                        

TABLE B

2020 Federal Basic Personal Amount and Quebec Basic Personal Amount
2020 Federal Basic Personal Amount 2020 Quebec Basic Personal Amount
$13,229 $15,532
Tax rate 15% Tax rate 15%

 

TABLE C

Tax-Free Savings Account (TFSA): Annual Limits
Years Annual Limit Years Annual Limit
Year started 2009 – 2012 $5,000/year 2016 – 2018 $5,500/year
2013 – 2014 $5,500/year 2019 – 2020 $6,000/year
2015 $10,000/year 2021 $6,000/year

 

TABLE D

Registered Retirement Savings Plan (RRSP): Annual Limits

Formula for RRSP contribution limit: 18% of your previous year’s earned income less your previous year’s pension adjustment to an annual maximum.

Year Annual maximum contribution limit
2018 $26,230
2019 $26,500
2020 $27,230
2021 $27,830

TABLE E

Home Buyer’s Plan (HBP)
Withdrawals made after March 19, 2019 Withdrawals made prior to March 19, 2019
  • Withdraw up to $35,000 per borrower and up to $70,000 per couple.
  • 15 years to pay back the amount withdrawn
  • Withdraw up to $25,000 per borrower and up to $50,000 per couple.
  • 15 years to pay back the amount withdrawn

TABLE F

  Time Value of Money Formulas  
Simple Interest  
Future (FV) of a single dollar amount
Present Value of a single dollar amount
Future Value of an annuity   
Present Value of an annuity
Interest Rate Conversion
Time Value:

FV = Maturity value or Future value             

PV = Principal or Present value        

PMT = Periodic annuity payments

n = Number of compounding periods per year

i = Annual interest rate

t = Time (in years)

 

EY = Effective yield

Simple interest:

I = Interest earned

P = Principal or Present Value

r = annual interest rate

t = time (in years)

 

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