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 |
$ |
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Part 2 (2 marks – 1 mark each)
- Both Monir and Jackie made their TFSA contributions in December. What would you say to them about the timing of this contribution?
- 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 If he had withdrawn $5,000 on December 31, 2021, what would have been his TFSA contribution room as of January 1, 2022?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
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Part 2(ii) | Contribution room calculation
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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 |
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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. |
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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 |
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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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