Michael is 47 years old and lives in toronto, Ontario with his wife emma. They have one daughter. Michael was forced into early retirement due to a workplace accident. Emma is a homemaker and she has no source of income. daughter is in Grade 2 with no income.

Pension Income $ 40,000

Interest Income 2,000

Eligible dividends 30,000

Non-Eligible dividends 5,000

2017 RRSP contribution room 6,000

RRSP contributions made during 2017 10,000

Child Care expense for Pebbles 2,000

Donations to registered charities made by Wilma 1,000

In addition to the above, michael has 9,000 shares in XYZ Corp shares with an ACB of $ 72,000. In August 2017, he sold all his holdings of XYZ Corp shares @ 18 / share after sales charges.

QUESTION 1 - Calculate total, net, and taxable income:

Calculate total income, net income, and taxable income with a view to minimizing tax among the family members

(Hint: The gross-up on eligible dividends is 38 %; on non-eligible it is 17 %)

2 - Calculate federal tax: Calculate Fred's federal tax liability using the following tax rates and federal credit amounts:

Basic personal amount $ 11,635

Spouse/common-law partner amount 11,635

Pension income amount 2,000

Canada employment amount 1,177

Federal credit rate 15.00 %

Dividend tax credit rate on eligible taxable dividends 15.02 %

Dividend tax credit rate on non-eligible taxable dividends 10.52 %

Donation tax credit on first $ 200 15.0 %

Donation tax credit on the next $ 800 29.0 %

Federal Tax:

On first $ 45,916 15 %

$ 45,917 - $ 91,831 20.5 %

$ 91,832 - $ 142,353 26.0 %

$ 142,354 - $ 202,800 29.0 %

$ 202,800 and over 33.0 %

3: The case for spousal RRSPs

Mary, michael's friend, was visiting him one day and they were discussing income splitting strategies over coffee. mary was saying that with the advent of pension income splitting in 2007, spousal RRSPs are not necessary and they don't really provide any additional benefits. She said "It seems to me that I can split my company pension, my RRSPs/RRIFs, and also my CPP benefit without any problems. What is the purpose of having a spousal RRSPs anyway ?

Do you agree with Mary ? Please explain by providing at least two good reasons to explain your position

Answer rating: 100% (QA)

1 Calculate total net and taxable income Total Income Total Income Pension Income Interest Income Eligible Dividends NonEligible Dividends Total Incom... View the full answer