At the beginning of 2020, Mr. Sidi Blake is 71 years old and has been retired for 5 years. Prior to his retirement, he had been a long-term employee of a large public company. During 2020, he receives payments from the employer’s RPP of $86,000. Both the employee and employer contributions to this RPP ended when Mr. Blake retired.

In addition to the pension income from his employer’s RPP, in 2020, Sidi is entitled to $11,000 in Canada Pension Plan benefits. When Sidi first began to receive CPP benefits, he elected to split these benefits with his wife, Adrianna.

Because his income is consistently in excess of $150,000 per year, he has not applied for and does not receive OAS payments.

Sidi has a 45 year old son who has been blind since birth. The son lives with Sidi and has no income of his own.

Sidi’s wife Adrianna has provided all of the care required for their son. She is 66 years old at the beginning of the year and, during 2020, she received OAS payments of $7,400 in addition to the $5,500 in CPP benefits that Sidi has elected to split with her. She has no other personal source of income. However, for 2020, Sidi will split all of his qualifying pension income with Adrianna.

The family’s medical expenses are as follows:

Sidi	$ 2,500
Adrianna	3,100
Son	9,800
Total	$15,400

Sidi makes an annual donation to the Canadian National Institute for The Blind of $4,000.

While he was still employed, he was granted options to acquire 5,000 shares of his employer’s stock. The option price was $15 per share and, at the time the options were granted, this was also the fair market value of his employer’s shares. All of these options were exercised in February, 2020. At this time, the shares were trading at $21 per share. In November, 2020, all of the shares are sold for $23 per share.

Sidi had other investment income during 2020 as follows:

Interest from Canadian Sources	$18,000
Eligible Dividends Received	2,200
Foreign Source Interest (Net of 10 Percent Withholding)*	2,700
Total	$22,900

*Assume that the foreign tax credit is equal to the amount withheld.

On January 1, 2020, Sidi owns three residential rental properties. They are all Class 1 properties. Relevant information on these properties is as follows:

	Property A	Property B	Property C
Capital Cost - Building	$560,000	$685,000	$426,000
UCC On January 1	422,000	571,000	$385,000
Rental Revenues	34,000	42,000	26,000
Expenses (Other than CCA)	29,000	37,000	23,000

On December 31, 2020, property A is sold for $960,000. The value of the land for this property was $100,000 at the time of purchase and had increased to $340,000 at the time of sale. The vendor pays $96,000 in cash, with Sidi taking back a mortgage for the $864,000 balance. The mortgage requires annual payments of $86,400 on the principal, beginning in 2021.

When he turned 71 in 2020, Sidi transferred his RRSP assets into a RRIF. On January 1, 2020, the fair market value of these assets is $1,250,000. As he has little need for current income, Sidi would like to minimize his withdrawals from the plan.

At the beginning of 2020, Sidi opens an RRSP with his wife as the registrant. He has no unused RRSP deduction room carried forward from 2019. He would like to make the maximum deductible contribution to his wife’s RRSP during 2020. In calculating this amount, assume that his 2019 earned income is equal to his 2020 earned inome.

Required: Ignore GST/HST/PST considerations.

1. Calculate Mr. Sidi’s maximum deductible spousal RRSP contribution for 2020.

B.Assume that Mr. Sidi contributes the amount calculated in Part A to his wife’s RRSP. Calculate Mr. Sidi’s 2020 minimum:

1. • Net Income For Tax Purposes,
   • Taxable Income, and federal Tax Payable before consideration of any income tax that would have been withheld or paid in instalments.
   • In general terms, without doing calculations, describe the factors that Mr. Sidi should consider when deciding how much pension income he should split with his spouse.

Answer rating: 100% (QA)

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