rfra asignment 2

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School

York University *

*We aren’t endorsed by this school

Course

FINANCIAL

Subject

Economics

Date

Apr 28, 2024

Type

txt

Pages

1

Uploaded by PresidentFrog3372

Reginald is retired and receives CPP and OAS benefits, as well as a pension from his former employer. His financial planner is calculating his income from various sources. All of the following statements are true, EXCEPT: Correct The correct answer: Reginald's employment pension income must be indexed to the CPI. Your answer: Reginald's employment pension income must be indexed to the CPI. Solution: Reginald's employment pension may or may not be indexed. If it is indexed, it may be indexed to the CPI or to some other pre-determined percentage. 2 Questions 2 to 5 are based on the Fred and Irene Buckley case study presented throughout this unit.  Through your discussions with the Buckleys, you have learned that Fred and Irene have been married for almost 40 years. Fred has had a stable career throughout their marriage while Irene's career has been more sporadic as she has devoted most of her energies to raising the children and maintaining the household. After reviewing Schedule 2, you notice that this year (i.e. the year Fred is 66 years old and Irene is 63 years of age), Fred will be paying much more in income taxes than Irene. Fred is on the right track to reduce his tax liability by making spousal RRSP contributions. What else could Fred and Irene do to shift some of the tax burden to Irene to take advantage of her lower marginal rate? Incorrect The correct answer: They could assign their CPP pensions. Your answer: Fred could give his portfolio assets to Irene. Solution: Schedule 2 currently shows that Fred receives more than 4 times the CPP retirement pension that Irene does, calculated as ($9,200 ÷ $2,100). Because they have lived together for the bulk of their working lives, they have the opportunity of assigning a significant portion of Fred's CPP credits to Irene. This would increase Irene's taxable income, and decrease Fred's taxable income. Even if Fred bases his RRIF on Irene's younger age, the withdrawals will still be taxed in his hands. Fred can rollover his capital assets to Irene without incurring an immediate tax liability under the spousal rollover provisions. However, any income, including capital gains, will still be attributed to him.
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