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ADMS 3520 (32)
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Lecture

3520-4- updated JF.doc

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Department
Administrative Studies
Course
ADMS 3520
Professor
All Professors
Semester
Fall

Description
3520-4: September 8, 2008 1-6 1 Lecture 4: Other Income and Deductions  The lecture is to highlight parts of CTP chapter 8 and CTP 9 (mainly on RRSP contributions)  The designated problems are:  Moving Expenses: Exercise 8-1, Self-study Problem 8-1  Child Care Expenses: Exercise 8-2, Self-study Problem 8-2  Support Payments: Exercise 8-5  Annuity Payments: Exercise 8-6  CESG: Exercise 8-7  RRSP Contributions - Chapter 9, Exercises 9-1,2, 3 2 Pension Benefits [8-14 to 8-15]  ITA 56(l)(a)(i) = Inclusion section for employer’s registered pension plans (RPP) and government’s Old Age Security (OAS) and Canada Pension Plan (CPP) payments 3 Retiring Allowances [8-16 to 8-18]  ITA 56(l)(a)(ii) = inclusion section for retiring allowances  Retiring allowances = payment(s) by employer for long service or loss of office whether or not ordered by a court judgment [ITA 248(l)]  the eligible portion of retiring allowances can be transferred tax-free to an RRSP based on a formula, i.e. the income inclusion is offset by a special limited registered retirement savings plan (RRSP) deduction (formula covered in ADMS 4561) 4 Death Benefits [8-19 to 8-22]  ITA 56(l)(a)(iii) = inclusion section for death benefits for a dead employee’s surviving spouse or common-law partner as defined in ITA 248(l): 1st $10,000 is tax-free and is not a death benefit 5 Income Inclusions from Deferred Income Plans [8-23 to 8-24]  RRSPs, Deferred Profit Sharing Plans (DPSPs) and Registered Retirement Income Funds (RRIFs) and RPPs are registered plans  They are registered with the federal government  In order to be registered they must meet certain conditions  The advantage of registration is  that contributions into the plan are either tax-free benefits (e.g., employer RPP and DPSP contributions) or tax-deductible individual contributions (e.g. RRSPs, RPPs) or tax-free transfers (RRSPs to RRIFs)  income grows tax-free in the plan Jason Fleming [[email protected]] 3520-4: September 8, 2008 2-6  Payments out of the following plans are included in income when received:  RRSP withdrawals, payments etc are taxable [ITA 56(l)(h)]  DPSP payments [ITA 56(l)(i)]  RRIF payments [ITA 56(l)(t)] 6 Educational Assistance Payments and Research Grants [8-25 to 8-25]  2007 onwards: scholarships and bursaries are fully exempt from tax [ITA 56(1)(n) and 56(3)]  ITA 56(1)(o): research grant net of unreimbursed expenses must be included in income 7 Social Assistance and Workers’ Compensation Payments [8-27 to 8-28]  ITA 56(1)(u) and (v): include in calculation of net income for tax purposes for means testing but deducted in calculation of taxable income as exempt income for policy reasons 8 Universal Child Care Benefit [8-29 to 8-31]  Universal Child Care Benefit Act: $100 a month for each child under the age of 6 (i.e., 5 and under)  ITA 56(6): include in income of lower-income spouse or common-law partner 9 CPP Contributions on Self-employed Earnings [8-32 to 8-35]  ITA 60(e): deduct one-half of all CPP contributions payable on self-employed income  remaining half treated the same as CPP contributions made by employee to be covered later in the course 10 Moving Expenses [8-36 to 8-47]  ITA 62(1): eligible relocation as defined in ITA 248(1)  The move must bring you 40 km. closer to workplace/school and the reason for the move must be to carry on business, to be employed, or to be a full-time student  Can only be deducted against income from the new location. There is a one year carryforward for un-deducted moving expenses  ITA 62(3) on items included: see 8-40  For items not allowed, see 8-41  Simplified method: for 2007 rates see 8-42;  2007 rates – for meals: $17/person/meal = $51/person/day, for car expenses: 49.5 cents/km  for 2008 rates when they are posted (in 2009) see http://www.cra- arc.gc.ca/travelcosts/ Jason Fleming [[email protected]] 3520-4: September 8, 2008 3-6  ITA 6 (20): half of any reimbursement > $15,000 to be included as taxable benefit [see examples at 8-44 and 8-47] 11 Child Care Expenses [8-48 to 8-61]  ITA 63: incurred to earn taxable income or receive an education  Terms to know:  Eligible Child = under 16 at some time during the year  Annual Child Care Expense Amount  $10,000 for child of any age eligible for disability tax credit  $7,000 for child under age of 7 at year-end  $4,000 for child aged 7 to 16 or child over 16 infirm but not eligible for disability tax credit  Periodic Child Care Expense Amount per week: 1/40 of annual child care expense amount  Attendance at boarding school or camp: limited to Periodic Child Care Expense per week [i.e., $250 for children eligible for the disability tax credit, i.e., $10,000/40; $175 for children under age 7, i.e., $7,000/40; and $100 for other eligible children, i.e., $4,000/40]  Earned Income: will be provided in this course  Supporting person = spouses living together at any time in the year and at any time within 60 days of the end of the year  No deduction for services beyond child care such as computer lessons or sports fees  Child care expenses can generally only be deducted if both parents (“supporting persons”) work because child care expenses can generally only be claimed by the lower but non-zero income parent  In the case of a single parent family, the single parent must have earned income to claim the deduction  ITA 63(2): child care expenses can be claimed by a higher income spouse (including situations where one spouse is not working)  when the other spouse is  attending a designated educational institution  full time: 10 hours a week for at least 3 weeks  part time: 12 hours a month for at least 3 weeks  mentally or physically impaired for at least 2 weeks, confined to bed or wheelchair or otherwise incapable of looking after the child supported by doctor's certificate  in prison for at least two weeks  is separated from them at the end of the year and for at least 90 days commencing in the year  Note that if the separation taxes pla
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