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Chapter 9

AFM362 Chapter Notes - Chapter 9: Registered Retirement Income Fund, Registered Retirement Savings Plan, Canada Pension Plan


Department
Accounting & Financial Management
Course Code
AFM362
Professor
Andy Bauer
Chapter
9

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Chapter 9
Other Income: Miscellaneous income or benefits other than from employment,
business, or property; including: pensions, retiring allowances and severance pay,
supports receipts, annuity payments, deferred income plans, education assistance, legal
costs awarded by court, social assistance, workers compensation, indirect payments,
child care benefits, and restrictive covenants.
Income from Pensions: Pension income, including that from the Old Age Security Act,
Canada Pension Plan, Employment Insurance Act, or any other pension is included in
taxable income.
Death Benefits: Are included in taxable income, but receive a $10,000 maximum
exemption.
Income Splitting: Spouses or common-law partners can split their eligible pension
income by allocating up to 50% to the other spouse, but prorated for the length of
time the individuals have been together. CPP income can only be split by 50% (no in
between).
Eligible Pension Income: For individuals 65 years and over, includes registered
pension plans, registered retirement saving plan, deferred profit sharing plan, or a
registered retirement income fund. For individuals under 65, includes registered
pension plans and certain payments received as a result of the death of a spouse or
common-law partner.
Allowances and Other Payments on Termination of Employment: Are all taxable as
a retiring allowance, with exceptions for amounts out of an employee benefit plan,
retirement compensation arrangement, or a salary deferral arrangement.
Retiring Allowance: Excludes pension income and death benefits, but specifically
includes payments in respect of:
(a) Retirement from employment in recognition of long service
(b) Loss of office including court-awarded damages
Annuity: An investment of money entitling the inve stor to a series of equal annual
sums. The full amount of an annuity payment is included in income, then the capital
portion is deducted. The following annuity payments do not qualify for this capital
portion deduction:
(a) A superannuation or pension benefits
(b) A payment under a RRSP or RRIF
(c) A payment from a deferred profit sharing plan
Capital Portion Deduction: The annuity payment multiplied by the capital element
ratio (capital outlay to buy the annuity / total payments expected to be received).
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