Homework answers / question archive / Humber College - BMGT ACCT 203 chapter 10 1)What amount of payments received from an annuity that was acquired within a tax deferred plan must be included in the? recipient's net income for tax? purposes? Choose the correct answer

Humber College - BMGT ACCT 203 chapter 10 1)What amount of payments received from an annuity that was acquired within a tax deferred plan must be included in the? recipient's net income for tax? purposes? Choose the correct answer

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Humber College - BMGT ACCT 203

chapter 10

1)What amount of payments received from an annuity that was acquired within a tax deferred plan must be included in the? recipient's net income for tax? purposes?

Choose the correct answer.

1. 1. the part of the payment that is a return of capital invested
   2. the part of the payment that is not a return of capital invested
   3. none of the payment
   4. the entire payment

 

2. RESPs and RDSPs are tax advantaged plans because? ________.

Choose the correct answer.

1. 1. earnings and growth on contributions accumulate tax free
   2. distributions from these plans are? non-taxable to the recipient
   3. contributions to the plans are tax deductible
   4. distributions from the plans are tax deductible

 

 

3. The tax benefits associated with an RRSP are? ________.

Choose the correct answer.

1. 1. tax deferred earnings and accumulation and government matching on contributions
   2. a current tax deduction and tax free withdrawals upon retirement
   3. a current tax deduction and tax deferred earnings accumulation
   4. a current tax deduction and government matching on amounts contributed

 

4. The RRSP deduction limit is? a(n) ________.

Choose the correct answer.

1. 1. cumulative? limit, in which unutilized deduction room can be carried forward to future years
   2. annual? limit, in which unutilized deductions in a year are forfeited
   3. one-time limit that must be utilized all in one year
   4. lifetime limit that can be utilized in any amount for a given year

 

5. Which of the following income types is excluded from earned income when calculating a? taxpayer's RRSP deduction? limit?

Choose the correct answer.

1. 1. wages
   2. interest income
   3. net rental income
   4. taxable spousal support received

 

6. The home? buyer's plan and lifelong learning plan are incentives that apply to which tax deferral? plans?

Choose the correct answer.

1. 1. Registered Retirement Savings Plan? (RRSP)
   2. Registered Disability Savings Plan? (RDSP)
   3. All tax deferral plans
   4. Registered Education Savings Plan? (RESP)

 

7. The RRSP annual limit for the current year is calculated as? ________

Choose the correct answer.

1. 1. the greater of? 25% of the? individual's earned income in the prior year and the RRSP dollar limit established by the government for the current year.
   2. the lesser of eligible contributions made to an RRSP during the calendar year and the RRSP dollar limit established by the government for the current year.
   3. the lesser of? 30% of the? individual's earned income in the current year and the RRSP dollar limit established by the government for the current year.
   4. the lesser of? 18% of the? individual's earned income in the prior year and the RRSP dollar limit established by the government for the current year.

 

8. Suki Vanderbilt would like to calculate her RRSP annual limit and needs your assistance in computing her earned income. Her previous? year's tax return reported the following? amounts:

$65,000 net employment? income, after deducting her registered pension plan contributions of ?$3,200

$3,100 net rental loss

$11,500 interest income

$5,400 spousal support received

Which of the following is the correct amount of earned income for Suki for the previous taxation? year?

Choose the correct answer.

8. 1. $82,000
   2. $75,600
   3. $70,500
   4. $76,360
9. A: While calculating earned income for RRSP, interest income is excluded. And gross employment income is taken for calculation purpose.

 

 

10. Jin Dowling would like to know his maximum RRSP deduction in the current year. The Federal? government's annual RRSP limit for the current year is set at ?$26,500.  provides you with the following information.

Unused RRSP Deduction Room at December 31 of the prior? year: ?$ 6,200

Prior year earned? income: ?$78,000

Current year earned? income: ?$95,000

RRSP contribution made to his own? self-administered RRSP plan during the current? year: ?$11,800

RRSP contribution made to a spousal plan? (TD Bank) on February 1 of the following? year: ?$6,400

RRSP contribution made to his own plan? (TD Bank) on March 15 of the following? year: ?$5,200

What is Jin ?Dowling's maximum RRSP deduction for the current? year?

Choose the correct answer.

20,240

23,300

26,500

18,200

 

 

11. With respect to RRSP? contributions, which of the following statements is? correct?

Choose the correct answer.

 

1. 1. There is no penalty for making contributions that are in excess of available RRSP deduction room.
   2. Contributions made during the current year can be deducted in any subsequent year? (i.e. unused RRSP contributions can be carried forward? indefinitely).
   3. Contributions made during the current year and within 30 days of the end of the current? year, must be deducted in the current year.
   4. Contributions in excess of available deduction room cannot be deducted in the current year or any subsequent year.

 

12. Five years? ago, Jeff Jones commenced making contributions to a spousal RRSP plan for his? wife, Jena.  has made a ?$5,500 contribution to the spousal RRSP plan on June 1 for the past five? years, including the current year.  In the current? year, Jeff and Jena needed cash for home renovations and redeemed ?$20,000 from her spousal RRSP plan.

Which of the following statements is correct in regard to the taxation of the ?$20,000 in the current? year?

Choose the correct answer.

1. 1. $16,500 is included in ?Jeff's Net income and ?$3,500 in Jena?'s Net Income.
   2. $20,000 is included in ?Jeff's Net Income and? $0 in ?Jena's Net Income.
   3. $0 is included in Jeff?'s income and ?$20,000 in ?Jena's Net Income.

D.$3,500 is included in jeff?'s Net Income and ?$ in ?Jena's Net income.

 

13. Contributions to RESPs are? ________ and earnings on invested amounts are? ________ when withdrawn.

Choose the correct answer.

1. 1. non-deductible, taxable to the student
   2. deductible, tax-free
   3. deductible, taxable to the contributor
   4. non-deductible, tax free

 

 

14. RESPs and RDSPs can be used to? ________.

Choose the correct answer.

1. 1. avoid tax with tax free distributions
   2. reduce tax when distributions are received by individuals with lower tax rates then the contributor
   3. avoid tax with deductible contributions
   4. reduce tax when contributions are made by individuals with lower tax rates than the distribute

 

15. You are a CPA working in the tax group of a? medium-sized accounting? firm, Smith? & Ross LLP. This? morning, the partner of the tax group approached you regarding new? clients, Cherie and Tabib Carter.

Cherie is a? 50-year-old pharmacologist living in Calgary?, AB. Tabib ?, aged? 55, is a partner at a large law firm in Calgary. Tabib and Cherie have two children who are currently attending elementary school in Calgary.  Tabib and Cherie starting to look forward to retirement and would like professional advice in effectively planning for their retirement.

The partner would like you to calculate Tabib and Cherie ?'s Registered Retirement Savings Plan? (RRSP) contribution room for the current? year,2020 ?, since this information will assist in the Carters?' retirement planning. The tax partner provides you with the Carters?' client? file, which includes the ? Carters' tax returns from 2019?, as well as notes prepared by the? partner's administrative assistant after his first meeting with the couple. The file and notes contain the following information.

 

 

 

 

 

 

 

16. Which of the following is incorrect with respect to the transfer of a retiring allowance to an? RRSP?

Choose the correct answer.

1. 1. The transfer must be made within 60 days of the end of the year in which the retiring allowance was received.
   2. Within certain? limits, a portion of a retiring allowance received for service prior to 1996 can be transferred to an RRSP.
   3. The amount of the retiring allowance which can be transferred to an RRSP is limited only by the? individual's RRSP deduction limit for the year.
   4. The amount of the retiring allowance which can be transferred to an RRSP is limited to a set amount per year of service prior to 1996.

 

17. Jagdish Patel would like to know how much of his unused RRSP deduction room will carry forward to the next taxation year. Assume the federal? government's annual RRSP limit for the current year is set at? $26,000. Jagdish provides you with the? following information:

Unused RRSP Deduction Room at December 31 of the prior? year = $250

Prior year Earned? Income = $82,500

Current year Earned? Income = $95,750

RRSP contribution made to his? own self-administered RRSP plan during the current? year = $12,430

Jagdish does not have an employer provided pension? plan, so his pension adjustment in the prior year and current year is zero.

Jagdish takes the maximum RRSP deduction on his current? year's tax return. What is Jagdish? Patel's unused RRSP deduction room at the end of the current taxation? year?

1. 1. $250
   2. $2,670
   3. $13,820
   4. $5,055

 

18. Which statement BEST describes the difference between a Defined Benefit Plan and a Money Purchase Plan? (a.k.a. Defined Contribution? Plan)?
    1. In a Defined Benefit? Plan, the plan sponsor agrees to provide a specified benefit for each year of qualifying? service, whereas in a Defined Contribution Plan the plan sponsor agrees to make a specified contribution for each plan participant.
    2. In a Defined Benefit? Plan, the employee assumes the most risk and? uncertainty, whereas in a Defined Contribution Plan the plan sponsor assumes the risk and uncertainty.
    3. In a Defined Contribution? Plan, the plan sponsor agrees to provide a specified benefit for each year of qualifying? service, whereas in a Defined Benefit Plan the plan sponsor agrees to make a specified contribution for each plan participant.
    4. In a Defined Contribution? Plan, the plan sponsor normally agrees to provide a benefit equal to a certain percentage of the? employee's earnings, whereas in a Defined Benefit Plan the plan sponsor agrees to provide a contribution equal to a certain dollar value each year.

 

19. With regard to pension? adjustments, which of the following statements is NOT? correct?
    1. The prior year pension adjustment reduces an? individual's RRSP deduction limit to reflect retirement savings taking place in a registered pension plan? (RPP) or deferred profit sharing plan? (DPSP).
    2. The calculation of a pension adjustment for an individual with a defined contribution plan is the sum of the employee and employer contributions to the RPP or DPSP in the year.
    3. If an individual does not participate in an employer sponsored RPP or? DPSP, their pension adjustment will be zero.
    4. The current year pension adjustment reduces an? individual's RRSP deduction limit to reflect retirement savings taking place in a registered pension plan? (RPP) or deferred profit sharing plan? (DPSP).

 

20. At the beginning of the current? year, Mary Woo had zero unused RRSP deduction limit and no undeducted contributions. During the current? year, Mary's RRSP deduction limit increased by? $6,000 and on December 15 Mary contributed? $7,000 to her RRSP. Which of the following statements best describes the consequences of? Mary's RRSP? contribution?
    1. Mary has made excess contributions to her RRSP and will be subject to a? 1% per month penalty tax on the cumulative excess in her RRSP.
    2. There is no penalty for Mary as her RRSP contribution of? $7,000 is only? $1,000 more than her? $6,000 RRSP deduction limit.
    3. Mary has made excess contributions to her RRSP of? $1,000 and she must withdraw the excess contribution as soon as possible.
    4. The excess contribution of? $1,000 will be included in? Mary's income and taxed on? withdrawal, even though an RRSP deduction for this amount was not taken.

 

21. Which of the following statements regarding the Home? Buyers' Plan? (HBP) is NOT? correct?
    1. A repayment schedules requires that amounts withdrawn under the HBP be repaid on a? straight-line basis over ten years.
    2. A special rule denies the tax deduction for contributions to an RRSP or spousal RRSP if amounts are withdrawn within 90 days under the HBP.
    3. The HBP allows for a? non-taxable withdrawal of up to? $25,000 from one or more? individual's RRSP's.
    4. In order for the HBP RRSP withdrawal to be? non-taxable, the purpose of the withdrawal must be to purchase or build a qualifying home.

 

22. Which of the following statements regarding repayments of a withdrawal under the Lifelong Learning Plan? (LLP) is NOT? correct?
    1. Minimum repayments of amounts withdrawn under the LLP must be made on a? straight-line basis over a period of ten years.
    2. The minimum repayment required for a withdrawal under the LLP can be calculated for any given year? as: LLP withdrawal less amounts repaid in previous years multiplied by the fraction? 1/10.
    3. Any amounts that are not returned to the plan as per the required repayment schedule are included in the? taxpayer's income in the year.
    4. RRSP contributions made during the year or in the first 60 days of the following year designated as LLP repayments are not deductible in the calculation of net income for tax purposes.

 

23. Which of the following statements regarding Registered Retirement Income Funds? (RRIF's) is NOT? correct?

A Legislation provides a calculation for the minimum withdrawal that must be made from a RRIF each year.

B. Tax-free transfers from other types of retirement savings? arrangements, such as RPPs or? RRSPs, can be made to a RRIF.

C. A RRIF can be established by an individual of any? age, but must be terminated in the year the individual turns 95.

D. A RRIF is very similar to an? RRSP, with the exception that deductible contributions cannot be made to a RRIF.

 

24. Vanessa Brown has a RRIF account and turned 70 years old in the current taxation year. Vanessa informs you that the fair market value of her RRIF assets at the beginning of the current taxation year is? $475,000. Vanessa is a widower and does not have a? common-law partner. What is? Vanessa's minimum RRIF withdrawal for the current taxation? year?
    1. $25,080
    2. $23,750
    3. $25,000
    4. $95,000

 

25. Which statement BEST describes a Deferred Profit Sharing Plan? (DPSP)?
    1. Similar to other retirement savings? plans, amounts contributed in a DPSP accumulate investment earnings on a? tax-free basis and can be withdrawn from the DPSP without tax consequences.
    2. Unlike? RPPs, there is more flexibility in scheduling of employer contributions to a? DPSP, making DPSPs more desirable from the? employer's perspective.
    3. Unlike? RPPs, the amount of an? employer's contribution to a DPSP is not limited by the tax? legislation, making DPSPs more desirable from the? employee's perspective.
    4. A DPSP is very similar to a? RPP, where both employers and employees can deduct contributions made to a trustee of the plan.

 

26. Ronald Wilson retired in December after providing 36 years of service to his employer. In recognition of his years of? service, Ronald's employer provides him with a retiring allowance of? $125,000. Ronald would like his employer to directly transfer the maximum eligible amount of his retiring allowance to his RRSP account. Ronald provides you with the? following information related to his years of? service:

Number of years Ronald was employed by his employer prior to? 1996: 14

Number of years Ronald was employed by his employer prior to? 1989: 7

Ronald's employer has never sponsored an RPP or DPSP.

What is the maximum contribution that can be made to? Ronald's RRSP? (without eroding his RRSP deduction? room) for the retiring? allowance?

1. 1. $24,500
   2. $31,500
   3. $38,500
   4. $125,000