2. CH 10 RRSP (15-20%)

On January 1, 2021, Laura Linny had unused RRSP deduction room of $18,500. In addition, because she was unemployed in the two previous years, she had undeducted contributions of $14,700. She had no earned income for RRSP purposes in either 2019 or 2020. While she manages to live on accumulated savings during the year, she also has no 2021 earned income.

In 2022 she has several periods of part time employment and has earned income of $17,300. In addition, as the result of an incredible lucky streak at the blackjack tables in the Moncton Casino, she has accumulated winnings of over $100,000. In her excitement, she immediately makes a $20,000 contribution to her RRSP, on October 1, 2022. Without deducting any RRSP contributions for 2022, she has no income tax payable for the year.

In 2023, she finally finds full time employment, resulting in 2023 earned income of $45,000. She makes no further contributions in the year and claims her maximum RRSP deduction for 2023.

Required:

A. Determine Lauras maximum RRSP deduction for 2023.

B. Determine any penalty tax that will be charged for 2023 for excessive RRSP contributions.

C. Determine the amount of contributions that Laura would have to withdraw from her RRSP on January 2, 2024 to avoid further penalty tax. What advice would you give to Laura regarding her retirement savings?

Answer: Part A MAX RRSP Deduction Laura's MAX2023 RRSP deduction