Kevin just turned 18 years old on February 18, 2022, and received money from his parents, aunts, and uncles. In total he had $2,000 and wanted to invest it. He has always saved his money and started saving at the age of 15 when he started working at his fathers company, but until now, has only put it in his savings account. Kevin went to the Canada Revenue Agency (CRA) site under My Account after he filed his 2020 personal income tax return to confirm his contribution room for both a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA). He however is in a dilemma to know which one to contribute to. He is going to his bank next week to open both accounts and will decide then. His total contribution will be the $2,000 from his birthday and his previous savings of $3,000 when working with his father during summers. He will invest the $5,000 and then withdraw it all on December 15, 2022, to buy a touring bike for his trip to Australia that he will be taking over the holidays. See Table C and D.

TABLE C

Tax-Free Savings Account (TFSA): Annual Limits
Years	Annual Limit	Years	Annual Limit
Year started 2009 - 2012	$5,000/year	2016 - 2018	$5,500/year
2013 - 2014	$5,500/year	2019 - 2022	$6,000/year
2015	$10,000/year	2023	$6,500/year (estimated)

a) Based on the information above, which would be the recommended account for Kevin to contribute to with regards to either an RRSP or TFSA, and the reason? (.5 marks)

______________________________________________________________________________________________________________________________________________________________________

TABLE D

Registered Retirement Savings Plan (RRSP): Annual Limits Formula for RRSP contribution limit: 18% of your previous year's earned income less your previous year's pension adjustment to an annual maximum.
Year	Annual maximum contribution limit
2020	$26,500
2020	$27,230
2021	$27,830
2022	29,210

b) Kevins mother thought her son was quite clever in investing his money. She does not understand how an RRSP or TFSA work and asked Kevin to help determine her contribution room for both accounts. Do not forget to consider her carryforward amounts (if any). (1 mark -.5 marks)

Kevins mother: (currently 40 years old, birthday is May 3rd):

• graduated from university in April 2000 but decided to stay home to raise Kevin;
• she never had a full or part-time job and is not planning on doing so as she spends endless hours volunteering with many charities in her community; and
• to date has never contributed to her RRSP nor to her TFSA.

2022 RRSP Contribution room for Kevins mother: (.5 marks)

2022 TFSA Contribution room for Kevins mother: (.5 marks)

c) When it comes to RRSP and TFSA, Kevins father, George has simply transferred the amounts to both plans based on what his tax advisor recommends. George has always contributed the maximum to both his RRSP and TFSA on January 1^st each year, but without quite understanding how either the RRSP or TFSA work. He has therefore asked Kevin to work out a few scenarios for him to help him better understand. (2.5 marks)

George: (currently 41 years old, birthday is June 23rd):

• graduated in April 2000 and met Kevins mother at their graduation ceremony, they married a year later; and
• started his own business upon graduation and always paid himself a salary of $300,000 each year for the last 22 years.

Scenario 1:

George wants to know how his tax advisor calculated his 2021 RRSP contribution. (.25 marks)

Calculate Georges 2021 RRSP contribution (.25 marks)

Scenario 2:

Georges market value in his TFSA as of February 18, 2022, is $151,000 (this includes his 2022 contribution). If George withdraws $30,000 on March 10, 2022, what is the earliest date he can re-contribute to his TFSA? Highlight and underline your response (only 1 correct answer). (.25 marks)

• His birthday, June 23, 2022
• December 31, 2022
• March 11, 2022
• March 10, 2023
• January 1, 2023
• February 1, 2023

Scenario 3:

If George over contributes to his TFSA (i.e. more than the contribution room limit), what will be the penalty? (.5 marks)

______________________________________________________________________________________________________________________________________________________________________

Scenario 4:

If George over contributes to his RRSP (i.e. more than the contribution room limit) by $2,000, what will be the penalty? (.5 marks)

______________________________________________________________________________________________________________________________________________________________________

Scenario 5:

George is thinking that his TFSA investments are too conservative and wants to invest in XYZ Inc. as their stock is up 40%! If George invests all his TFSA money in XYZ Inc. and it continues to climb to the crazy predictions that his investment advisor says, then George expects his TFSA could have a market value of $400,000! This would pay for the cottage he has been looking at. If George indeed makes $400,000 by November 2022 and immediately withdraws the amount, how much could he then re-contribute to his TFSA in 2022? 2023? (.5 marks-.25 marks each)

2022: $____________(.25 marks each)

2023: $____________(.25 marks each)

Scenario 6:

Consider Georges example in Scenario 4, but this time, instead of his TFSA growing to $400,000, he loses all the money as the company goes bankrupt in November 2022. How much would his contribution room then be for 2022? 2023? (.5 marks-.25 marks each)

2022: $____________ (.25 marks each)

2023: $____________ (.25 marks each)