Mini-Case A: (6 marks)

Your best friends Jason and David share a condo near Concordia University that they rent. Tensions have been high over finances.

Jason: (currently 24 years old, birthday was June 20, 2022):

• graduated in April 2022 but is not looking for work as he is not sure what he wants to do;
• never had a full nor part-time job;
• parents provided Jason with a lump sum each month for his tuition, books, rent, living expenses etc. while he was in school; they continue to do so as they believe he is actively looking for work and they wish to support him during this time; and
• has never contributed to his Tax-Free Savings Account (TFSA) nor his Registered Retirement Savings Plan (RRSP).

David (currently 22 years old, birthday is on November 27, 2022):

• graduating in December 2022;
• on a tight budget; has been working since 2020 part-time earning $14,000 a year; parents are helping him with his tuition and expenses; and
• to date he has contributed $5,000 to his Tax-Free Savings Account (TFSA) but has not yet contributed to his Registered Retirement Savings Plan (RRSP).

1. Jason and David just got into another argument, this time on how Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Accounts (TFSA) work. Help your buddies out by providing the correct response in each box below. Simply underline AND highlight the YES or NO response in each box (no explanation is needed). (3 marks-.125 marks each)

Question	RRSP	TFSA
Do you receive a deduction on your personal income tax return for a contribution made?	Yes No	Yes No
Is there an age limit to when you can start making contributions to the plan?	Yes No	Yes No
Is there an age limit to when you can no longer make contributions to the plan?	Yes No	Yes No
With regards to any withdrawn funds, are these funds automatically added to your contribution room for the following year?	Yes No	Yes No
Is there an annual contribution limit?	Yes No	Yes No
Do you need earned income to determine the amount you are allowed to contribute?	Yes No	Yes No
Do you report contributions made on your personal income tax return?	Yes No	Yes No
Do you report withdrawals on your personal income tax return? Disregard Home Buyers Plan (HBP) and Lifelong Learning Plan (LLP) for this question.	Yes No	Yes No
Do you report your annual investment earnings (interest, dividends, capital gains) on your personal income tax returns?	Yes No	Yes No
Is the interest on a loan tax deductible?	Yes No	Yes No
Is there a penalty if you made an overcontribution of exactly $2,000?	Yes No	Yes No
Is there a requirement to either 1) cash-in or 2) convert to a Registered Retirement Income Fund (RRIF) or 3) purchase an annuity by December 31st in the year you turn age 71?	Yes No	Yes No

b) It is July 1, 2022, and Jason just won $5,000 in a video gaming tournament and would like to start saving his money. Which would you recommend Jason to participate in with regards to either an RRSP or TFSA, and the reason for your choice? (.5 marks)

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

(.5 marks)

c) What is the maximum amount that Jason and David can contribute to their TFSA in 2022? Do not forget to consider contribution room from previous years. (2 marks -1 mark each)

Contribution amount for Jason: (1 mark)

Contribution amount for David: (1 mark)

4. Both names are on the Montreal lease agreement along with the hydro and internet bills. Jason always took care of making the monthly bill payments which made it easy for David. David simply e-transferred a lump sum based on Jasons monthly calculations. It was only once Jason won the money from the video gaming tournament that David realized that Jason had not paid the rent, nor the utility bills for some time. David found out as Jason came clean when discussing what he should do with his winnings, pay the overdue bills, or invest the money. Provide two potential financial impacts these non-payments could have on David. (.5 mark-.25 marks each)

1. Impact:_______________________________________________________________________________________________________________________________________________________________________________________________________________________

2. Impact:_______________________________________________________________________________________________________________________________________________________________________________________________________________________