Question 3

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, Cali and Tobey Couture. Cali is a 50-year-old pharmacologist living in Edmonton, AB. Tobey, aged 55, is a partner at a large law firm in Edmonton. Tobey and Cali have two children who are currently attending elementary school in Edmonton. Tobey and Cali are starting to look forward to retirement and would like professional advice in effectively planning for their retirement The partner would like you to calculate Cali and Tobey's Registered Retirement Savings Plan (RRSP) contribution room for the current year, 2021, since this information will assist in the Coutures' retirement planning. The tax partner provides you with the Coutures' client file, which includes the Coutures' tax returns from

2020, 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.

Part 1 of the additional information.

Cali was previously married. According to her divorce agreement, she must make monthly payments for the maintenance of her former spouse of $600. Cali indicated that she has always made all required spousal support payments.

A copy of Cali's T4 slip for 2020 shows gross salary of $63,000. From this amount, the employer withheld the following amounts.

	Income tax: $15,700
	CPP: maximum for the year (see the Tax Rate sheet)
	EI: maximum for the year (see the Tax Rate sheet)
	Registered Pension Plan (RPP): $1,500
	Pension Adjustment: $3,500

Other relevant information from Cali's tax return for 2020 is shown below.

	Actual amount of eligible dividends: $4,500
	Interest income: $3,600
	Unused RRSP deduction room at the end of 2020: $4,800

A copy of Tobey's statement of partnership income from the previous year shows that his income earned as an active partner was $325,000. Tobey's law firm does not provide pension plans for its partners.

Tobey owns a rental property and reported a net rental loss of

$3,700 on his 2020 tax return.

Tobey owns some farmland in Alberta. There is an oil well located on this land, and Tobey receives some resource royalty income each year. In 2020, Tobey earned royalty income of $6,460.

Other relevant information from Tobey's 2020 tax return:

	Actual amount of ineligible dividends: $12,100
	Interest income: $8,100
	Unused RRSP deduction room at the end of 2020: $200

Part 2 of the additional information

The following day, the tax partner informs you that the Coutures

have indicated that they have made the following contributions to various RRSP accounts during

2021.

	On March 20, Tobey made a $12,500 contribution to his RRSP account at TD Bank.
	On July 3, Tobey made a $4,250 contribution to a spousal RRSP account for Cali at Royal Bank.
	On November 12, Tobey made a $2,000 contribution to an RRSP account in his own name at TD Bank.
	On September 3, Cali made a $5,500 contribution to an RRSP account in her own name at Scotiabank.

Requirement 1. Complete the partner's request and calculate the RRSP contribution room for both Cali and Tobey in 2021. The RRSP contribution limit in 2021 is

$27,830. The contribution room for Cali is $________

2.	It is now December 5, 2021, and the Coutures would like to know how much more they can contribute to their RRSP accounts and when the deadline is for making contributions to RRSPs for 2021. In addition, Cali plans on buying a new car in a few months. Cali would like to withdraw $3,000 from the spousal RRSP account in her name for the down payment on the vehicle purchase. Explain the tax impact, if any, of this withdrawal.
3.	The tax partner informs you that Cali and Tobey were very pleased with the RRSP information provided to date and have three questions about other tax deferral plans.
	a.	The Coutures have always contributed to their Registered Retirement Savings Plans (RRSP), but they are unsure of what will happen to their RRSPs as they near retirement. Briefly summarize the fundamental principles of an RRSP and what will happen when the Coutures retire and begin withdrawing their RRSPs.
	b.	The Coutures' teenage children plan to attend a post-secondary institution in Canada after graduation. The Coutures have heard that a Registered Education Savings Plan (RESP) could assist them in paying for their children's tuition in the future, but they are not sure how this plan works. Provide a brief overview of the tax benefits of contributing to an RESP.
	c.	Cali's current employer provides retiring allowances to its long-term employees. Cali will be eligible to receive a retiring allowance if she continues her employment for another 10 years. Cali would like to know if there is any tax planning for retiring allowances which would allow her to defer taxation on this income in the future.