Need help for this question about pension income splitting
Bennett Bixlar and his wife Belinda are both 66 years of age and in good health.
For 2016, Bennett receives payments totaling $120,000 from his former employer?s RPP. Other
than OAS payments described in Alternative 2, Bennett has no other income during 2016.
Belinda has received a significant portfolio of dividend paying stocks from her family. During
2016, she received eligible dividends of $39,000. In addition, she received OAS payments of
$7,000 during the year.
They have been advised of the possibility of splitting Bennett?s pension income. To assist in
deciding whether or not they should use this election they have asked you to provide information
under each of two alternatives:
Alternative 1 Their tax returns are prepared without splitting income. Bennett does not
file for OAS payment as they would be clawed back due to his ongoing high level of
Alternative 2 Their tax returns are prepared using the pension income splitting election.
Bennett?s pension income is evenly split, with $60,000 going to each spouse. Bennett
applied for OAS when he turned 65 and received OAS payments of $7,000 during the
They have no deductions that will be used in the determination of Taxable Income. Neither
Bennett nor Belinda are eligible for any tax credits other than the: basic personal credit,
dividend tax credit, and
pension income credit. Required: A. Calculate the amount of Net Income For Tax Purposes and Taxable Income
for both Bennett and Belinda under each of the two Alternatives.
B. Based on your figures from Part A, calculate the amount owing to the CRA
for both Bennett and Belinda under each of the two Alternatives. Provide a
comparison of the amounts owing under the two alternatives.
This question was answered on: Sep 18, 2020
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