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[answered] Bennett Bixlar and his wife Belinda are both 66 years of ag


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

 

income.

 

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

 

year.

 

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,

 

age 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.

 


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