Determine karlas maximum rrsp deduction

Reference no: EM133608062

Problem

As she was attending university during 2018, 2019, and 2020, Karla had no earned income for RRSP purposes in any of these three years. However, before returning to university she had been employed and, reflecting this, on January 1, 2020, she has RRSP deduction room of $21,300. She also has undeducted contributions on this date of $15,250.

She returned to work on a part-time basis in 2021, resulting in 2021 earned income for RRSP purposes of $19,100. Also during 2021, she receives a bequest from the estate of her father in the amount of $225,000. She immediately contributes $25,000 of this inheritance to her RRSP. She does not deduct any RRSP contributions in 2021. She also makes sufficient charitable donations that her 2021 federal income tax payable is reduced to nil

In 2022, she resumes full-time employment, resulting in a 2022 earned income of $47,800. While she claims her maximum RRSP deduction for 2022, she makes no further contributions to the plan during the year.

Task

Question 1. Determine Karla's maximum RRSP deduction for 2022

Question 2. Determine the Part X.1 penalty tax (ITA 204.1) (excess RSP contributions) that would be assessed to Karla for 2022.

Question 3. Determine the amount of contributions that Karla would have to withdraw from her RRSP on January 2, 2023, to avoid being assessed the penalty tax under Part X. 1- (ITA 204. 1). What advice would you give to Karla regarding her retirement savings?

Reference no: EM133608062

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