Case One Neta Burnstein Had Total Income of $112,000 and Earned Income

question 1

Essay

Case One
Neta Burnstein had total income of $112,000 and earned income of $75,000 in 2019.Neta's 2019 Notice of Assessment reported unused RRSP contribution room of $12,000.Neta's T4 showed a pension adjustment of $5,000 in 2019.Neta anticipates a pension adjustment of $5,500 in 2020.
Required:
Calculate the maximum RRSP deduction that Neta can make for the 2020 taxation year.
Case Two (Independent of Case One)
Neta is 35 years old, and is considering investing $2,000 per year in a savings account at 8% or $2,000 in an RRSP at 8%, (both annual interest).The money will be invested for the next 30 years and will not be withdrawn until Neta retires.
Required:
Compare the valuation of each option (Savings vs.RRSP) net of taxes if Neta withdraws all of the money at age 65? Assume that the tax rate will be 35% every year until retirement.

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Definitions:

Neolithic Period

A phase in human history marked by the development of agriculture and permanent settlements, roughly beginning around 10,000 BCE.

Domestication

The process by which humans modify the genetic traits of plants and animals to better serve human purposes.

Agriculture

The science or practice of farming, including cultivation of soil for growing crops and rearing animals to provide food, wool, and other products.

Hunting and Gathering

A traditional subsistence strategy based on the procurement of food by hunting animals and foraging for plants.