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FAQ for Investments

Q. I want to know the major income classes that qualify for RRSP contributions and those that are excluded?

Earnings   Yes
Certain disability benefits    Yes
Net rental income   Yes
Net business income Yes
Professional income   Yes
Net spousal support  Yes
Retirement pension No
Unemployment insurance benefits No
Investment income  No

Q. What is the tax treatment of withdrawals from registered saving?

Withdrawals made from a registered vehicle are ultimately taxed in the same way as earnings, and the concept of type of income (dividends, capital gains, etc.) does not apply. Withdrawals are taxed first at source (depending on the level of the withdrawal) and then readjusted on the tax return. The minimum RRIF withdrawal is tax free at source. Finally, after age 65, RRIF withdrawals and life annuity payments give entitlement to a pension tax credit.

Q. Until what age can I contribute to an RRSP?

Contributions can be made to an RRSP until December 31 of the year in which the contributor turns 71 years of age. If there is contribution room and the individual's spouse is under 72, however, contributions may be made to the spouse's RRSP.

Q. What are the only two extreme situations in which an RRSP can be transferred to a spouse?


An RRSP can be transferred to a spouse only in the following two cases:

· In the event of death, if the heir to the RRSP is the spouse, the deceased's RRSP will be transferred to the surviving spouse's RRSP tax free;

· In the event of divorce, there could be a transfer of RRSP's between the former spouses.

Q. Who can start a TFSA (Tax Free Savings Account) and what is it?

Any person, with the exception of a trust, who resides in Canada and is at least 18 is eligible to open a TFSA.

TFSA contributions are not tax-deductible and withdrawals are not taxable or considered in the calculation of the GIS or the OAP. Starting in 2009, you can put up to $5000 a year in a TFSA. This contribution right, which is not related to earned income, can be deferred indefinitely. There is no maximum age limit for contributing or holding a TFSA. The contribution ceiling will be indexed annually to inflation and rounded to the nearest $500. You cannot contribute to a spousal TFSA in the same way as a spousal RRSP, but you can finance your spouse's contribution as long as your spouse has contribution room. There are no attribution rules.


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