SOLUTIONS MANUAL - Gary Donell Byrd & Chen’s Canadian Tax Princi...

SOLUTIONS MANUAL

Volume 1 (Chapter 1-10) Gary Donell Byrd & Chen’s Canadian Tax Principles 2025-26 Edition Gary Donell This is the Only Original Solutions Manual for 2025-2026 Edition, Volume 1 (Chapter 1 -10). All other Files in the Market are Fake/Old/Wrong Edition.

All Chapters are Arranged Reverse: Chapter 10-1

Case

Solutions: Page 228-244 1 / 4

Instructor’s Solutions Manual, Byrd & Chen’s Canadian Tax Principles 2025/26 Edition

Copyright © 2026 Pearson Education Inc. 10-1 Chapter 10 Instructor’s Solutions Manual

Answers to Quick Review Questions

• An employer is permitted to deduct any RPP contributions for a specific taxation

year if made within 120 days of the end of that taxation year.

• This is true, but only for defined benefit plans.
• Both business profits and business losses are part of earned income.
• Only employers make contributions to DPSPs.
• DPSPs are always money purchase plans and cannot be designed to provide

defined benefits.

• (c) describes a salary deferral arrangement (SDA). The result is that the employer

is entitled to a deduction in the year the bonus is accrued, and the employee is required to include the bonus in the year when it was accrued.

• Only periodic annuity-type payments from an RRSP would qualify.
• Lump-sum withdrawals from an RRIF are subject to the same withholding as

RRSPs but only to the extent that the amounts withdrawn exceed the minimum withdrawal amounts for the year.

• The contributing spouse is entitled to the RRSP deduction, and it is the

contribution room of the contributor that is reduced, not that of the RRSP annuitant spouse.

• C. Individuals can use both the HBP and FHSA. This means that a married couple

or a couple living in a common-law partnership can have a maximum of $200,000 to put toward a new home [HBP ($60,000)(2) + FHSA ($40,000)(2)]

Solutions to Assignment Problems

Solution to AP 10-1 Case A

The required 2025 PA would be calculated as follows:

Employer’s Contribution to RPP $3,200 Employer’s Contribution to DPSP 1,100 2 / 4

Instructor’s Solutions Manual, Byrd & Chen’s Canadian Tax Principles 2025/26 Edition

Copyright © 2026 Pearson Education Inc. 10-2 Mr. Brokow’s Contribution to RPP 1,500

2025 PA $5,800

Case B

The required 2025 PA would be calculated as follows:

[(9)(0.0165 or 1.65%)($52,000)] = $7,722 Note that the contributions made in 2025 by either the employer or employee have no influence on the PA for a defined benefit RPP, which is based on pensionable earnings.

Case C

Bob’s 2025 PSPA would be calculated as follows:

[(9)(0.011 or 1.1%)($48,000)(2 Years)] = $9,504 The 2025 PA will reflect the pension benefits earned in 2025. The amount would be $4,752 [(9)(0.011 or 1.1%) ($48,000)].

Case D Marianne’s 2025 PSPA is based on the PAs that would have been reported in the relevant years based on the increased retroactive benefits, less the PAs actually reported. The

calculation would be as follows:

[(9)(1.7% – 1.4%)($52,000)(2 Years)] = $2,808 This $2,808 2025 PSPA would reflect the increase in benefits that occurred in January 2025.In addition to this PSPA, there would also be a PA based on her 2025 pensionable earnings, multiplied by the benefit factor of 9 and the new formula rate of 1.7%. This amount would be $7,956 [(9)(0.017 or 1.7%)($52,000)].

Solution to AP 10-2 Part A - Maximum RRSP Deduction

Karla’s maximum 2025 RRSP deduction would be calculated as follows:

Unused Deduction Room - January 1, 2023 $21,300 2023 Addition (Based on 2022 Earned Income of Nil) Nil 2024 Addition (Based on 2023 Earned Income of Nil) Nil

2025 Addition - Lesser of:

RRSP Dollar Limit − $32,490 18% of 2024 Earned Income

[(18%)($19,100)] = $3,438 3,438

Maximum 2025 RRSP Deduction $24,738

Part B - Penalty Tax for Excess RRSP Contributions Karla would have been assessed the penalty tax for excess RRSP contributions for 2024.However, the problem only requires calculation for 2025.The 2025 penalty for excess RRSP contributions would be calculated as follows: 3 / 4

Instructor’s Solutions Manual, Byrd & Chen’s Canadian Tax Principles 2025/26 Edition

Copyright © 2026 Pearson Education Inc. 10-3

Undeducted Contributions January 1, 2023, Balance $15,250

2024 Addition 25,000 2025 Deduction (24,738) $15,512 Unused Deduction Room January 1, 2023 $21,300 2025 Addition 3,438 2025 Deduction (24,738) Nil Permitted Cushion (2,000) Excess Subject to Penalty $13,512 Penalty Rate 1% Monthly Penalty $ 135 Months January to December 2025 12 Penalty tax for 2025

$ 1,620

Part C - Recommended Withdrawal and Advice Karla’s earned income for 2025 is $47,800. This will result in a 2026 addition to her deduction room of $8,604 [(18%)($47,800)]. Provided she wishes to leave the permitted cushion of $2,000 in her RRSP , she should immediately withdraw $4,908 ($13,512 – $8,604) from her RRSP in order to avoid additional penalties in 2026.Although she would not be able to deduct the $2,000 cushion, it would enjoy the benefit of having any income earned while in the plan compounded without any Part I income tax. An overcontribution to her RRSP would be deductible in a future year as RRSP deduction room becomes available.

As she obviously does not need the funds that must be withdrawn, she could contribute that amount to a TFSA, provided she has available TFSA room.As long as the recommended withdrawal is made prior to the end of 2026 (the year after the penalty assessment for 2025 was made), a deduction is available (ITA 146(8.2)) to offset the inclusion of the withdrawn excess amount.In the future, Karla should verify her RRSP deduction room prior to contributing to her RRSP to avoid paying the penalty tax for excess RRSP contributions. She should also consider requesting a waiver of the Part X.1 penalty tax particularly given the circumstances (ITA

204.1(4).

Solution to AP 10-3 Part A

Josh’s 202 4 net income would be calculated as follows:

Income Under ITA 3(a):

Employment Income $88,000 Interest income 3,400 Eligible Dividends 1,900

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