Question

Question a)

Mr. Dayani purchases an annuity with funds from his savings account on January 1, 2016. The annuity has a 5 year term, and cost him $25,000. Payments are made annually on December 31 in the amount of $5,772. The annuity provides an effective yield of 5%. How much of the annuity payment is taxable in 2016?

	$772
	$1,250
	$5,000
	Nil

Question b)

Under ITA 73(1) and 73(1.01), when there is a transfer of non-depreciable property from an individual to his/her spouse, the proceeds are deemed to be the UCC of the class.

	True
	False

Question c)

RESP: payments made to subscribers out of the accumulated income of the RESP plan would be included in the subscriber's Net Income for Tax Purposes, but not Taxable Income.

	True
	False

Answer 1

a) Annual payments made at the end of each year for 5 years

And the amount is $5,772

Effective yield nothing but rate of return is 5%

There for amount taxable in 2016 = present value of annuity-cost invited for that investment

=($5,772×PVAF(r,n))-$25,000

=($5,772×PVAF(5%,5))-$25,000

=($5,772×4.329)-$25,000

=$24,986.988-$25,000

=$25,000-$25,000

=Nil

Note:- $24,986.988 is rounded of to $25,000

b) true

c) false