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Discussion Starter #21
If you are the company owner where she is not a shareholder or owner - your lack of RRSP contribution room prevents using a spousal RRSP (or your own). This is why there is talk about having you pay more of the expenses to free up cash for her to put into registered accounts.



Cheers
I meant I draw money out of my TSFA account. I have the right to do that it. Correct? Then with that money we pay for her RRSP.
Basically what I mean is that maybe from the beginning it was better that instead of saving for the TSFA, we had contributed to her RRSP ( although we had our reasons not to do that at that time). We wanted to have some emergency fund available. If we need we always have some money inside the corporation.
 

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For her RRSP contribution room to matter - she's have to be a shareholder or part-owner being paid (i.e. the withdrawn funds from the business have to be hers).
If the withdrawn funds are yours then you need RRSP contribution room whether it's your RRSP or a spousal RRSP that is contributed to.

If you want to complicate things - you could give her the funds but as per the article, that means figuring out CRA's rules for determine when that money is withdrawn from the RRSP/RRIF to properly report the taxable income on your tax return instead of on hers. Just based on the complication, I'd want to avoid this scenario but to each their own.

The riskiest option is to gift it and cross your fingers that CRA never notices to potentially slap you with interest/penalties for missing what was withdrawn from her RRSP that was supposed to be reported on your tax return.

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Discussion Starter #23 (Edited)
For her RRSP contribution room to matter - she's have to be a shareholder or part-owner being paid (i.e. the withdrawn funds from the business have to be hers).
If the withdrawn funds are yours then you need RRSP contribution room whether it's your RRSP or a spousal RRSP that is contributed to.

If you want to complicate things - you could give her the funds but as per the article, that means figuring out CRA's rules for determine when that money is withdrawn from the RRSP/RRIF to properly report the taxable income on your tax return instead of on hers. Just based on the complication, I'd want to avoid this scenario but to each their own.

The riskiest option is to gift it and cross your fingers that CRA never notices to potentially slap you with interest/penalties for missing what was withdrawn from her RRSP that was supposed to be reported on your tax return.

Cheers
I’m sorry. I’m not the sharpest here and I do not get it at all.
she is not a shareholder in my business. She works for a reputable company y. She has $130 K unused contribution. I have a TSFA. I have already paid the taxes on it and the money inside it belongs to me and I can take it out and do ANYTHING I want to do with it. Am I wrong?
If I’m right, then I give this money to my wife and say “ honey , put this amount in your RRSP, as you still have a lot of room”. She then gets a tax break and next April will receive part of the taxes she has already paid. Then she will give the money to me Aand says “ thanks honey, please put them back in your TSFA. “
is this scenario possible and works and makes sense?
Thanks
 

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... I meant I draw money out of my TSFA account.
The line talking about a withdrawal started with "invest inside the company Or should I take it out, pay a lot of taxes".
This reads to be a withdrawal from the company as pulling funds out of a TFSA do not result in taxes.

I'm happy to switch to this scenario but don't see anything until now that would indicate a shift from a company withdrawal to a TFSA withdrawal.


... I have the right to do that it. Correct? Then with that money we pay for her RRSP ...
Trouble is I doubt CRA will see a withdrawal from your company, your after tax income or a withdrawal from your TFSA that is given to your wife to make a contribution to her RRSP any differently.
I believe it will still be subject to the attribution rules mentioned in G&M article that post # 21 has a link for.

I also don't see how it helps regarding the funds trapped in the business and also wonder why with her large income, she can't simply make her own RRSP contributions as well as start a TFSA. Maybe it's clearer this way ... how is making your TFSA fund taxable then an RRSP contribution with future tax complications any better than having her make RRSP contributions out of her income?


...Basically what I mean is that maybe from the beginning it was better that instead of saving for the TSFA, we had contributed to her RRSP ...
Maybe ... I'm just not sure that drawing down your TFSA now when it seems she's got 10 years of $100K+ income to go before retirement is a good move. Running some scenarios of choices might help.


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Here's the trouble. There are rules that you cannot contribute to your wife's RRSP with your money. It must be her money. So money you draw from your corporation is not her money. Money you take out of your TFSA is not her money.

The way to get around it is to draw money from the corporation or TFSA and use that to pay household expenses. That leaves her entire salary to put into her RRSP, assuming you can cover all the expenses with your money.
 

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... I have a TSFA. I have already paid the taxes on it and the money inside it belongs to me and I can take it out and do ANYTHING I want to do with it. Am I wrong?
If you are thinking you can avoid the attribution rules by using a TFSA withdrawal - I believe you are wrong.

CRA cares about gifts that are used for RRSP contributions, outside of a spousal RRSP. They don't specify the source ... just that they are gifts.

With the attribution rules in play, at some point when she withdraws from her RRSP/RRIF, whatever amount CRA figures is going to have to be reported on your tax return and not hers. It seems to be adding complications for limited or a small benefit.


... I give this money to my wife and say “ honey , put this amount in your RRSP, as you still have a lot of room”. She then gets a tax break and next April will receive part of the taxes she has already paid. Then she will give the money to me Aand says “ thanks honey, please put them back in your TSFA. “
is this scenario possible and works and makes sense?
This adds two layers of attribution rules. The "gift to make her RRSP contribution" results in some of her RRSP/RRIF withdrawals down the road having to be reported on your tax return. The "tax refund given to you to contribution to your TFSA" is fine while in the TFSA. When withdrawn, it has to be spent because if it is used to invest - the income/capital gains have to be attributed back to her.

Maybe CRA won't notice ... maybe they will.

It seems a lot of complication and risk when it looks like she can use up her RRSP contribution room from her income and contribute her tax returns to her own RRSP with none of the attribution rules.


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Discussion Starter #27
Here's the trouble. There are rules that you cannot contribute to your wife's RRSP with your money. It must be her money. So money you draw from your corporation is not her money. Money you take out of your TFSA is not her money.

The way to get around it is to draw money from the corporation or TFSA and use that to pay household expenses. That leaves her entire salary to put into her RRSP, assuming you can cover all the expenses with your money.
How should we prove I have paid the household expenses or she has? We have a joint account and use the same credit card. This is interesting subject. I thought when money comes inside the house it belongs to the family. I understand limitations of RRSP contribution to 18% of your income and it is OK but for unused contribution I dont think it makes sense. You can get the money from your parents or partner as a gift and use it for your RRSP.
 

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Discussion Starter #28 (Edited)
Ok. I think in getting it. So I CAN take out from TSFA and use it as spousal RRSP. Is this acceptable and has the SAME results like a gift? I don’t mind how I should do it. I just want to increase our total net assets.

Edit: No. I didn’t get it. I myself should have room to contribute to her RRSP. AND I don’t.
 

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Discussion Starter #29
The line talking about a withdrawal started with "invest inside the company Or should I take it out, pay a lot of taxes".
This reads to be a withdrawal from the company as pulling funds out of a TFSA do not result in taxes.

I'm happy to switch to this scenario but don't see anything until now that would indicate a shift from a company withdrawal to a TFSA withdrawal.
you are right. This was not the subject of the original post. Sorry. I didn’t get any answer for that , except the first one and the article of PWL capital , which showed after at least 15 years taking the money out of the corporation and investing it works better that investing inside the corporation. I unfortunately don’t have that time horion.
 

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Here's the trouble. There are rules that you cannot contribute to your wife's RRSP with your money. It must be her money. So money you draw from your corporation is not her money. Money you take out of your TFSA is not her money.
What if the wife was an employee and received income from the corporation? Is it not, then, her money?

I'm just brainstorming here, this is not something I know about. But even if not an employee, could your wife perform some useful services for the company and receive consulting fees? I believe that would become an expense for the corporation. Or would all of this be complicated by the relationship of the two people? I don't know.

... article of PWL capital , which showed after at least 15 years taking the money out of the corporation and investing it works better that investing inside the corporation. I unfortunately don’t have that time horion.
OK, I see now. I didn't realize you don't have that longer time horizon.
 

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How should we prove I have paid the household expenses or she has?
It is being spent so likely CRA won't care ... it is when it gets invested or contributed to an RRSP that being able to show it's hers will matter.

I suspect all you'll really need to be able to show is that the her RRSP contribution is less than or equal to what she put into the joint account and that what you put into it was greater or equal to the household expenses.

If you want a clear cut paper trail, open a second joint account that has her name as the main name on it. Make sure that her income goes into that account only and make the RRSP contributions from that account. If you name is on it but you've never contributed funds, the whole account is hers, leaving a clear trail.


... I thought when money comes inside the house it belongs to the family.
Because of the special rules where one invests to earn income or contributes to an RRSP, it may not be considered "family" money but whatever you contributed is your and what your spouse contributed is hers.


I understand limitations of RRSP contribution to 18% of your income and it is OK but for unused contribution I dont think it makes sense,
I don't think you do understand.

What's available is what has been earned in the past and has not yet been used. The "18%" part of the formula for determining how much contribution room was earned in a particular tax year. It is also "18% x earned income" plus some other factors.

Take you as a business owner. Where you paid yourself a $100K salary, that's earned income. You also likely don't have a private pension so the factors for pensions won't apply. The annual amount would be $100K x .18 = $18K.

The $18K is under the limit per year of $27K so it won't be capped. Pay yourself a $200K salary then 18% is $36K but that's over the $27K limit so you only have $27K earned.

On the other hand, if the company pays you $100K in dividend - you earn zero RRSP contribution room as dividends don't count as earned income.

Once the annual earned amount is figured out, it is added to what was earned in previous years but not used. For example, if you had $10K of RRSP contribution room earned but not used plus the $18K mentioned earnlier then you have $28K available to use.


Your wife is working for a company so her salary will count as earned income. If that company provides a private pension then additional factors will be involved. The most common is the pension adjustment (PA) that reduces what she has earned to adjust for the private pension. As an example, my friend based on his salary x 18% would have $19K RRSP contribution room but then the PA is applied to reduce it so that he only is granted $4K of RRSP contribution room.


You can get the money from your parents or partner as a gift and use it for your RRSP.
Sure, which trigger special rules for spouses (aka attribution rules).

From the article:
"Your spouse has unused RRSP contribution room, and wants to set aside some money for retirement, but doesn't have the cash to make a contribution to their RRSP. So, you give your spouse the money to make a contribution. Good planning, right? Not quite.

You see, the Canada Revenue Agency (CRA) says that when you give money to your spouse to make a contribution to their RRSP, all or part of the withdrawals made from that RRSP will be taxed in your hands - not your spouse's hands."


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What if the wife was an employee and received income from the corporation? Is it not, then, her money?
Sure ... but the corp would have to deduct CPP and EI payments from her money plus make the employer's contributions. Likely a pension could be skipped by maybe not vacation pay.

Having her buy company shares that are paid dividends seems a better route but not having a company, I haven't dug into any restrictions or the pros/cons.


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Sure ... but the corp would have to deduct CPP and EI payments from her money plus make the employer's contributions. Likely a pension could be skipped by maybe not vacation pay.
If she's low on CPP this may not actually be paid a bad thing. For example I'm nowhere near my CPP maximums and would love to pump some extra money into the CPP. It's a lot like investing into a government-backed annuity for yourself.

She can log into the Service Canada portal and click on the CPP section to see where she stands on CPP, looking at the maximum she could collect.

However she doesn't have to be an employee. If she's a contractor or consultant who is paid fees, that's just an expense for the company, but not employment. I'm reasonably sure that would not require CPP/EI or T4 slips.

If doing something like that, must actually provide services that can be backed up with paperwork and invoices of course.

Having her buy company shares that are paid dividends seems a better route but not having a company, I haven't dug into any restrictions or the pros/cons.
Dividends sound like a good route too
 

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If she's low on CPP this may not actually be paid a bad thing. For example I'm nowhere near my CPP maximums and would love to pump some extra money into the CPP. It's a lot like investing into a government-backed annuity for yourself.
She makes 110k so she cannot be low on CPP.
 

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Regardless of the company money, it seems to me that if her retirement income is going to be similar or lower than the current level, her making RRSP contributions then transferring refund money to her TFSA should be done no matter what.

Returning to the question of whether to invest the money that's in the company or withdraw into personal accounts, since there hasn't been a comment from those with experience, here is a link that talks about it.



Cheers

PS
Since it is a business, it may be worthwhile to hire an expert to evaluate the choices as I suspect the fees can be written off by the business. Plus it gives a likely better source of info than an anonymous internet board with mostly amateurs commenting.
 
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