Lian and sara johnson have recently married.liam, 52 years old, works as a software engineer and earnes annual salary of $150000. Sara, 47 years old, is a successful freelance writer, earning approximately $80000 per year.
This is sara’s second marriage, and she has a 10 year old son from her previous relationship, according to the agreement in place, sara is obligated to make child support payments until her son turns 18, and is also mandated to make spousal support payments to her ex-husband for the next six years.
At present, they are resiging in a rented condominium, but they are fervently saving to buy a house soon. They plan to register the future property under both their names as joint tenants.previoysly,sara has co-owned a home with her ex-husband, which was sold as a part of the divorce settlement. Liam, on the other hand, has never owned any property before.
Sara’s registered retirement savings plan
Sara has been diligently contributing to her rrsp, which now has an accumulated market value of $350000, invested in a blend of stocks and mutual funds.
She also has a carryforward of $21500 from the years she couldn’t contribute the maximum allowed amount. The contribution limit last year was $29210, and this year it stands at $30780.
However, sara hasn’t designated a beneficiary for her rrsp. Moreover, sara is enrolled in her company’s defined benefit pension plan, which calculates the pension based on the average of the best five years of her pensionable service times 2% times years of service.
Non-registered investments
In addition to these, liam and sara have jointly invested in a portfolio comprising mutual funds and common shares, currently valued at $100000. Recently, they invested in a duplex to generate rental income, registered under both their names as joint tenants.
Following the breakdown of liam and sara’s marriage in five years, part of the court order requires sara to transfer 50% of the value of her rrsp to liams RRSP. If sara’s rrsp at that time has a fair market value of $450000 and her combined marginal tax rate is 50%, what tax liability will sara incur as a result of the transfer?