# Question #18 – Taxation

At the end of 2017 Larry had unused RSP contribution room of \$10,000. During 2018, he earned a salary of \$50,000 and reported total income of \$53,000 (the difference is to account for taxable benefits). He made RSP contributions in the amount of \$2,000 (from pre-tax dollars) and reported a pension adjustment (PA) of \$6,000. Outside of his employment, Larry reported net rental income of \$1,000 on an investment property he acquired two years ago. What is Larry’s unused RSP room for 2019?

1. \$8,000
2. \$11,180
3. \$11,540
4. \$11,720

Solution: When calculating Larry’s unused contribution room, we begin with \$10,000 (which is the carry-forward room from 2017), and then add \$9,720 (which is 18% of \$54,000 (\$53,000 + \$1,000)). We arrive at \$19,720. We then subtract Larry’s RSP contribution of \$2,000 and his PA of \$6,000. The calculation is \$19,720 - \$8,000 = \$11,720. Larry’s net rental income of \$1,000 will count towards earned income for purposes of computing RSP contribution room. The correct answer is d.