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investor clinic

Welcome to Part 2 of the Investor Clinic post-quiz review, in which I'll be discussing a few more questions that stumped some readers.

If you haven't taken the quiz yet, you can view it online. And if you missed last week's follow-up column, it's available here.

Questions No. 11 and 12 were related, so let's look at them together:

11. For 2014, a person can have up to _______ of income before the Old Age Security clawback kicks in.

a. $61,249

b. $63,629

c. $66,382

d. $71,592

12. If your income exceeds the threshold in question No. 11 by $7,500, you would have to repay _______ of your OAS.

a. $1,125

b. $3,750

c. $7,500

d. all

The answer to No. 11 is d. $71,592. I chose this question to demonstrate that, despite widespread griping about the Old Age Security clawback, individuals can have a fairly high income before they have to repay a penny of their OAS pension.

Just as OAS payments are indexed to inflation, so is this "minimum income recovery threshold," as the federal government calls it. So the threshold will rise over time. By the way, the government doesn't call it a "clawback" – it uses the more polite term "Old Age Security pension recovery tax."

Turning to question No. 12, if an individual's world income exceeds the threshold, he or she must repay 15 per cent of the difference. If your income exceeds the threshold by $7,500, you would therefore have to repay 15 per cent of $7,500, or $1,125, which is answer a.

Even some people with six-figure incomes can still collect OAS. For the 2014 taxation year, an individual can have up to $116,103 of income before OAS is clawed back entirely. For the first quarter of 2015, the maximum monthly OAS payment is $563.74.

Another question that tripped up some readers was No. 13.

Sally's parents spent $5,000 to enroll her in bowling lessons in 2014. The family is eligible to receive a federal Children's Fitness Tax Credit of:

a. zero

b. $75

c. $150

d. $1,000

Not sure about you, but I don't usually break a sweat when I'm bowling. Nevertheless, bowling lessons do qualify for the Children's Fitness Tax Credit (as do horseback riding, sailing and golf, in addition to more strenuous activities such as hockey).

To be eligible, the child must have been under 16 years of age (or under 18 if eligible for the disability amount) at the beginning of the year in which the fitness expense was paid. An astute reader pointed out that I didn't include Sally's age, which was an oversight on my part, but we'll assume she qualifies.

How much would the credit be worth to Sally's family?

In October, the federal government doubled the maximum amount of fitness expenses that can be claimed per child to $1,000. But the credit itself is not worth $1,000. To calculate the credit, one would multiply the eligible expenses claimed (in this case $1,000) by the lowest federal personal income tax rate of 15 per cent, which yields the correct answer of c. $150.

The final question we'll look at is No. 8.

If your spouse has TFSA contribution room available, you may:

a. contribute directly to his or her TFSA.

b. give him or her money to contribute to his or her TFSA.

c. not fund his or her TFSA, directly or indirectly.

d. apply to have the contribution room transferred to your TFSA.

The tax-free savings account holder is the only person who can contribute directly to his or her TFSA.

However, you are permitted to give your spouse or common-law partner money to contribute to his or her own TFSA, so the correct answer is b. This is advantageous when a higher-income spouse has sufficient cash to max out contributions to both TFSA accounts. Investment income earned in both accounts will be tax-free and will not be attributed back to the higher-income spouse.

The TFSA contribution limit for 2015 is $5,500, plus any unused contribution room and withdrawals from previous years.

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