Michael turned 25 years old on March 1, 2023, and just opened a Tax-Free Savings Account (TFSA) where he deposited $6,500. Help Michael with the scenarios below. Michael is aware of the following basics regarding TFSA’s: you can withdraw any amount from your TFSA whenever you want; all withdrawals are tax-free; withdrawing from your TFSA doesn’t result in lost TFSA contribution room; withdrawals you make this year will be added to your unused contribution room the following year (i.e. withdrawing from your TFSA has no effect on your contribution room in the year that you make the withdrawal, it only affects your contribution room for the following year); you can re-contribute any funds that you have withdrawn from your TFSA back into your account starting the year after the year in which you make the withdrawal (i.e. January 1st of the following year); and you can carry forward any uncontributed amounts into future years indefinitely. If Michael’s $6,500 TFSA investment decreases due to a downturn in the market to $4,000 which he then withdraws, how much can Michael recontribute? (ignore carry forward contribution room) If Michael’s $6,500 TFSA investment increases to $8,000 which he then withdraws, how much can Michael recontribute? (ignore carry forward contribution room)? Michael’s friend, John just turned 23 on February 28, 2023. He recently opened a TFSA account but has yet to make a TFSA contribution. How much can John contribute to hisTFSA (consider carry forward contributions). Michael’s younger brother, Sam is trying to understand his TFSA available contribution room to ensure that he does not go over the limits. Complete the TFSA Available Contribution Room Table

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Michael turned 25 years old on March 1, 2023, and just opened a Tax-Free Savings Account (TFSA) where he deposited $6,500. Help Michael with the scenarios below. Michael is aware of the following basics regarding TFSA’s:

you can withdraw any amount from your TFSA whenever you want;
all withdrawals are tax-free;
withdrawing from your TFSA doesn’t result in lost TFSA contribution room;
withdrawals you make this year will be added to your unused contribution room the following year (i.e. withdrawing from your TFSA has no effect on your contribution room in the year that you make the withdrawal, it only affects your contribution room for the following year);
you can re-contribute any funds that you have withdrawn from your TFSA back into your account starting the year after the year in which you make the withdrawal (i.e. January 1^st of the following year); and
you can carry forward any uncontributed amounts into future years indefinitely.

If Michael’s $6,500 TFSA investment decreases due to a downturn in the market to $4,000 which he then withdraws, how much can Michael recontribute? (ignore carry forward contribution room)
If Michael’s $6,500 TFSA investment increases to $8,000 which he then withdraws, how much can Michael recontribute? (ignore carry forward contribution room)?
Michael’s friend, John just turned 23 on February 28, 2023. He recently opened a TFSA account but has yet to make a TFSA contribution. How much can John contribute to hisTFSA (consider carry forward contributions).
Michael’s younger brother, Sam is trying to understand his TFSA available contribution room to ensure that he does not go over the limits. Complete the TFSA Available Contribution Room Table

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