Two months after she retired, Rose Robertson received a retiring allowance of $45,000 for her long service to the employer. Initially, the employer offered her $25,000, but Rose thought this amount was unreasonable based on her long years of hard work. She hired a lawyer who successfully negotiated an increase to $45,000. Rose incurred legal fees of $2,500, which are eligible for deduction pursuant to ITA 60(o.1). Additionally, based on her years of service prior to 1996, as per ITA 60(j.1), Rose is eligible to transfer a maximum of $52,000 to her RRSP.

Based on the tax planning opportunities related to retiring allowances, how much of the retiring allowance should Rose transfer to her RRSP?

a) $42,500
b) $52,000
c) $45,000
d) $49,500

Rose Robertson should transfer $42,500 of her retiring allowance to her RRSP, after deducting $2,500 in legal fees. This amount is within her eligible transfer limit of $52,000 according to ITA statutes.(a)

Rose received $45,000 as a retiring allowance.

The legal fees of $2,500 can be deducted from this amount, resulting in $42,500 that she can transfer to her RRSP. The fact that she is eligible to transfer up to $52,000 to her RRSP ($10,000 more than her retiring allowance) validates that she can transfer the full $42,500.

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