Let's break down Simone's situation: - **Age:** 67 - **OAS:** $607/month = $7,284/year - **CPP:** $840/month = $10,080/year - **OAS threshold:** Her net income is **$3,500 below** the OAS clawback threshold (let's use the 2024 threshold of $90,997, so her net income is ~$87,497) - **Needs to withdraw:** $15,000 from savings - **Accounts/investments:** - Non-registered: appreciated common shares (a) - Non-registered: bond mutual fund (d) - 'R' Canada Savings Bonds outside RRSP (b) - RRSP (c) **Goal:** Withdraw $15,000 in the most tax-efficient way, avoiding or minimizing OAS clawback and taxes. --- ### Tax Considerations - **OAS clawback** starts if net income > $90,997 (2024). For every $1 over, 15 cents of OAS is clawed back. - **RRSP withdrawals** are fully taxable as income. - **Interest income** (from bonds) is fully taxable. - **Capital gains** (from appreciated shares or mutual funds): only 50% is included in taxable income. - The **bond mutual fund** may have accrued capital gains or interest. --- ### Let's analyze each option: #### a) Dispose of some of her common shares in her non-registered investment account (significant appreciation) - **Tax effect:** Realizes capital gains. Only 50% of the gain is added to income. - **If she needs $15,000,** only half of the gain is taxable. - **Most tax-efficient** if the adjusted cost base is low and capital gains are not large enough to push her above the OAS threshold. - **If she realizes $15,000 in capital gains,** only $7,500 is added to income, keeping her just at or below the threshold (since she was $3,500 below). #### b) Cash in her 'R' Canada Savings Bonds held outside of her RRSP - **Tax effect:** Interest income, fully taxable. - **All $15,000** is added to income, likely pushing her over the OAS threshold and triggering clawback. #### c) Withdraw the required funds from her RRSP - **Tax effect:** Fully taxable income. - **All $15,000** is added to income, causing OAS clawback and higher tax. #### d) Dispose of the bond mutual fund held in her non-registered account - **Tax effect:** Could be a mix of capital gains and interest, depending on the fund. - **If largely capital gains,** similar to (a), but often bond funds have more interest income, which is fully taxable. - **If mainly interest income,** same as (b)—less tax-efficient. --- ### **Best Option** **a) Dispose of some of her common shares in her non-registered investment account** - Because capital gains are only **50% taxable**, she can realize up to **$7,000 in capital gains** and only have $3,500 added to her net income (matching her $3,500 "buffer" before OAS clawback starts). - If she needs to realize more, she can sell just enough to stay below the OAS threshold. - This minimizes tax and avoids OAS clawback. --- ### **Final Answer** **a) dispose of some of her common shares in her non-registered investment account; the shares have appreciated in value significantly since she bought them** This is the most tax-efficient option, as it allows her to control how much taxable income she realizes and avoid OAS clawback.