Podcast
Questions and Answers
Which of the following statements about the taxation of capital gains under Canadian law is true?
Which of the following statements about the taxation of capital gains under Canadian law is true?
- Capital gains are taxed at a higher rate than interest income.
- Capital losses can offset only capital gains income.
- Capital gains are taxed at the same rate as dividends.
- Only 50% of capital gains are included in taxable income. (correct)
What is true regarding accrued interest when selling fixed-income securities?
What is true regarding accrued interest when selling fixed-income securities?
- Accrued interest is considered income to the seller at the time of disposition. (correct)
- Accrued interest is included in the capital gains calculation.
- Accrued interest represents a capital gain for the seller.
- Accrued interest is the same as the principal amount of the security.
Which of the following best describes the process of calculating taxable income for a corporation in Canada?
Which of the following best describes the process of calculating taxable income for a corporation in Canada?
- Taxable income is calculated without any deductions or credits.
- The chosen fiscal year can be longer than 53 weeks for large corporations.
- Choose any fiscal year as long as it is shorter than a calendar year.
- A consistent fiscal year must be used each year for accurate calculations. (correct)
When an investor disposes of a fixed-income security, what component is specifically NOT included in calculating capital gains?
When an investor disposes of a fixed-income security, what component is specifically NOT included in calculating capital gains?
What is the primary reason for taxing foreign income earned by residents in Canada?
What is the primary reason for taxing foreign income earned by residents in Canada?
What is the condition for a fixed-income security to NOT produce capital gains upon sale?
What is the condition for a fixed-income security to NOT produce capital gains upon sale?
Which of the following provinces administers its own corporate income tax?
Which of the following provinces administers its own corporate income tax?
According to the example provided, what was the total cost incurred by Jared when purchasing the bond?
According to the example provided, what was the total cost incurred by Jared when purchasing the bond?
What is the correct order in which taxpayers should calculate their income tax?
What is the correct order in which taxpayers should calculate their income tax?
In the event of a sale where the sale occurs five months post last regular interest payment, what does the buyer compensate the seller?
In the event of a sale where the sale occurs five months post last regular interest payment, what does the buyer compensate the seller?
What happens to the taxable status of a deferred annuity if the annuitant passes away?
What happens to the taxable status of a deferred annuity if the annuitant passes away?
Which of the following statements about Tax-Free Savings Accounts (TFSAs) is correct?
Which of the following statements about Tax-Free Savings Accounts (TFSAs) is correct?
What is the primary advantage of contributing to a TFSA?
What is the primary advantage of contributing to a TFSA?
What factor primarily affects the taxability of income earned in a deferred annuity?
What factor primarily affects the taxability of income earned in a deferred annuity?
Which of the following is true regarding the funds contributed to a TFSA?
Which of the following is true regarding the funds contributed to a TFSA?
What is Margaret's federal marginal tax rate when her taxable income increases to $180,001?
What is Margaret's federal marginal tax rate when her taxable income increases to $180,001?
How is income from property, not held in a registered plan, taxed?
How is income from property, not held in a registered plan, taxed?
When must accrued interest be included in taxable income?
When must accrued interest be included in taxable income?
What type of tax credits are available on dividends from publicly-traded Canadian corporations?
What type of tax credits are available on dividends from publicly-traded Canadian corporations?
What is the annual tax payment requirement for investments like zero-coupon bonds?
What is the annual tax payment requirement for investments like zero-coupon bonds?
Flashcards
TFSA
TFSA
A tax-free savings account in Canada, allowing tax-free growth and withdrawals.
RRSP deferred annuity
RRSP deferred annuity
A deferred annuity held within a registered Retirement Savings Plan (RRSP).
TFSA contribution limit
TFSA contribution limit
An annual limit on the amount that can be contributed to a TFSA.
Deferred Annuity
Deferred Annuity
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Taxation of TFSA investment income
Taxation of TFSA investment income
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Marginal tax rate
Marginal tax rate
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Accrual basis taxation (Property Income)
Accrual basis taxation (Property Income)
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Interest Income Taxation
Interest Income Taxation
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Taxable Income
Taxable Income
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Dividend Tax Credits (Publicly Traded)
Dividend Tax Credits (Publicly Traded)
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Tax Treatment of Investment Income
Tax Treatment of Investment Income
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Canadian Income Tax Calculation Process
Canadian Income Tax Calculation Process
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Employment Income Composition
Employment Income Composition
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Taxable Income Calculation
Taxable Income Calculation
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Taxation of Foreign Income
Taxation of Foreign Income
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Capital Gain/Loss on Fixed-Income Securities
Capital Gain/Loss on Fixed-Income Securities
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Accrued Interest
Accrued Interest
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What is the impact of accrued interest on the buyer?
What is the impact of accrued interest on the buyer?
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What is the impact of accrued interest on the seller?
What is the impact of accrued interest on the seller?
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Why do savings bonds typically not generate capital gains?
Why do savings bonds typically not generate capital gains?
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Study Notes
Section 8: Working with the Client
- This section outlines client interactions, including Canadian taxation, fee-based accounts, retail client interactions, and institutional client interactions.
- Specific topics include: Canadian Taxation, Fee-Based Accounts, Working with Retail Clients, and Working with Institutional Clients.
- Topic 24 details Canadian taxation, covering different income types (interest, dividends, capital gains/losses), tax-deferral plans, and basic tax planning strategies for minimizing tax liability.
- Topic 25 explores fee-based accounts' characteristics and management.
- Topic 26 focuses on working with retail clients, encompassing client communication and service.
- Topic 27 addresses working with institutional clients, highlighting unique aspects of institutional client interactions.
Canadian Taxation (Topic 24)
- Canadians are taxed on income by federal and provincial statutes.
- The Income Tax Act governs federal income taxes.
- Different provinces manage their own income taxes on residents.
- Income tax applies to foreign income earned by Canadian residents, and certain Canadian-source income for non-residents.
- Corporations incorporated in Canada are considered residents and taxed accordingly.
- Taxpayers must determine income and calculate taxes annually. Individuals use calendar years, while corporations have flexibility in choosing fiscal years.
- Five steps are involved in calculating income tax: calculate income sources, determine allowable deductions, calculate basic tax, claim tax credits, and calculate net tax payable.
- Individuals can use various deductions, exemptions, and tax credits to reduce taxable income.
- Treatment of interest income, dividends, and capital gains/losses varies.
- Capital gains/losses are calculated based on the difference between sale price and purchase price.
- Investment income is often taxed.
- Tax-deductible expenses for investment income are available and explained.
Key Terms
- Many financial terms are defined (e.g., annuity, attribution rules, Canada Education Savings Grant, carrying charges).
- Key terms for Canadian taxation are part of this chapter (e.g., deferred annuity, defined benefit plans, defined contribution plans, fiscal year, income splitting, marginal tax rate, money purchase plans, past service pension adjustment, pension adjustment, registered education savings plan, registered pension plan, registered retirement income fund, registered retirement savings plan, self-directed registered retirement savings plan, spousal registered retirement savings plan, superficial losses, tax-free savings account, withholding tax).
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