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NEW QUESTION # 64
Saheed is a retiree who is considering splitting his pension income with his wife, Minu.
Which of the following outcomes may occur if he shares his pension benefits?
- A. Regardless of how much income each person reports, the total amount of income taxes will not change.
- B. This is a form of tax evasion and is therefore considered illegal based on income tax legislation.
- C. Minu will be exposed to a pension adjustment (PA) if she receives income from his pension.
- D. Whether the couple saves on income tax will be dependent on Minu's marginal tax rate.
Answer: D
Explanation:
Explanation
Whether the couple saves on income tax will be dependent on Minu's marginal tax rate. Pension income splitting is a tax planning strategy that allows a spouse or common-law partner who receives eligible pension income to allocate up to 50% of that income to their spouse or common-law partner1. This may result in tax savings if the transferring spouse or common-law partner is in a higher tax bracket than the receiving spouse or common-law partner1. The tax savings depend on the difference between the marginal tax rates of the spouses or common-law partners1. The other statements are incorrect. Minu will not be exposed to a pension adjustment (PA) if she receives income from Saheed's pension. A PA is a measure of the value of benefits accrued in a registered pension plan or deferred profit sharing plan during a calendar year2. It reduces the RRSP contribution room of the plan member, not the spouse or common-law partner who receives part of their pension income2. Pension income splitting is not a form of tax evasion and is not illegal based on income tax legislation. It is a legitimate way to reduce taxable income and taxes payable by shifting income from a higher-income spouse or common-law partner to a lower-income spouse or common-law partner1. Pension income splitting may change the total amount of income taxes paid by the couple, depending on their marginal tax rates. If the transferring spouse or common-law partner is in a higher tax bracket than the receiving spouse or common-law partner, pension income splitting may lower their combined taxes payable1. However, if they are in the same tax bracket, pension income splitting may not have any effect on their taxes payable1.
References: Pension income splitting, Pension adjustment
NEW QUESTION # 65
Janine will celebrate her 71st birthday this year. She currently has a lot of money in a personal registered retirement savings plan (RRSP) and knows there are rules about what she can do with those funds. Which of the following is TRUE?
- A. She can convert her RRSP to a registered retirement income fund (RRIF) this year or by December 31st of next year.
- B. She can purchase a registered term or life annuity.
- C. She can convert her RRSP to a locked-in retirement income fund (LRIF).
- D. She can take the entire amount in cash, with no tax consequences because her RRSP funds were tax-sheltered.
Answer: B
NEW QUESTION # 66
Lucas is 60 years old and continues to work. He presently is a plan holder of a registered retirement savings plan (RRSP). He is considering changing his RRSP to a registered retirement income fund (RRIF).
Which of the following statements is CORRECT?
- A. Once he changes his RRSP to a RRIF, his unused total RRSP contribution room is lost.
- B. There is no minimum age to be an annuitant to a RRIF.
- C. Investments that qualify as an eligible investment for a RRIF are different than for an RRSP.
- D. Minimal withdrawals are required to start in the current calendar year his RRIF was established.
Answer: A
Explanation:
Explanation
A registered retirement income fund (RRIF) is a type of registered plan that provides a stream of income in retirement. A RRIF can be created by converting an RRSP, but once the conversion is done, the plan holder can no longer make contributions to the RRSP or the RRIF. Therefore, any unused RRSP contribution room is lost after the conversion. The other statements are incorrect because:
A: There is a minimum age to be an annuitant to a RRIF, which is 71 years old. However, a plan holder can convert an RRSP to a RRIF at any age before 71.
C: Minimum withdrawals are required to start in the year following the year the RRIF was established, not in the current calendar year.
D: Investments that qualify as an eligible investment for a RRIF are the same as for an RRSP, such as mutual funds, stocks, bonds, GICs, etc. References:
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 6: Registered Plans, Section 6.2:
Registered Retirement Income Fund (RRIF), page 6-81
Registered Retirement Income Fund (RRIF) - Canada.ca2
NEW QUESTION # 67
Xerxes, 45 years old, is a successful architect, having an annual income of $185,000. He has around $10,000 in his non-registered account, which he is looking to invest in a tax-efficient manner.
From the following options, which would be the most tax-efficient?
- A. asset allocation fund
- B. bond fund
- C. target date fund
- D. Canadian equity index fund
Answer: D
Explanation:
Explanation
A Canadian equity index fund is a type of mutual fund that invests in a basket of Canadian stocks that track the performance of a market index, such as the S&P/TSX Composite Index. A Canadian equity index fund can be a tax-efficient option for a non-registered account, because it can generate capital gains and eligible dividends, which are taxed at lower rates than interest income or foreign dividends. A bond fund, on the other hand, would produce mostly interest income, which is fully taxed at the marginal rate. An asset allocation fund or a target date fund would have a mix of different asset classes, such as bonds, stocks, and cash, and may not be as tax-efficient as a pure equity fund123 References = web search results from search_web(query="tax-efficient investment options in Canada")123 and Canadian Investment Funds Course (CIFC) - Module 2: Investment Products - Section 2.2: Mutual Funds4
4: https://www.ifse.ca/wp-content/uploads/2021/08/CIFC-Module-2.pdf
NEW QUESTION # 68
Charlotte has received proceeds from a deceased family member's estate. Charlotte decides to visit Malik, who's a Dealing Representative at her bank. She tells Malik, she does not know much about trading ETFs, but she wants to invest in ETFs. Charlotte says she feels fortunate to have this money and that she's not worried about losing it because she never planned on having any of it.
What element of the Know Your Client (KYC) information has Malik been able to learn?
- A. Risk Profile
- B. Risk Capacity
- C. Risk Tolerance
- D. Risk Preference
Answer: D
Explanation:
Explanation
The element of the Know Your Client (KYC) information that Malik has been able to learn is Charlotte's risk preference. KYC information is a collection of personal and financial information that registered firms and individuals must obtain from their clients before providing any investment advice or services. KYC information helps registered firms and individuals understand their clients' needs, goals, risk tolerance, time horizon, and personal circumstances, as well as comply with regulatory obligations such as suitability, disclosure, and reporting. One of the components of KYC information is risk preference, which is a measure of how much risk an investor is willing to take on in their portfolio. It reflects the investor's attitude, personality, and emotional factors that influence their investment decisions. Risk preference can be classified into three categories: risk-seeking, risk-averse, or risk-neutral. Based on Charlotte's statement that she does not know much about trading ETFs, but she wants to invest in ETFs, and that she feels fortunate to have this money and that she's not worried about losing it because she never planned on having any of it, Malik can infer that Charlotte has a high-risk preference or a risk-seeking attitude. This means that Charlotte is willing to take on more risk in exchange for higher potential returns, even if it means losing some or all of her money.
Therefore, option C is correct regarding what element of KYC information Malik has been able to learn. The other options are not correct regarding what element of KYC information Malik has been able to learn. Option A is false because risk profile is not an element of KYC information; rather, it is an outcome of KYC information that summarizes the investor's overall suitability for different types of investments based on their KYC information. Option B is false because risk capacity is not an element of KYC information; rather, it is a measure of how much risk an investor can afford to take on in their portfolio based on their financial situation and goals. Option D is false because risk tolerance is not an element of KYC information; rather, it is a measure of how much risk an investor can handle in their portfolio without losing sleep or changing their plans. References: [Know Your Client (KYC) | IFIC], [Know Your Client (KYC) | GetSmarterAboutMoney.ca], [Risk Preference | Investopedia]
NEW QUESTION # 69
Which of the following statements best describes dollar-cost averaging?
- A. It is a type of systematic withdrawal program.
- B. It is buying a set dollar amount of a mutual fund on a regular basis
- C. It is the strategy of purchasing a set number of units of a mutual fund on a regular basis.
- D. It is making lump-sum purchases when the market price for a mutual fund is low.
Answer: B
NEW QUESTION # 70
Dakota is a Dealing Representative with Harvest Wealth Inc., a mutual fund dealer. Dakota starts a marketing campaign to contact prospective new clients and increase sales with existing clients. Which of the following CORRECTLY describes activities that Dakota can engage in under her marketing campaign?
- A. Dakota can send promotional emails to clients who have opted in to receive commercial electronic messages (CEMs).
- B. Dakota can make telemarketing calls to clients who have opted in to receive commercial electronic messages (CEMs).
- C. Dakota can make telemarketing calls to clients who are listed on the National Do Not Call List
- D. Dakota can send promotional emails to clients who have opted into Harvest Wealth's Do Not Call List
Answer: A
Explanation:
Explanation
Dakota can send promotional emails to clients who have opted in to receive commercial electronic messages (CEMs). A CEM is any electronic message that encourages participation in a commercial activity, such as an email, a text message, or a social media message. Under Canada's anti-spam legislation (CASL), Dakota must obtain consent from the recipients before sending CEMs, either explicitly (e.g., by asking them to sign up for a newsletter) or implicitly (e.g., by having an existing business relationship with them). Dakota must also identify himself and his dealer, provide contact information, and include an unsubscribe mechanism in every CEM. The other statements are incorrect. Dakota cannot make telemarketing calls to clients who are listed on the National Do Not Call List (DNCL). The DNCL is a list of telephone numbers of consumers who do not want to receive unsolicited telemarketing calls. Under the Telecommunications Act, Dakota must register with the National DNCL operator, subscribe to the National DNCL, and avoid calling any number on the list, unless he has express consent from the consumer or an exemption applies. Dakota cannot send promotional emails to clients who have opted into Harvest Wealth's Do Not Call List. A Do Not Call List is a list of telephone numbers of consumers who do not want to receive telemarketing calls from a specific organization.
Under the Telecommunications Act, Dakota must maintain an internal Do Not Call List for his dealer and respect the requests of consumers who ask not to be called by his dealer. However, this does not mean that he can send promotional emails to those consumers, as that would violate CASL. Dakota cannot make telemarketing calls to clients who have opted in to receive commercial electronic messages (CEMs). Opting in to receive CEMs does not imply consent to receive telemarketing calls, as they are different forms of communication governed by different laws . Dakota must obtain separate consent from the clients before making telemarketing calls to them, either explicitly or implicitly. References: [Canada's anti-spam legislation], [National Do Not Call List]
NEW QUESTION # 71
One of your clients, Harry, has heard that he can defer paying tax on capital gains. He wants to know if what he has heard is correct and if so, how to defer paying taxes on capital gains.
What would you tell Harry?
- A. Harry should buy and sell investments actively.
- B. He should invest in mutual funds just before the dividend paying date to pick up the dividend.
- C. He should hold unprofitable investments as long as possible.
- D. He should hold profitable investments as long as possible.
Answer: D
Explanation:
Explanation
The answer that you should tell Harry is that he should hold profitable investments as long as possible. A capital gain is the difference between the selling price and the purchase price of an asset when the selling price is higher than the purchase price. A capital gain is subject to tax only when it is realized, meaning that the asset is sold or disposed of. Therefore, one way to defer paying tax on capital gains is to hold profitable investments as long as possible and delay selling them until a future year. This allows the investor to postpone paying tax on the capital gain and benefit from the compounding effect of the investment returns. Therefore, option A is correct regarding how to defer paying taxes on capital gains. The other options are not correct or effective ways to defer paying taxes on capital gains. Option B is false because investing in mutual funds just before the dividend paying date does not defer paying taxes on capital gains; rather, it increases the taxable income of the investor by adding dividend income, which may be subject to a gross-up and a tax credit depending on the type of dividend. Option C is false because buying and selling investments actively does not defer paying taxes on capital gains; rather, it triggers more taxable events and increases the transaction costs of investing. Option D is false because holding unprofitable investments as long as possible does not defer paying taxes on capital gains; rather, it reduces the potential return of the portfolio and prevents the investor from using capital losses to offset capital gains from other sources. References: [Capital Gains Tax in Canada | Wealthsimple], [Capital Gains Tax: What It Is and How It Works in Canada], [Capital Gains Tax | GetSmarterAboutMoney.ca]
NEW QUESTION # 72
Which of the following best describes how a target date fund works?
- A. In exchange for a lump-sum purchase the unitholder receives guaranteed monthly payments for life.
- B. Through the years, the asset allocation shifts from equities towards fixed income as the maturity date approaches.
- C. The mutual fund is constantly rebalanced to maintain an even split between equities and fixed income through the life of the mutual fund.
- D. Through the years, the asset allocation shifts from fixed income towards equities as the maturity date approaches.
Answer: B
Explanation:
Explanation
This is because a target date fund is designed to reduce the risk and volatility of the portfolio as the investor gets closer to their retirement or other savings goal. Equities tend to have higher returns but also higher risk than fixed income, so a target date fund gradually reduces the exposure to equities and increases the exposure to fixed income over time. This way, the investor can benefit from the growth potential of equities in the early years and preserve their capital with the stability of fixed income in the later years.
NEW QUESTION # 73
You are collecting know your client (KYC) information for your new client, Yael. She has recently accepted an early retirement package from her employer and has $100,000 to invest. She is looking for an investment that will provide income to help pay her ongoing monthly expenses. Without this extra income, she would have trouble paying her bills. From your discussions, Yael understands that markets fluctuate and says she is comfortable with high risk. Which of the following would be a suitable investment?
- A. money market fund
- B. global equity fund
- C. Canadian equity index fund
- D. mortgage fund
Answer: D
NEW QUESTION # 74
Sven owns preferred shares that give him the option to sell his holdings back to the issuing company at a predetermined price and within a specified time. What type of preferred shares does Sven own?
- A. convertible
- B. redeemable
- C. retractable
- D. participating
Answer: C
NEW QUESTION # 75
Jehona is a Dealing Representative with Vista Wealth Investments Inc., a mutual fund dealer in Ontario and Nova Scotia. Jehona has reviewed her client Sokol's account and wants to adjust the holdings andre-balance the portfolio. Which of the following statements about Jehona's permitted activities is CORRECT?
- A. If Jehona wants to execute the trades without Sokol's pre-approval, Sokol must first appoint Jehona as his Power of Attorney.
- B. If Sokol has qiven Jehona discretionary tradinq authority, Jehona can process trades in the account without Sokol's pre-approval.
- C. If Jehona wants to execute trades for Sokol's account, Sokol must provide his specific authorization before the trades are entered.
- D. If Sokol has siqned a Limited Authorization Form, Jehona can process the trades in the account without Sokol's pre-approval.
Answer: C
NEW QUESTION # 76
Which of the following individuals would qualify for a full or partial Old Age Security (OAS) pension?
- A. Marcus, who is 60 years old, a Canadian citizen, and has lived in Canada for 20 years.
- B. Donald, who is 65 years old and has lived in Canada since his birth but worked in Australia for the past
10 years. - C. Lenny, who is 65 years old and was born and raised in Canada, but lived in Jamaica from ages 25 to 65.
- D. Katrina, who is 75 years old and just immigrated to Canada from the U.S. last month.
Answer: C
Explanation:
Explanation
Lenny would qualify for a partial OAS pension, because he meets the following criteria:
*He is 65 years old or older.
*He is a Canadian citizen or a legal resident at the time of his OAS pension application.
*He has resided in Canada for at least 10 years since the age of 18.
The amount of his partial OAS pension would be proportional to the number of years he has lived in Canada after the age of 18, divided by 40. For example, if he has lived in Canada for 15 years, he would receive 15/40 or 37.5% of the full OAS pension1 References = web search results from search_web(query="Old Age Security pension eligibility")
NEW QUESTION # 77
What does a normal yield curve look like?
- A. is flat and has no slope
- B. slopes upward to the right
- C. slopes down to the right
- D. slopes upward to the left
Answer: B
Explanation:
Explanation
A normal yield curve is a graphical representation of the relationship between the interest rates and the maturities of different fixed income securities. It slopes upward to the right, meaning that longer-term bonds have higher yields than shorter-term bonds. This reflects the fact that investors demand higher compensation for lending money for longer periods of time and taking on more risk. A normal yield curve indicates that investors expect the economy to grow steadily and inflation to remain stable. References: Canadian Investment Funds Course (CIFC) | IFSE Institute, Unit 4, Lesson 3
NEW QUESTION # 78
Which among the following plans includes a provision that places a maximum limit on the amount that can be withdrawn during a calendar year?
- A. Registered Retirement Income Fund (RRIF)
- B. Deferred Profit Sharing Plan (DPSP)
- C. Registered Retirement Savings Plan (RRSP)
- D. Life Income Fund (LIF)
Answer: D
Explanation:
Explanation
A LIF is a type of registered retirement income fund that is used to hold and pay out locked-in pension funds.
A LIF has both a minimum and a maximum withdrawal limit for each calendar year, which are determined by the federal or provincial pension legislation, the age of the annuitant, and the value of the fund. The minimum withdrawal limit is similar to that of a RRIF, but the maximum withdrawal limit is intended to ensure that the LIF provides income for the lifetime of the annuitant123 References = Canadian Investment Funds Course (CIFC) - Module 3: Registered Plans - Section 3.4: Life Income Fund (LIF)4 and web search results from search_web(query="maximum withdrawal limit for LIF RRSP RRIF DPSP")123
4: https://www.ifse.ca/wp-content/uploads/2021/08/CIFC-Module-3.pdf
NEW QUESTION # 79
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