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CFP 2022 June > memo list > Flashcards

memo list Flashcards

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1
Q

RRIF minimal withdraw Formulary / age 71 rates

A

= RRIF Amount/ (90 – Age at Jan 1st)

  • minimal withdraw is 5.28%
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2
Q

Pension Adjustment for DB

A

=BE*9-600

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3
Q

unreduced pension age 拿满pension的年龄

A

= (start age + qualifying factor)/2

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4
Q

Early/late CPP and late OAS

A

CPP
- age 60, 36% total clawback. 7.2% yearly, 0.6% monthly
- age 70, 42% total increase. 8.4% yearly, 0.7% monthly
late OAS
- 36% increase to age 70, 7.2% yearly, 0.6% monthly

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5
Q

OAS Clawback

A

clawback amt = (net of income - $79,845 )*15%

- over 129,260 no OAS

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6
Q

GIS Clawback

A

Each $2 of income reduces GIS by $1.

= income*0.5

  • employment income
    • first 5k exempt
    • (超过5k-15k的部分) *0.25
  • OAS not include
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7
Q

Charitable tax credit

A

The donation could be carried forward up to 5 years

  • credit
    - 15% first $200 - provinces match the Federal credit at their lowest tax rate
    - 29% $200以上 donor’s highest tax -provinces
  • limitation
    - 平常最多75% of net income
    - exception (for 100% of net income)
    - Year of Death and Year Prior
    - Cultural Property
    - Ecological sensitive land
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8
Q

Retiring Allowances- like severance pay

A

1996年后開始工作而收到的severance pay不能create RRSP room

- service prior to 1996 generates $2000 per year of RRSP contribution room.
- service prior to 1989 generates add a further $1500（total $3500） per year of RRSP contribution room, but only if the taxpayer was not a member of a pension plan with vested rights.
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9
Q

bank - CDIC

how much can CDIC insure

A

Canada Deposit Insurance Corporation

  1. Credit unions are not CDIC members.
  2. Maximum of $100,000 per account type per institution

5 years term gic not include

types of insured accounts are: 
• Individual accounts. 
• Joint accounts. 
• RRSP accounts. 
• RRIF accounts. 
• TFSA accounts. 
• Trust accounts. 
• Pre-paid property taxes on mortgaged properties.
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10
Q

Insurance- Assuris can insure

Death/Sickness/income/cash value/Annuity

A
  • Death
    • 200k- 100%
    • 200k+ 85% 无上限
  • Sickness
    • 60k- 100%
    • 60k+ 85%
  • income
    • 2k- 100%
    • 2k+ 85%
  • cash value
    • 60k- 100%
    • 60k+ 85%
  • Annuity
    • 100k- 100%
    • 100k+ no coverage
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11
Q

securities can be insured

A
  • MFDA/CIPF/IIROC/IPC

- offer up to $1,000,000 of protection

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12
Q

TDS/ GDS

A

GDS = Housing cost / Gross income
- Housing Cost : mortgage rent/ heat/ 50% condo /property tax
- 2020 maximum permitted GDS for a Canada Mortgage and Housing Corporation (CMHC) insured mortgage is 35%
- usually between 30% and 35%
TDS= (Housing cost + other debt servicing) /Gross income
2020 maximum permitted GDS for a Canada Mortgage and Housing Corporation (CMHC) insured mortgage is 42%
- Most lenders set an upper limit of around 40% to 45%

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13
Q 
principal residence exemption formular
A own both property for 20 years 
house FMV 800K ACB 250K
cottage FMV 900K ACB 300K
what's taxable income at deemed disposition now
A

Exempt gain = {(years designated as principal residence + 1) × capital gain} / years owned

  • 先看哪个cap gain 高，选高的作为PR
  • 算最多exemption是900-300=600k
  • 需要几年拿满exemption，根据公式 19 年就够了
  • 所有house 还可以再有一年的exemption
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14
Q

如果passive asset 超过标准，strategy to qualify the QSBC for LCGE (90% active income)

A
  1. if there is CDA - tax free pay out
  2. pay the extra dividend to shareholder - not preferable since will put shareholder on highest tax rates. 但如果有CNIL 可以先发dividend，用CNIL抵。
  3. reduce the CNIL (cumulative net investment loss)
  4. acquire some active assets
    • buy equipment / inventory
    • buy a small competitor
  5. establish RCA / IPP (not recommend since cost is high)
  6. charitable donation
  7. retirement allowance - if work previous to 1996, can create 2k/mos
  8. create hold co. - move cash to hold co.
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15
Q

How much Deduction for CPP Contributions
CPP’s YMPE $61,600 5.45%
EARNING 90K/YR

A

[(Lesser of YMPE and pensionable earnings) – YBE] x 5.45% = [61,600 -
3,500] x 5.45% = 3,166

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16
Q

transferring the property to joint tenancy

pro (3点) & con（4点）

A

PROS
easy fast
- There will not be delays nor disputes, the asset will transfer automatically to the surviving joint tenants.

tax benefit

- **bypass the probate** - He will not have to pay probate on the investment property, and it will not be on his list of assets at death.
- **rental income splitting** -  parent can split income related to the investment property with his daughters. Because they are adults, there will be no income attribution back to parent; the income will be divided by three.

CONS
control
- loss control the property - **His daughters can make changes to the property or sell their portion without Barney’s consent.
- loss control for how to distribute the estate - This may not be Barney’s intended flow of the asset. One daughter may be better at managing investment properties.

risk on other relationship - marriage/ business

- potential risk on **marriage breakdown** - Both daughters are married. If either of their marriages breakdown the investment property may be included in family assets to split.
- potential risk on **current business for creditors** - Because their business is not incorporated, creditors of the business can access the daughters’ personal assets, including the investment property. They both have significant mortgages; creditors are likely to access assets beyond their homes.
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17
Q

transferring the property to a inter vivos trust / family trust
pro (2点) & con（3点）

A

It allows the settlor control over the assets during his lifetime, but has significant set up costs and tax implications.

  • PROS
    • control - Parent will retain control of the property since he is the settlor of the trust.
    • bypass the probate - The trust assets will not go through Barney’s estate at his death. His estate will not have to pay probate on the investment property, and it will not be on his list of assets at death, so his estate and heirs will have privacy related to this asset.
  • CONS 基本就是贵
    cost
    • Trusts are expensive. parent would need to pay to set up the trust and for annual reporting requirements.
    • tax right away - There will be a deemed disposition of the investment property and parent will need to pay capital gains taxes now. He will pay 50% (FMV – ACB) x 42% = $31,500 in tax now
    • 21-year rule - parent could live many more years. Trusts are subject to the “21-year rule” or a deemeddisposition every 21 years
18
Q

transferring the property by setting up a trust in his will - testamentary trust
pro (3点) & con（4点）

A

PROS
- ownership and control - Parent will retain ownership and control of the property while he is alive.
- flexibility - Based on parent’s experience with his daughters and how things go with the relationship and/or the property, he retains the flexibility to change his will.
- cap gain deferred - Capital gains taxes will be deferred until parent dies.
CONS
- subject to probate - The investment property will go through parent’s estate at his death. His estate will have to pay probate on the investment property.
- potential disputes - kids will share the trust assets. Shared ownership can lead to disputes.
- 21-year rule - if kids still young, they are expected to live for many more years. Trusts are subject to the “21-year rule” or a deemed disposition every 21 years.
- cost - There will be costs to set up and maintain the trusts that could offset some of the benefits.

19
Q

non taxable income

A
  • government benefits
    • CCB
    • WCB/WSIB/social assistance
    • GIS/ Allowance
    • GST Credit
  • 意外之财
    • insurance
    • winnings
    • Inheritance
    • Gift
  • TFSA
  • principle residence
  • Child support
20
Q

Thierry purchased a bond with a face amount of $1,000 on November 1 at a price of $105.75. The bond pays a semi-annual interest amount of $30 on April 30 and October 31 and has eight years remaining to maturity. What will Thierry’s annual rate of return be if he holds it to maturity?

A

The purchase price was $1,057.50 based on a price of $105.75. Using key strokes,
Mode=end, PV=1,057.50, FV=1,000, PMT=30, N=16 (2 times 8), solve for I=2.56 times 2=5.12%.

21
Q

three tax consequences for sales

- eg: ACB $500 UCC $200
    1. FMV for $100
    2. FMV for $300
    3. FMV for $600
A

FMV ACB UCC

  1. UCC > FMV = capital loss
    FMV - UCC = 100-200 = - 100
  2. ACB > FMV > UCC = depreciation recapture 折旧成本报多了， 卖的价格超过了UCC，所以要打全税退回去
    FMV - UCC = 300-200=100, $100 declare as ordinary income
  3. FMV> ACB > UCC = ordinary income + cap gain
    FMV - ACB = 600-500=100 tax as capital gain , $100*50%= $50 taxable income
    ACB -UCC = 500-200=300 declare as ordinary income
22
Q

Several years ago, Joshua purchased 200 shares of BCorp, a large cap publicly traded Canadian bank, for $60 per share. This year he has received eligible dividend payments of $3 per share. Joshua just sold 100 shares of BCorp for $80 per share. Based on Joshua’s 26% federal tax rate, approximately how much federal tax will Joshua pay on these sources of investment income?

A

a) $351
Joshua’s taxable eligible dividend income is $3 times 200 shares = $600 grossed up by
38% = $828. The federal dividend tax credit is 15% of $828 or $124.20. Joshua has realized a gross
capital gain of $2,000 ($80 less $60 = $20 times 100 shares), resulting in a taxable capital gain portion
of $1,000. Taxable investment income is $828 grossed up dividends plus $1,000 taxable capital gain =
$1,828. $1,828 income taxed at 26% = $475.28 federal tax less $124.20 federal dividend tax credit =
$351.08 federal tax.

23
Q

In December 1991, Dwight purchased a whole life insurance policy with a death benefit of $500,000. The policy has a cash surrender value of $78,000. Since purchase, Dwight has received dividends of $7,000 that he has elected to leave and accumulate in the policy. The ACB of the policy is $42,000. If Dwight surrenders the policy, what will be the tax impact?

a) $14,500 taxable capital gain
b) $18,000 taxable capital gain
c) $36,000 taxable income
d) $43,000 taxable income

A

c) is correct. The policy gain is taxable as income. This $36,000 income amount is derived from cash
value less ACB ($78,000 less $42,000 = $36,000). Dividends are already included in this ACB value.

24
Q

Q42. Samuel appointed his son Brian, age 45, as his power of attorney for property. Samuel recently passed away, leaving a sizeable estate which includes a number of investment accounts, real estate and registered plans. His will names his wife Edna, age 78, as his sole executor and calls for an outright distribution to her. Edna is unsure if she can handle this role and the ongoing management of these assets. Which of the following options are available to her? Edna can:

  1. have Brian manage Samuel’s property under the power of attorney.
  2. establish a testamentary spousal trust to hold the assets for her.
  3. hire professional advisors to administer the estate.
  4. renounce her appointment as executor.
A
  1. is incorrect. The power of attorney becomes void on the death of the donor. Brian no longer has
    authority to deal with Samuel’s property.
  2. is incorrect. A testamentary trust can only be established through the will.
  3. is correct. As executor, Edna can hire professionals to help administer the estate. However, the
    decisions and ultimate responsibility will rest with her.
  4. is correct. Edna can renounce her appointment as executor, and then the court will appoint an
    administrator for the estate.
25
Q

Gloria and Albert, both in their late sixties, recently got married. Gloria is wealthy and has a large portfolio of investments and real estate, with significant accrued gains. On her death, Gloria wants to ensure a comfortable lifestyle for Albert and she also wants to protect the balance of her children’s inheritance in the event that Albert remarries. In order to achieve these objectives and minimize tax on her death, Gloria should leave her estate to Albert:

a) and the children in trust, with access to income and capital available to all beneficiaries on her death.
b) in trust, and in the event of his remarriage, trust assets would be distributed to her children.
c) in trust, with access to only trust income for him, and on his death, trust capital would be distributed to her children.
d) in trust, with access to only trust income for him and, if required, for her children, and on his death, trust capital would be distributed to her children.

A

a) is incorrect. Since her children would have access to income and capital, this trust would not qualify as a
spousal trust. As such there would be a deemed disposition of her assets on transfer, resulting in capital
gains tax. Further, little asset protection is available to her children if all beneficiaries can encroach on the
trust capital.
b) is incorrect. A qualifying spousal trust provides for income during the spouse’s lifetime. A qualified
spousal trust does not exist if income ceases on remarriage, and as a result, a tax deferred rollover of assets
to the trust cannot occur. This would not satisfy her objective to minimize tax on her death.
c) is correct. A qualifying spousal trust allows the rollover of assets to the trust at her cost base, thereby
deferring capital gains tax on first death. A qualifying spousal trust allows income to be paid to the spouse
only. Use of this trust protects the capital for the eventual distribution to her children and minimizes tax on
her death.
d) is incorrect. If trust income can be paid to her children when required, this trust would not qualify as a
spousal trust. As such, the spousal rollover provisions to defer capital gains would not be available when
assets are transferred into the trust, resulting in a deemed disposition and capital gains tax on her death.
This option does not minimize tax on first death.

26
Q

residence eligibility for collecting cpp/oas/gis

A

cpp - has to be residence
oas -
in Canada : have resided in Canada for at least 10 years since the age of 18
outside Canada : have resided in Canada for at least 20 years since the age of 18

27
Q

Insurance- Assuris coverage

Death/ Sickness /income /cash value /Annuity

A
  • Death
    • 200k- 100%
    • 200k+ 85% 无上限
  • Sickness
    • 60k- 100%
    • 60k+ 85%
  • income
    • 2k- 100%
    • 2k+ 85%
  • cash value
    • 60k- 100%
    • 60k+ 85%
  • Annuity
    • 100k- 100%
    • 100k+ no coverage
28
Q

Bank- CDIC Canada Deposit Insurance Corporation

A
  1. Credit unions are not CDIC members.

2. Maximum of $100,000 per account type per institution

29
Q

monetary policy VS Fiscal policy

A

monetary policy

  • Interest
  • government securities
    • government bonds t-bill
  • money supply 印钱

Fiscal policy

  • Government spending 基建
  • regulation 监管
  • Taxation 税
30
Q

medical tax credit
- eg: income 60k, medical tax credit 20%, medical expense 10k
how much tax credit he has?
how many years can he carry forward?

A
  • claim all in one year tax credit : (10k- 60k3%)20%= 1640（可用來抵稅）
  • no carry forward
31
Q

cpp survivor child benefit
tax?
last till when?

A
  • CPP child survivor benefits is taxed on child, so likely is free for the parent
  • Kids’ benefits can continue to age 25 if they are full-time students.
32
Q

life insurance donate to charity, change charity to owner vs beneficiary tax credit

A

charity as bene 保费和理赔有tax credit

charity as owner donate的时候deemed disposition增长部分算taxable gain有tax credit，后续继续交的保费也算death benefit

33
Q 
RDSP 
- 开户年龄
CDSG-Grants/CDSB- Bonds
- 领取年龄
- 领多少
- max 
- buyback
A 
开户年龄：60岁以内
CDSG-Grants
- 领取年龄 50
- 领多少 
net family income $97,069 more - 1K+1K=2k/年
    - 100% match, **$1000** max a year
net family income $97,069 less - 1.5K+3.5K=5k/年
   - 前$500 match 300%=$1500
    - $1000 match 200%= $2000
- max : 70k
- grants最多一年可以追 $10,500
CDSB- Bonds
- 领取年龄 50
- 领多少
net family income less $31,711 , $1000/年 
$48,535+, no bonds 
- Max $20k lifetime
- Bonds最多一年可以追$11,000 , 最多一次性能回追10年
34
Q

RDSP decumulation/ withdraw

三种取法

A
  1. DAP Disability Assistance Payments
    - 怎么取：Lump sum
    - when can withdraw: any age
    - type：PGAP（会有clawback）vs Non PGAP
  2. LDAP Lifetime Disability Assistance Payments
    - 怎么取：RRIF type schedule 每年取
    - when can withdraw: at age of 60
  3. SDSP Specified Disability Saving Plan - 活不过5年
    - bene寿命不到5年
    - 可以取10k/年，no AHA
    - still taxable
35
Q

什么是PGAP vs Non PGAP

A
  • PGAP (primary government assistance plan) grants+bonds>parent money - 大部分情况，因为grants match 很多
  • Non PGAP grants+bonds
36
Q

rules for loss carry forward/ back

  • ABIL (allowable business investment loss)
  • unused charitable donations
  • farm losses
  • AMT
A
  • ABIL **(allowable business investment loss)
    • non-capital loss 平常支出高于收入的loss
      • carry back 3 tax years
      • carry forward 10 tax years.
    • capital loss 卖的时候价格低于ACB产生的loss
      • carry back 3 tax years
      • carry forward indefinitely tax years.
  • unused charitable donations - 5
    • carry forward 5 tax years.
      • claim them in any of the 5 following tax years.
  • farm losses
    • carry back a current-year farm loss to previous years.
    • carry forward 20 tax years.
  • AMT
    • carry forward 7 tax years.
37
Q

estate planning recommendation 需要考虑哪些点

人/工具

A
  • 人
    - executor / trustee for will/trust
    - are executor / trustee appropriate ?
    - beneficiary
    - if reg account’s bene will be most tax efficient
    - guardian for kids
    • 工具
      • trust
        • should client set up trust
          • testamentary spousal trust
          • insurance trust
      • use of seg fund
        • credit protection - business owner
        • name bene
38
Q

AMT consideration

A
  • when claim a large LCGE likely will increase the AMT, it can be carry forward to offset taxes in future years
39
Q

RDSP GRANTS BOND income 要求

A

grants

  • net family income $97,069 more - 1K+1K=2k/年
    • 100% match, $1000 max a year
    • total
      • contribution + grants = $2000/年
  • net family income $97,069 less - 1.5K+3.5K=5k/年

bonds

  • net family income less $31,711 ,Max $1000/年
  • $48,535+, no bonds
40
Q

real rate of return

A

1+ inflation

CFP 2022 June (1 decks)

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