Taxation on Investments

Question 1

What is a RRSP?

Answer 1

Registered Retirement Savings Plan
Portfolio of different investments
Income earned is generally exempt from tax until received payments
Contribution limits.
Lower of: a) 18% earned income, b) $25,370, or c) unused room
Tax-deductible (subject to certain limits)

Question 2

What is Income vs. Capital?

Answer 2

Income:
more of a recurring nature
may receive regularly

Capital:
more like property,
having these may generate items in left hand column

rents → apartment building
interest → GIC
dividends → stocks/company shares
interest → T-bills
operating income → Own a business

Question 3

How do you generate a return on property or investments?

Answer 3

Income → Interest/dividend/other investment income
Capital Gain/Loss → When you sell the investment

Question 4

What do tax rates look like?

Answer 4

Interest & Regular Income: 51.97-53.53%
Dividends: 37.19– 39.34%
Capital Gains: 25.98-26.76%

Interest: 100%
Capital Gain: 50%
Dividend: 100%

Question 5

Where do you report them on your tax return (T1)?

Answer 5

Schedule 4

Generally, you should receive an information slip
(i.e. a T3, T5, or other) that tells you where to report
the information.

Question 6

What are considerations other than tax?

Answer 6

Risk profile of an investment
Liquidity of investment
Hidden costs (e.g. management fees, transaction costs, MERs)
Others are to be studied later in the course!