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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Family Law | 15% | - Family property and financial considerations - Legal implications in financial planning |
| Topic 2: Investment and Tax Planning | 10% | - Tax planning concepts - Investment strategies and portfolio considerations |
| Topic 3: Estate Planning | 10% | - Wills, trusts and succession planning - Estate transfer strategies |
| Topic 4: Retirement Planning | 20% | - Retirement income sources and strategies - Government benefits and retirement plans |
| Topic 5: Savings Planning & Debt Management | 10% | - Debt management techniques - Savings strategies and cash flow management |
| Topic 6: Financial Planning Practice | 10% | - Financial planning process and client relationship management - Professional standards and ethical practices |
| Topic 7: Insurance Planning | 10% | - Risk management and insurance products - Insurance needs analysis |
| Topic 8: Financial Planning for Small Business | 15% | - Small business financial strategies - Business ownership structures and planning |
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NEW QUESTION # 39
The following table outlines details for a life insurance policy issued in 1995:
Details
Amounts
Cash surrender value
$8,000
Premiums paid
$6,000
Dividends declared
$1,500
Net cost of pure insurance
$750
Marginal tax rate
30%
Assuming the policy is completely surrendered, what are the taxes payable?
Answer: B
Explanation:
The taxable policy gain is determined by comparing the policy's surrender proceeds with its adjusted cost basis (ACB).
For this policy, the simplified ACB calculation is:
Premiums paid # policy dividends # net cost of pure insurance
Therefore:
$6,000 # $1,500 # $750 = $3,750 ACB
CRA guidance confirms that the ACB of a life insurance policy is increased principally by premiums and reduced by specified amounts including the net cost of pure insurance; policy dividends to which the policyholder becomes entitled also reduce the ACB.
The policy gain on surrender is therefore:
$8,000 cash surrender value # $3,750 ACB = $4,250 taxable policy gain
Apply the 30% marginal tax rate:
$4,250 ร 30% = $1,275
Therefore, option C is correct.
The $4,250 amount itself is not the tax payable; it is the amount included in taxable income under the simplified calculation. Applying the client's marginal tax rate determines the resulting tax liability.
FPII reference/topic: Insurance Planning - permanent life insurance; cash surrender; adjusted cost basis; net cost of pure insurance; policy gains.
NEW QUESTION # 40
Maxwell is filing a rights or things tax return for his deceased mother. She had the following sources of income:
Debenture interest coupons.
Unpaid dividends declared before her death.
Old age security that was due before her death.
Income from a registered retirement savings plan (RRSP).
Which form of income will Maxwell have to exclude from the rights or things tax return?
Answer: B
Explanation:
Income associated with the deceased person's RRSP must be excluded from the optional Return for Rights or Things.
The rights-or-things return under subsection 70(2) of the Income Tax Act allows certain income amounts that had been earned or became receivable before death, but had not actually been received, to be reported separately from the deceased person's terminal return. CRA examples include matured bond coupons, accrued bond interest, qualifying pension amounts, and dividends declared before death but unpaid at death.
CRA's longstanding treatment specifically states that an annuitant is not considered to have a "right or thing" in respect of an RRSP. Instead, the tax treatment of the RRSP on death is governed by the separate RRSP death provisions, which generally bring the fair market value into income subject to applicable rollover and refund-of-premiums rules.
The unpaid dividend declared before death is a classic example of a right or thing. Accrued debenture or bond amounts can likewise qualify, as can eligible OAS amounts payable in respect of the period before death.
Therefore, the RRSP amount is the required exclusion.
FPII reference/topic: Estate Planning - taxation at death; rights or things return; RRSP taxation on death; optional tax returns.
NEW QUESTION # 41
If an employee earns more than the yearly maximum pensionable earnings, but an employer continues to deduct Canada Pension Plan contributions, what will happen to the excess contributions?
Answer: D
Explanation:
Where an employee has contributed more CPP than required for the year, the excess employee contribution is ultimately refunded or credited through the individual's income tax return.
CRA specifically provides for CPP overpayments to be calculated on the applicable Schedule 8 or interprovincial CPP/QPP form. The excess is reported on the individual's tax return, and CRA will either refund it or apply it against another balance owing.
An employer that discovers an over-deduction during the same year should generally correct its payroll records and reimburse the employee directly. However, where the overpayment remains on the T4 and has not been reimbursed, CRA credits the excess when the employee files the personal return.
The excess is not transferred to an RRSP, nor is it automatically carried forward against the employee's CPP obligation for the next calendar year. CPP contribution calculations operate on an annual basis.
Option A is also incorrect because repayment of the employee's own excessive CPP deduction is not a taxable employment benefit.
Accordingly, within the circumstances presented in the question, option D is the correct treatment.
FPII reference/topic: Retirement Planning - Canada Pension Plan; maximum pensionable earnings; employee contributions; CPP overpayments and refunds.
NEW QUESTION # 42
Nelson Smith has hired Jackie Fraser to be his financial advisor. Jackie works for FP Inc. On Nelson's behalf, Jackie has placed an order for units of the QBR Balanced Fund from QBR Investments Inc., a subsidiary of the QBR Insurance Company. Who is the principal and third-party for this transaction?
Answer: D
Explanation:
In an agency relationship, the principal is the person on whose behalf the agent acts. The agent is the person authorized to act for the principal, while a third party is the external person or organization with whom the agent deals in carrying out that authority.
Here, Nelson Smith retained Jackie Fraser as his financial advisor. Jackie places the investment order on Nelson's behalf. Nelson is therefore the principal, and Jackie is acting as the agent in the transaction.
The transaction is placed with QBR Investments Inc., the entity offering the QBR Balanced Fund. QBR Investments is therefore the relevant third party with whom the agent deals for the principal.
Jackie's employer, FP Inc., does not replace Nelson as the principal in the client-advisor agency relationship described by the question. Similarly, QBR Insurance Company's status as the parent of QBR Investments does not make it the relevant third party because the actual fund transaction is with QBR Investments.
The legal distinction matters because an agent owes obligations to the principal and must act within the authority conferred by that principal.
FPII reference/topic: Financial Planning Practice - agency law; principal-agent relationships; authority; dealings with third parties.
NEW QUESTION # 43
What do most successful cases of unequal division of property involve?
Answer: B
Explanation:
Short marriages provide the strongest basis among the listed alternatives for an unequal division of matrimonial property. Under Ontario's equalization regime, the normal rule is that the spouse with the lower net family property is entitled to one-half of the difference between the spouses' net family properties.
A court can depart from equal division only where ordinary equalization would be unconscionable, a deliberately demanding legal threshold. One factor specifically identified in the Family Law Act is where the amount a spouse would otherwise receive is disproportionately large in relation to a period of cohabitation of less than five years.
That provision explains why short marriages are particularly significant in unequal-division cases. A spouse may, for example, experience a major increase in net family property during a very brief marriage, producing an equalization entitlement disproportionate to the duration of the relationship.
Income disparity alone is not generally a basis for unequal property division; it is more directly relevant to support. Domestic abuse can have legal significance, but it does not automatically change equalization unless the statutory property criteria are established. Joint ventures concern a different property or unjust-enrichment analysis.
FPII reference/topic: Family Law - equalization of net family property; unequal division; unconscionability; short marriages.
NEW QUESTION # 44
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