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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Financial Planning for Small Business | 15% | - Small Business Financial Planning
|
| Topic 2: Family Law | 15% | - Financial and Property Issues
|
| Topic 3: Savings Planning and Debt Management | 10% | - Debt Planning and Mortgages
|
| Topic 4: Financial Planning Practice | 10% | - The Personal Financial Planning Process in Canada
|
| Topic 5: Insurance Planning | 10% | - General Insurance
|
| Topic 6: Estate Planning | 10% | - Trusts and Powers of Attorney
|
| Topic 7: Investment and Tax Planning | 10% | - Tax Planning Strategies
|
| Topic 8: Retirement Planning | 20% | - Retirement Income Needs Analysis
|
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NEW QUESTION # 14
Diana has begun receiving spousal support payments and child support payments from her ex-husband Bruce.
What tax planning issue should be of greatest concern to Diana?
Answer: C
Explanation:
Diana's principal tax concern is the tax payable on qualifying spousal support payments that she receives.
Under Canadian income-tax rules, periodic spousal support paid pursuant to a qualifying court order or written agreement is generally deductible by the payer and taxable to the recipient. CRA therefore requires a recipient to include the taxable portion of qualifying spousal support in income.
Child support is treated differently. Under the current regime applicable to post-April 1997 arrangements, child support is generally not deductible by the payer and not taxable to the recipient. CRA expressly distinguishes the two forms of support on this basis.
Because Diana is receiving both forms of support, she should distinguish them carefully and plan for the income-tax liability associated with taxable spousal support. Depending on the amount received and the withholding arrangements, she may need to retain sufficient cash to satisfy tax instalments or the balance due when filing her tax return.
Option A concerns Bruce's potential deduction rather than Diana's tax liability. Options B and C incorrectly treat ordinary child-support payments as deductible or taxable.
FPII reference/topic: Family Law - taxation of support; spousal support; child support; payer deductions and recipient income inclusion.
NEW QUESTION # 15
Sarah would like to add another stock holding to her portfolio. She is researching the financial condition of different companies and trying to determine their potential for future growth. What type of approach is Sarah taking when reviewing these companies?
Answer: B
Explanation:
Sarah is applying fundamental analysis because she is evaluating companies' financial condition and their prospective ability to grow.
Fundamental analysis examines the underlying economic characteristics of an issuer. Typical factors include revenue growth, earnings, cash flow, profitability ratios, debt levels, competitive position, management quality, industry conditions, economic outlook, and valuation measures. The purpose is to estimate the company's intrinsic value and compare it with the current market price.
Technical analysis takes a fundamentally different approach. It studies market-generated information such as historical prices, volume, chart formations, momentum, and trading patterns rather than concentrating principally on a company's underlying financial performance.
A passive investment strategy generally seeks to replicate a market index or predetermined asset class rather than select individual companies through detailed security analysis. Tactical asset allocation involves actively changing the portfolio's allocation among broad asset classes based on shorter-term market expectations.
Neither describes Sarah's company-by-company investigation.
Because Sarah is explicitly researching companies' financial condition and future growth potential, her analysis concerns the economic fundamentals that support future earnings and valuation.
FPII reference/topic: Investment and Tax Planning - security analysis; fundamental analysis; financial statements; growth prospects and intrinsic value.
NEW QUESTION # 16
An employee chose a particular contractor to repair their roof based on an employer's recommendation. The employer hinted that the employee may receive a higher future bonus if they hire the recommended contractor. How would you describe the employer's actions?
Answer: D
Explanation:
The employer's conduct is best characterized as undue influence. The employer occupies a position of power relative to the employee and is using that relationship to influence the employee's independent decision about entering into a contract with a particular contractor.
Undue influence focuses on whether one party's free and informed consent has been improperly affected through a relationship involving dominance, dependency, confidence, or significant influence. The Supreme Court of Canada has described the analysis as beginning with the nature of the relationship and whether it creates the potential for one person to dominate another's decision-making. The Court has also expressly recognized that an employer may occupy a position of power and influence relative to an employee depending on the circumstances.
The promise or suggestion of a larger future bonus creates pressure through the employment relationship but does not amount to classic duress, which ordinarily involves coercive threats or illegitimate pressure depriving a person of meaningful choice.
There is also no false factual representation concerning the contractor, so misrepresentation does not apply.
Nor does recommending a contractor make the object of the roofing contract illegal.
FPII reference/topic: Financial Planning Practice - contract validity; undue influence; duress; misrepresentation; relationships of power and dependency.
NEW QUESTION # 17
What is the maximum of the payor spouse's net income that may be deducted to fulfil child support obligations?
Answer: D
Explanation:
The applicable maximum is 50% of the payor's net amount under the ordinary support-deduction framework.
Ontario's Family Responsibility and Support Arrears Enforcement Act provides that the total amount deducted by an income source and remitted under a support deduction order generally must not exceed 50% of the net amount owed by the income source to the payor.
The "net amount" concept is important because the statutory limit does not simply mean 50% of gross salary.
Required statutory deductions are taken into account in determining the amount available for enforcement.
The support obligation itself continues to exist even where enforcement through a particular income source is limited. Arrears can accumulate and other enforcement measures may become available. There are also specific statutory exceptions applying to certain lump-sum amounts and enforcement circumstances, so the
50% figure should be understood as the standard deduction limit tested by the question rather than an absolute limit in every possible enforcement proceeding.
Accordingly, among the four alternatives, 50% correctly represents the general maximum deduction against the payor's net income source for support enforcement.
FPII reference/topic: Family Law - child-support enforcement; support deduction orders; garnishment; limits on deductions from income.
NEW QUESTION # 18
Roy gifted his nephew Charles, age 16, shares for his birthday. The managed portfolio will generate both dividends, and capital gains and losses. What will be Roy's future tax implications, with respect to this transfer, until Charles reaches the age of majority?
Answer: A
NEW QUESTION # 19
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