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| Section | Weight | Objectives |
|---|---|---|
| Savings Planning and Debt Management | 10% | - Net Worth and Cash Management Planning
|
| Financial Planning for Small Business | 15% | - Business Law and Agency Relationships
|
| Retirement Planning | 20% | - Registered Pension and Retirement Income Plans
|
| Financial Planning Practice | 10% | - The Personal Financial Planning Process in Canada
|
| Insurance Planning | 10% | - Disability and Health Insurance
|
| Family Law | 15% | - Financial and Property Issues
|
| Investment and Tax Planning | 10% | - Tax Planning Strategies
|
| Estate Planning | 10% | - Estate Distribution and Tax Planning
|
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NEW QUESTION # 54
In order to complete the analysis and development of a financial plan, an advisor receives a client's investment statements and tax returns. From the perspective of principle six (code of ethics), what action should the advisor take in order to maintain a relationship of trust and confidence?
Answer: D
Explanation:
Principle 6 of the FP Canada Code of Ethics is Confidentiality. It requires client information to be secured, protected, and maintained so that access is limited to authorized persons.
FP Canada's Standards state directly that client information must be handled in a manner that permits access only to those who are authorized, and that the relationship of trust and confidence depends on personal and confidential information being collected, used, and disclosed only as authorized.
Investment statements and tax returns contain highly sensitive financial and personal information. The advisor must therefore maintain appropriate physical and electronic safeguards, restrict internal access to personnel who require the information for authorized purposes, and avoid disclosure to external parties unless the client has authorized it or disclosure is otherwise legally permitted or required.
Option B involves professional referrals and raises separate considerations concerning competence, scope, and client consent. Option C is more closely related to placing the client's interests first. Option D relates to analysis and diligence but does not specifically address the ethical requirement described by Principle 6.
Accordingly, securing the documents so that only authorized personnel can access them directly satisfies the confidentiality obligation.
FPII reference/topic: Financial Planning Practice - Code of Ethics; Principle 6 Confidentiality; protection and authorized use of client information.
NEW QUESTION # 55
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: D
Explanation:
Because Charles is a related minor, the attribution rules apply to income generated from property transferred to him by Roy. Dividend income earned on the gifted shares is therefore attributed back to Roy and included in Roy's taxable income while Charles remains a minor.
The important distinction is between income from property and capital gains or losses. CRA's interpretation of subsection 74.1(2) confirms that income or loss from transferred property is generally attributed to the transferor where property is transferred to a related minor. This captures investment income such as dividends and interest.
Capital gains and capital losses receive different treatment. The same CRA guidance states that subsection
74.1(2) does not ordinarily attribute a subsequent taxable capital gain or allowable capital loss arising from disposition of transferred property back to the transferor. Those gains or losses generally remain with the minor, subject to specialized exceptions not indicated in this scenario.
Therefore, an equity portfolio producing capital appreciation may have different attribution consequences from one producing substantial current dividend or interest income.
FPII reference/topic: Investment and Tax Planning - attribution rules; transfers to related minors; property income versus capital gains.
NEW QUESTION # 56
What is the name of the individual who is responsible for making decisions based on a power of attorney?
Answer: A
Explanation:
The person who receives authority under a power of attorney is the donee, commonly referred to simply as the attorney. Ontario's Powers of Attorney Act expressly defines an attorney as the "donee of a power of attorney." The distinction between the parties is important. The donor is the individual granting the authority. The donee or attorney is the person authorized to act on the donor's behalf within the scope established by the power of attorney. Depending on the document and applicable legislation, the authority may relate to property, financial affairs, or personal-care decisions.
A settlor is associated with trust law. The settlor establishes a trust and transfers property into it for administration by a trustee. A testator is an individual who makes a will. Neither term identifies the person exercising authority under a power of attorney.
The donee's authority is fiduciary in character. The attorney must exercise the granted powers for the benefit of the donor and within the restrictions imposed by the document and applicable legislation.
FPII reference/topic: Estate Planning - powers of attorney; donor and donee; substitute decision-making; fiduciary responsibilities.
NEW QUESTION # 57
When a Canadian works abroad for a Canadian employer, what proof must be provided to have that time qualify as residence in Canada for Old Age Security?
Answer: B
Explanation:
Option D directly reflects the Old Age Security residence rules applicable to qualifying employment outside Canada.
Service Canada states that time spent working outside Canada for a Canadian employer may count as Canadian residence where the individual returns to Canada within six months after the employment ends, or where the individual reaches age 65 while still working abroad and otherwise satisfies the applicable conditions. For an application relying on this provision, the individual is required to provide proof of the Canadian employment and proof of physical return to Canada, unless the age-65 exception applies.
The test is therefore not based simply on whether Canadian income tax was paid. Income-tax residency and OAS residence are related concepts in some circumstances but are not interchangeable. Paying Canadian tax alone does not establish the special residence credit for employment abroad.
Option A is incorrect because it states a one-year return period rather than six months and adds income-tax payment as the relevant proof. Options B and C are insufficient because they omit the specific employment and return evidence required.
FPII reference/topic: Retirement Planning - Old Age Security; Canadian residence; employment outside Canada; qualification for public pension benefits.
NEW QUESTION # 58
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: A
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 # 59
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