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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Estate Planning | 10% | - Estate Distribution and Tax Planning
|
| Topic 2: Investment and Tax Planning | 10% | - Investment Management
|
| Topic 3: Financial Planning for Small Business | 15% | - Small Business Financial Planning
|
| Topic 4: Savings Planning and Debt Management | 10% | - Net Worth and Cash Management Planning
|
| Topic 5: Insurance Planning | 10% | - General Insurance
|
| Topic 6: Retirement Planning | 20% | - Registered Pension and Retirement Income Plans
|
| Topic 7: Financial Planning Practice | 10% | - The Personal Financial Planning Process in Canada
|
| Topic 8: Family Law | 15% | - Financial and Property Issues
|
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NEW QUESTION # 52
What is the tax treatment on disability assistance payments for Registered Disability Savings Plans?
Answer: D
Explanation:
A Disability Assistance Payment from an RDSP contains both potentially taxable and non-taxable components.
The beneficiary's own private contributions were made with after-tax funds and are therefore not taxed again when returned. However, the portion of a payment representing Canada Disability Savings Grants, Canada Disability Savings Bonds, investment income earned within the plan, and specified rollover proceeds is included in the beneficiary's income when paid from the RDSP. CRA confirms this treatment expressly.
Option A is therefore the best available answer. Its reference to the "grant and income earned portions" captures the central distinction tested by the question, although the complete current rule also encompasses bonds and taxable rollover amounts.
Option B is incorrect because the entire withdrawal is not taxable; the portion attributable to private contributions is returned tax-free. Option C incorrectly treats all withdrawals as tax-free. Option D is also inaccurate as a general tax characterization. CRA specifically provides that the taxable RDSP portion is excluded from income when calculating several federal income-tested benefits and credits.
The RDSP therefore combines non-deductible contributions with tax-deferred investment growth and government assistance, with taxable amounts recognized when qualifying payments are made.
FPII reference/topic: Investment and Tax Planning - RDSPs; Disability Assistance Payments; grants, bonds and investment income; taxation of withdrawals.
NEW QUESTION # 53
What factors are used for calculating contributions to an individual pension plan?
Answer: B
Explanation:
An Individual Pension Plan (IPP) is normally structured as a defined benefit registered pension plan. Unlike an RRSP, where contribution room is determined primarily by a statutory percentage of earned income and applicable pension adjustments, the required funding of an IPP is actuarially determined.
The contribution required to support the promised pension depends materially on the member's age, pensionable earnings history, and the pension benefit formula. Older members generally require larger contributions because fewer years remain to fund the promised retirement benefit. Earnings history is relevant because defined benefits are commonly based on final-average or best-average earnings, while the benefit formula determines the pension entitlement that must ultimately be funded.
CRA describes defined benefit arrangements as plans in which the retirement pension is determined by a prescribed benefit formula, including formulas based on earnings and pensionable service. The associated pension calculations therefore reflect the member's pensionable earnings and the benefit structure.
Business profitability may affect the employer's practical ability to fund the plan, but it is not itself one of the actuarial determinants of the required pension contribution.
FPII reference/topic: Retirement Planning - Individual Pension Plans; defined benefit pensions; actuarial funding; pensionable earnings and benefit formulas.
NEW QUESTION # 54
From the perspective of self-employment, how are personal benefits treated for the purposes of calculating child support?
Answer: C
Explanation:
Personal benefits paid through a self-employed individual's business are generally added back to income and grossed up when determining appropriate income for child-support purposes.
The purpose of the child-support income calculation is to identify the parent's true financial capacity rather than simply accept taxable income reported under the Income Tax Act. A business may legitimately deduct an expenditure for tax purposes while all or part of that expenditure provides a personal benefit to the owner- for example, personal vehicle use, housing expenses, meals, utilities, or other personal consumption paid by the business.
Where such expenditures effectively replace expenses the parent otherwise would have paid personally from after-tax income, the benefit is added back. A gross-up may then be necessary to express that tax-free or after- tax economic benefit as an equivalent amount of pre-tax income. Canadian child-support jurisprudence has repeatedly applied this approach to personal benefits funded through a business.
This prevents a self-employed support payor from artificially depressing guideline income by routing personal consumption through deductible business expenses.
Therefore, option D correctly reflects both required adjustments: add the personal benefit to income and gross it up where appropriate.
FPII reference/topic: Family Law - Federal Child Support Guidelines; determination of self-employment income; personal benefits; imputed income.
NEW QUESTION # 55
What is a disadvantage of a corporation?
Answer: B
Explanation:
A significant estate-planning disadvantage of private corporate ownership is the potential for double taxation at the death of a shareholder.
At death, a shareholder is generally deemed to dispose of capital property, including shares of a private corporation, at fair market value immediately before death unless an available rollover applies. This can produce a capital gain on the deceased shareholder's terminal return.
A second layer of tax can subsequently arise when corporate assets are sold and the corporation's after-tax value is distributed to the estate or beneficiaries. Without appropriate post-mortem planning, tax may therefore arise once at the shareholder level on the deemed disposition of the shares and again at the corporate
/shareholder level as corporate value is extracted.
Option B is incorrect because one of the principal advantages of incorporation is limited liability, subject to guarantees, statutory liabilities, and exceptional circumstances. Option C is also incorrect because corporations are not categorically excluded from government assistance programs. Option D does not describe the principal disadvantage being tested and overstates the operation of attribution rules.
Post-mortem strategies such as loss carryback or pipeline planning may be considered to mitigate the potential double-tax exposure, depending on circumstances.
FPII reference/topic: Financial Planning for Small Business - incorporation; shareholder death; deemed disposition; post-mortem taxation and double-tax exposure.
NEW QUESTION # 56
Tara bought an insurance policy on Wednesday, June 6. What date would her rescission right end?
Answer: C
Explanation:
Life insurance policies generally provide a 10-day rescission or "free-look" period after the policy is received.
During this period, the policyholder can review the contract and cancel it without the ordinary consequences associated with surrendering an established policy.
Canadian consumer guidance describes the standard life-insurance free-look period as usually 10 days, while some policies provide a longer period. Ontario's financial-services regulator similarly states that life-insurance consumers must generally be given at least 10 days, and in certain cases 20 days, to reconsider the purchase.
Using the 10-day period specified by the examination framework and counting ten days after Wednesday, June 6, the period ends on Saturday, June 16.
The rescission right differs from ordinary cancellation or surrender after the free-look period. During rescission, the policyholder is normally entitled to have the contract unwound and premiums refunded according to the governing policy and applicable law.
Therefore, of the dates presented, Saturday, June 16 is correct.
FPII reference/topic: Insurance Planning - insurance contracts; policy delivery; rescission rights; free-look period; consumer protection.
NEW QUESTION # 57
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