CIFP on the Web (TM) Program Review and...

CIFP on the Web® Program Review and Evaluation: Assessment 2

CIFP on the Web® Program Review and Evaluation

Assessment 2 1. Which of the following parties has a legal contract?

A. George, who offered to prepare an estate plan for an elderly friend for

$1. His elderly friend acknowledged acceptance by signing the letter of engagement.

B. Samantha, who offered to prepare a wealth accumulation plan for a

friend at no charge. Her friend acknowledged acceptance by signing the letter of engagement.

C. Rachel, who offered to prepare a retirement plan for a client for $250.

Her secretary typed the fee as $2.50 on the letter of engagement. The client acknowledged acceptance by signing the letter of engagement.

D. Marsha, who told her client she is a Certified Financial Planner® and would prepare a comprehensive financial plan for her for a fee of $1,500. Her client acknowledged acceptance by signing the letter of engagement. The client later discovered that Marsha only held a certificate in Personal Financial Planning.

2. Elaine is the beneficiary of an RESP, and she just received an educational assistance payment of $4,000. Prior to the payment, her RESP had accumulated investment income of $32,000 and a CESG account balance of $3,400. What will be her CESG balance after the EAP?

A. $2,948.02 B. $2,975.00 C. $3,015.82 D. $3,038.75

1 © 2010 Canadian Institute of Financial Planning


3. Dave is in a high marginal tax bracket and up until this year, he has always

claimed the full amount of the spousal or common-law partner tax credit. However, his wife, Tanya, recently inherited some money, which she invested; this year, she earned dividend income of $800 from a publicly-traded, taxable Canadian corporation. This is Tanya's only source of income. What statements are FALSE?'

1. If Tanya reports the dividend income on her tax return, she can claim the federal dividend tax credit. The value of the tax credit to Tanya will be $220.05.

2. Dave can report Tanya's dividend income on his tax return. He will also be able to claim the dividend tax credit.

3. If Tanya reports the dividend income on her tax return, Dave will not be able to claim the full amount of the spousal or common-law partner tax credit.

4. If Dave reports the dividend income on his tax return, he will still be able to claim the full amount of the spousal or common-law partner credit.

A. 1 and 2 B. 2 and 4 C. 1 and 3 D. 2 and 3

4. Betty's husband, Bill, died this year before his RRSP had matured. His RRSP contract named his estate as beneficiary, while his will stated that he wanted Betty to receive the RRSP. Betty and her lawyer jointly elected to treat the amount paid from Bill's RRSP to his estate as being paid from his RRSP to Betty. Betty just received the RRSP amount. All of the following statements are true, EXCEPT:

A. Betty can avoid paying tax on the amount received from Bill's RRSP by

using it to purchase an eligible annuity.

B. Betty can treat the amount received from Bill's RRSP as a refund of

premiums. C. Betty can avoid reporting the amount received on her income tax return.

D. Betty can transfer the amount of Bill's RRSP into an RRSP, RRIF or

annuity in her own name.

© 2010 Canadian Institute of Financial Planning 2


5. Georgette purchased a rental property eight years ago for $360,000 with

$290,000 attributed to the building and $70,000 to the land. She sold the property this year for $320,000, with $110,000 attributed to the land and $210,000 attributed to the building. Her UCC for the building was $248,000. Which of the following statements is TRUE?

A. Georgette has a capital gain of $40,000 and a recapture of $38,000. B. Georgette has a capital gain of $40,000 and a terminal loss of $38,000. C. Georgette has an allowable capital loss of $30,000. D. Georgette has a capital gain of $2,000.

6. Melanie recently severed ties with her financial planner, Jerry. He had a tendency to raise unreasonable expectations regarding mutual fund performance. Melanie would end up placing most of her money in these funds only to see their returns either drop significantly or perform poorly. Which principle of conduct has Jerry violated?

A. Confidentiality B. Diligence C. Objectivity D. Impartiality

7. Isabel prefers to purchase bonds that contain a sinking fund provision to protect her from any potential loss of her invested capital. She purchased a 20-year, $20,000 sinking fund bond with a 12% coupon, paid semi-annually, for $18,900. If the company calls the bond after 10 years, and the call penalty requires a payment of $30 per $1,000 of face value, what are the nominal and effective yields to call on this bond?

A. 12.77% and 13.18%, respectively B. 12.81% and 13.22%, respectively C. 13.01% and 13.43%, respectively D. 13.16% and 13.59%, respectively



8. Raymond works as an investment planner. A few of his clients need

assistance in preparing their income tax returns. Which of his following clients have correctly reported the amount of investment income earned for tax purposes?

1. Mujibar, who purchased a compound, Canada Savings Bond (CSB) on November 1st of last year, and who reported the interest earned on the bond from November 1st to December 31st of last year on his tax return for last year.

2. Sheila, who purchased a 60-day T-bill in December of last year, held it until maturity and will include the interest earned on the T-bill during December of last year, on her tax return for this year.

3. Luigi, who bought a US T-bill in January of last year, at an exchange rate of $0.78. The T-bill matured a year later when the exchange rate was $0.75 resulting in a $400 capital gain; Luigi did not report the gain for tax purposes.

4. Sara, who purchased a one-year GIC on March 1st of last year, and reported the interest income from March 1st of last year to February 28th of this year on her income tax return for this year.

A. 1 and 2 B. 2 and 3 C. 2 and 4 D. 4 only

9. Mr. Silwowitz went to the firm of Welsh and Associates to get his estate plan prepared. The sign on the door said "R. Welsh, CFP". The financial planner whom he saw was named Rosalie Welsh and he assumed she was a Certified Financial PlannerTM. He was not pleased with the final estate plan as it was presented to him. Some of the calculations contained errors and the assumptions were not realistic. He later learned that her father, Ronald Welsh was the CFPTM licensee, and that Rosalie only held a certificate in Financial Planning and had only six months of practical experience. Which of the following Principles of the Code of Ethics has Rosalie violated?

1. The Principle of Competence 2. The Principle of Diligence 3. The Principle of Fairness< Objectivity of Principle /> 4. The Principle of Objectivity

A. 1 only B. 1 and 2 C. 2 and 3 D. 3 and 4



10. Roland is a personal financial planner. He is caught stealing a candy bar from the local convenience store. His case makes the headlines of the local newspapers when it is discovered that he has huge debts in spite of his earning in excess of $80,000 per year. Which of the following principles did Roland violate?

A. The Principle of Diligence B. The Principle of Competence C. The Principle of Professionalism D. The Principle of Integrity

11. Maria is short-selling 100 shares at $13.75 a share. The required minimum balance is 150% of the short sale proceeds. She decides to close the short position when the share price drops to $11.25. Her before-tax rate of return, ignoring commissions, is:

A. 14.55% B. 22.22% C. 36.36% D. 81.82%

12. Jack is in a partnership with two other partners. He has decided to leave the partnership, but is unsure about the proper course of action. Which of the following statements about the disposition of Jack's interest in the partnership are TRUE?

1. Jack's partnership interest is considered to be his depreciable capital property.

2. Jack's capital gain or loss will be calculated as the proceeds of the disposition less his ACB and qualifying outlays and expenses.

3. When Jack disposes of his partnership interest, the other partners will be deemed to have disposed of their partnership interests, and will have no choice but to include any resulting taxable capital gains in their income.

4. Jack's ACB would have been increased by his share of partnership profits and decreased by any drawing he received from the business.




13. Gunner has decided to take a more aggressive approach to his wealth accumulation strategies. He would like to begin investing in common shares, instead of GICs and CSBs. Several financial analysts have told Gunner that the stock market is expected to yield a return of 8% over the next year. He agrees with their predictions and chooses a stock with a beta factor of 1.5. The current return on GICs is 4.5%. What is Gunner's required rate of return on this stock?

A. 5.25% B. 9.75% C. 10.25% D. 13.25%

14. Susan read several articles in the newspaper recently about the tax advantages of structuring a business as a corporation. Susan is wondering about incorporating her own business, Susco, and reinvesting the business income in a portfolio of investments. However, she found the articles to be very confusing and she is not sure if she has it all straight. Which of the following statements would be correct?

1. Susan could claim the small business deduction on the first $400,000 of the corporation's taxable business and investment income.

2. If Susco invests its after-tax profits in shares of other unconnected taxable Canadian corporations, any dividend income that Susco earns on those investments would not be subject to Part 1 tax, but it would be subject to Part IV tax.

3. Susco would receive a tax refund of $1 for every $3 of taxable dividends it paid to Susan, up to the amount in its RDTOH account.

4. If Susco earns interest income on its portfolio investments, it will be subject to a refundable Part 1 tax of 33.33%.

A. 2 and 3 only B. 1 and 2 only C. 3 and 4 D. 1, 2 and 3



15. Scott is the sole owner of Operco, a Canadian controlled private corporation

that manufactures optical lenses. He decided to create a holding company, Holdco, to hold his shares in Operco. He bought 50% of the non-voting common shares of Holdco, while his wife Allison bought 30% and each of their 4 children acquired 5% each. He then transferred his shares in Operco into Holdco in exchange for all of the preferred voting shares of the Holdco. All of the following statements are true, EXCEPT:

A. he can protect Operco's profits from the corporation's creditors by

paying dividends into the Holdco.

B. any dividends paid by Operco to Holdco will be subject to a refundable

Part IV tax. C. Scott has effected a partial estate freeze.

D. Scott has successfully arranged a way for Allison to benefit financially

from Operco's success without giving her any control over the management of the business.

16. Amal will turn 65 years of age this year. He first moved to Canada in 1965, and he remained in Canada for 7 years before moving to Spain. He returned to Canada in 1986, and has lived here ever since. Amal may qualify for any of the following, EXCEPT:

1. a full OAS pension under the old rules 2. a partial OAS pension under the old rules 3. a partial OAS pension under the new rules 4. a pension under either the new rules or the old rules

A. 1 only B. 2 only C. 3 and 4 D. 4 only



17. Annie, Betty, Carly and Dolly each borrowed $50,000 from their employer at

3% compounded annually. They have each agreed to repay the loan in full at the end of one year. During that time, the prescribed rate for each quarter was 5%, 5.5%, 5% and 6%, respectively. All of the following statements are true, EXCEPT:

1. Annie, who used the money to purchase a new house, has a taxable benefit of $1,000.

2. Betty, who used the money to purchase shares in her husband's new corporation, can deduct a total of $2,500 from her income.

3. Carly, who used the money to purchase a rental property, has a taxable benefit of $1,187.50.

4. Dolly, who used the money to purchase a new car, has a taxable benefit of $1,187.50.

A. 1 and 2 B. 2 only C. 3 only D. 3 and 4

18. Stuart is a commissioned salesman for a distributor of medical supplies and he is required by his employer to work out of his home as evidenced by a Declaration of Conditions of Employment. Stuart earned $34,600 in commission income last year. Stuart owns his own home and last year he made total mortgage payments of $22,600 of which $14,500 was attributed to interest. Stuart has converted one of the spare bedrooms into his office and it is used for this purpose exclusively, even though Stuart only works 5 days per week. Stuart's house has a total of 10 rooms. The undepreciated capital cost of the house at the beginning of the year was $240,000 and it falls into a CCA class with a prescribed rate of 4%. Stuart also paid the following amounts last year: Property Taxes $3,800 Utilities $2,900 Insurance $780 Cleaning and Maintenance $600 Total $8,080 How much can Stuart deduct as a workspace in home expense?

A. $350 B. $808 C. $2,258 D. $3,218



19. Steve likes to help out new businesses in his community that catch his interest by providing them with financing when they are unable to obtain traditional bank financing. On April 1st of last year, he entered into an investment contract with a startup company, Windfall Inc. According to the terms of the contract, Steve loaned Windfall $100,000, on the condition that Windfall pay him interest of 11% semi-annually, with the full amount of the principal to be repaid at the end of 5 years. Windfall made the required interest payments on September 30th of last year and March 31st of this year. However, by September 30th of this year, the company was strapped for cash and Steve agreed to accept a promissory note for the interest in lieu of the cash payment. What statements is true?

A. Steve had taxable interest income of $5,500 last year and $5,500 this

year.

B. Steve had taxable interest income of $8,250 last year and $11,000 this

year.

C. Steve had taxable interest income of $5,500 last year and $11,450 this

year.

D. Steve had taxable interest income of $5,500 last year and $11,000 this

year.

20. Kiesha is a commission-based Certified Financial Planner™. She also has her mutual fund license. Last year, she purchased $32,000 in the Albatross Growth Fund for Clive upon his request. On another occasion, she prepared an insurance needs analysis for Chrissy who subsequently implemented the recommendations. As a result of these actions, Kiesha has established a fiduciary relationship with:

A. only Clive B. only Chrissy C. Chrissy and Clive D. Neither client



21. Hannah held 8,000 of the 2,200,000 outstanding shares of Goodnews Corp.,

a taxable Canadian corporation, when it decided to issue a stock dividend and capitalize $1,200,000 of its retained earnings. By how much will Hannah's taxable income increase?

A. $6,328 B. $4,364 C. $5,455 D. $18,333

22. Felicity has been making contributions to an RESP on behalf of her son, Jake, for the last 6 years. Over this period of time, she has contributed a total of $18,000, and the accumulated income amounts to $4,500. Felicity died last year, and through her will, she left her estate to her husband, Max. Which of the following statements is TRUE?

A. Felicity's contributions must be used to fund Jake's education. B. Max can withdraw $18,000 from the RESP tax free. C. Felicity's contributions will be forfeited to the RESP promoter. D. All of the RESP funds will pass to her son, Jake in trust.

23. Greta owns and operates a summer camp and she owns a number of canoes, rowboats and paddle boats that fall into Class 7, which has a maximum CCA rate of 15%. Her UCC at the beginning of this year was $6,400. She sold some old canoes for a total of $350 and bought two new paddleboats for $500 each and a new kayak for $600. What is the maximum amount of CCA that Greta can claim this year?

A. $573.75 B. $730.00 C. $1,035.00 D. $1,053.75



24. Shayan owns and operates a business that roasts and distributes a line of

specialty coffees to both wholesale and retail customers across Canada. At the beginning of his fiscal year, he had a balance of $34,800 in his cumulative eligible capital account, and had deducted a total of $3,500 from his EC pool. During the year, he purchased a customer list at a cost of $4,300. He also sold an unlimited license to use his patented roasting process for $60,000. How much must Shayan report as business income as a result of his purchase and sale of eligible capital properties?

A. $2,317 B. $3,500 C. $5,817 D. $6,975

25. Anthony has spent the last 30 years running a successful family restaurant, Tony's Place, as a sole proprietor. Anthony is ready to retire and he just sold the business, including the building and all the fixtures and equipment, for $450,000. According to his financial statements, the fair market value of the building, fixtures and equipment was $380,000 at the time of the sale. At the beginning of the year, Anthony had a balance of $4,200 in his cumulative eligible capital account. Over his 30 years of business, Anthony had deducted a total of $16,740 from his business income in respect of eligible capital expenditures. All of the following statements are true, EXCEPT:

1. Anthony has disposed of goodwill for $70,000. 2. Anthony must add $52,500 to his cumulative eligible capital account. 3. Anthony has business income of $37,780 as a result of the disposition

of eligible capital property. 4. Anthony has a capital gain of $31,560 as a result of the disposition of

eligible capital property.

A. 1 and 4 B. 2 and 3 C. 2 and 4 D. 3 only



26. Mr. Steinburg is approaching retirement age. He has one child, who is an

adult and lives in Australia. He asks his financial planner, Robyn, to help him sell his business. Robyn assesses the value of the business. She brings one offer to Mr. Steinburg which is slightly below the assessed fair market value. Mr. Steinburg accepts the offer and the business is sold. He discovers later that the offer and purchase were made by Robyn's cousin and that the sale of the business was not widely advertised. Which of the following statements is TRUE?

A. Robyn has violated the Principle of Diligence. B. Robyn has violated the Principle of Integrity. C. Robyn has violated the Principle of Competence. D. Robyn has violated the Principle of Confidentiality.

27. Gail purchased a cottage from her sister in 1995 for $186,000, which included $60,000 for the land and $126,000 for the building. At the time of the purchase, Gail had the property appraised at $200,000, with $65,000 attributed to the land and $135,000 to the building, and she paid an appraisal fee of $300. To close the sale, she also paid legal fees of $1,200. Unfortunately, the building was completely destroyed by fire. Gail's insurance company covered the loss and provided her with a cheque for $135,000. Gail decided not to rebuild the cottage and sold the property for $80,000. All of the following statements are true, EXCEPT:

1. Gail's adjusted cost base is $186,000. 2. Gail's adjusted cost base is $187,500. 3. Gail has deemed proceeds of $135,000 with respect to the building. 4. Gail's total proceeds from the disposition are $215,000.

A. 1 only B. 1 and 4 C. 2 and 3 D. 4 only



28. Bernard makes a written disclosure to his client indicating that he works on

a commission-only basis. Bernard also states how financial companies compensate him for using their financial products. Bernard is adhering to:

A. The Principle of Competence B. The Principle of Fairness C. The Principle of Integrity D. The Principle of Professionalism

29. Jerome was the sole shareholder of a very successful operating company. He originally started the company with savings of $20,000 and today it is worth $840,000. Jerome is getting ready to retire. He wants to eventually pass the business on to his children upon his death. In the meantime, he wants to continue to control the business and to receive income from it. He is also worried that if the business continues to appreciate in value, his estate will incur a significant tax bill upon his death. This could force liquidation of the business assets, such that they could not pass to the children.

His financial advisor suggested he implement an estate freeze by transferring the assets to a holding company in exchange for preferred shares and a promissory note for $400,000, but Jerome has no idea what this means. If Jerome decides to follow this strategy, all of the following statements are true, EXCEPT:

A. Jerome could transfer his shares to the holding company without

realizing a capital gain.

B. To avoid realizing a capital gain, Jerome must take back a promissory

note from the holding company.

C. If Jerome takes back a promissory note for $400,000 from the holding

company, he must report deemed proceeds of at least $400,000. D. Jerome could elect a transfer price of $770,000.



30. Marta's investment income has been less than her investment expenses and

she has a cumulative net investment loss (CNIL) of $47,700. Marta also sold her shares in a qualifying small business corporation for $300,000. She had acquired the shares for $50,000. She has never made use of the lifetime capital gains exemption. What amount can Marta claim as a capital gains deduction to offset her taxable capital gain?

A. $77,300. B. $101,150. C. $125,000. D. $151,725.

31. Stella works as a commission-based financial planner. She provides each client with a list of the mutual fund companies that she represents plus the commission rates that she receives from each fund. She makes every effort to ensure that the funds recommended are based on the client's individual financial needs and not on the amount of compensation she receives from a particular fund. Stella is acting in accordance with the Principle of:

A. Competence B. Confidentiality C. Objectivity D. Diligence

32. Ned purchased shares in Americorp for $12,000 US at a time when the exchange rate was 0.74. He later sold the shares for $18,000 US at a time when the exchange rate was 0.68. What is Ned's total taxable capital gain?

A. $4,882.19 B. $4,927.19 C. $5,027.19 D. $5,127.19



33. Geraldine's neighbour burned leaves in the backyard close to Geraldine's

wooden garden shed. The shed caught fire and burnt to the ground causing $2,000 in damages to the shed and the tools inside. Geraldine placed a claim with her insurance company. Her insurance company exercised its rights under the principle of subrogation. How was the claim settled?

A. Geraldine received no compensation and had to sue her neighbour

personally.

B. Geraldine's insurer paid her compensation and then the insurer sued her

neighbour for reimbursement. C. Geraldine's insurer paid her compensation and retained the loss.

D. Geraldine had to obtain compensation from her neighbour's insurance

company.

34. Shirley currently has 1,000 shares of Oldcorp. The shares were valued at $7.10 per share on V-Day, and currently have a FMV of $56 per share. She has been buying and selling this stock since 1960, as follows:

In 1960, she purchased 200 shares at $4 per share. In 1963, she purchased 400 shares at $6.50 per share. In 1965, she sold 300 shares at $8 per share. In 1969, she purchased 200 shares at $10 per share. In 1975, she purchased 500 shares at $14 per share.

Since her last purchase, Shirley has held onto the shares, but now she is thinking about selling 600 shares today. If she does, what will be the amount of her capital gain?

A. $27,450 B. $27,600 C. $28,250 D. $28,950

35. Meredith earns $25,000 while her husband, Rhys, earns $45,000. Both fulfill the requirements for OAS benefits. If the age amount is $5,276, the income threshold for the age amount is $31,524 and the OAS clawback threshold is $64,718 what statement is true?

A. Meredith and Rhys will both receive the full age credit and OAS benefits. B. Meredith will receive both the age credit and OAS benefits. C. Rhys is subject to the OAS clawback but will receive the age credit. D. Rhys will not receive either the age credit or OAS benefits.



36. Simon is a financial planner and he often advises those of his clients who are in the highest marginal tax bracket to ask their employers for non-taxable benefits, instead of more taxable income, when it comes time to negotiate their compensation. All of the following individuals have received a non-taxable benefit, EXCEPT:

A. Amy, whose employer, a large public accounting firm, reimbursed her

for the dues that she pays to maintain her CA designation.

B. Beverly, whose employer pays for the Wheel-transit service that Beverly

uses to get to work because she is confined to a wheelchair.

C. Casper, whose employer reimbursed him for the cost of house hunting

trips when they transferred him from the head office in Toronto to the district office in Regina.

D. Darryl, whose employer allows him to use the new corporate limo for personal use as long as he pays the employer $0.41 for each personal kilometre driven. Darryl used the vehicle to transport himself and his family 80 kilometres to and from his son's wedding.

37. Theo wants to establish an RESP on behalf of his infant son, Jordan, but he is confused about the various rules and limits. Theo has all of the concepts correct, EXCEPT:

A. Contributions to all RESPs on Jordan's behalf are subject to a lifetime

limit of $50,000.

B. Theo is only permitted to make contributions of up to $4,000 per year to

Jordan's RESP.

C. If Theo establishes the RESP on Jordan's first birthday, which is on

September 1, 2005, it would have to terminate by December 31, 2030.

D. If Theo makes his first RESP contribution on September 1, 2005, he can

continue to make contributions up until the end of 2026.

38. Reese had met the vesting and locking-in requirements of his employer's registered pension plan when his employment was terminated. The plan is governed by the federal PBSA. His new employer has an RPP. Reese can do any of the following, EXCEPT:

A. rollover his vested benefits into his new employer's RPP B. transfer the vested benefits into a locked-in retirement account C. leave the funds in the pension plan and accept a deferred pension D. receive a cash refund of his own contributions, plus interest



39. Karl and Vivienne have been married for 15 years. However during that time Karl had many mistresses. A year ago, Karl and Vivienne separated and anticipate their divorce to be finalized some time this year. Over the last few years, Karl made the following contributions to a spousal RRSP for Vivienne: $2,000 this year, $5,000 last year, $4,000 2 years ago, and $4,000 3 years ago. Vivienne also has a personal RRSP worth $6,000. Vivienne wants to make a withdrawal of $15,000 from her RRSPs and wants to pay the least amount of tax as possible. What option would best suit Vivienne?

A. She should withdraw the entire $15,000 from her spousal RRSP because

it will all be taxable to Karl.

B. No matter how she divides the withdrawals between her RRSPs, the

entire amount will be included in Vivienne's income for this year.

C. She should withdraw $13,000 from her spousal RRSP and $2,000 from

her personal RRSP to minimize her taxes.

D. She should withdraw $11,000 from her spousal RRSP and $4,000 from

her personal RRSP to minimize her taxes.

40. Steve and Barney are the only two shareholders of Near North Products Inc., a private Canadian corporation. Steve owns 49% of the shares. Steve is a resident of Canada, and Barney lives in the United States and is not a Canadian resident. The corporation has $60,000 in taxable business income, and Steve and Barney are considering the possibility of paying the after-tax amount out as dividends. They could also pay the amount out as bonuses. Steve's income is in a 29% federal tax bracket, and a 19.7% provincial tax bracket. He lives in a province with a provincial dividend tax credit of 6.60%. Ignoring surtaxes, what strategy would likely benefit Steve the MOST?

A. It does not matter because he would have the same amount left after-

tax either way. B. He should take the bonus because he will have more left after-tax. C. He should take the dividend because he will have more left after-tax.

D. He should take the dividend because it gives the opportunity to make

use of the federal dividend tax credit.



41. Ahmed and Samira, both aged 40, are planning their retirement at age 65.

One of their goals is to ensure that Samira is able to maintain her standard of living if she outlives Ahmed by seven years as predicted based upon life expectancy tables. Of the following annuities purchased by Ahmed and naming Ahmed as the annuitant, which one will BEST help Ahmed and Samira address their concern?

A. a term-certain annuity B. a pure deferred annuity C. a straight-life annuity D. a joint and last survivor annuity

42. Jim, Ted, Alice and Theresa were each given $50,000 from their spouses to invest. Jim, Ted and Alice used the money to form a software business in which Ted and Alice were general partners and Jim was a limited partner. The business made a net profit of $60,000, which was allocated, equally between the three partners. Ted and Jim withdrew their share of the profits, but Alice left hers in the partnership's bank account. Theresa used the money she borrowed from her husband to start a sole proprietorship, which made a net profit of $20,000. Everyone has taxable income of $20,000, EXCEPT:

A. only Jim and Alice B. only Jim C. only Ted and Theresa D. only Theresa

43. As a result of her RRSP contributions last year, Barb had an overcontribution of $5,000. Barb's new RRSP contribution room arising for this year was $6,000. What is the maximum amount that she can contribute to an RRSP this year without incurring a penalty?

A. $1,000 B. $3,000 C. $9,000 D. $0



44. Simon is a financial planner and he is constantly warning his clients to be

wary of the perks offered by their employers because in many cases they are considered to be taxable benefits. All of the following individuals are deemed to have received a taxable benefit, EXCEPT:

1. Karl, who along with all of the other employees, was able to purchase a skidoo at 5% below his employer's cost.

2. Taylor, whose employer gave her $12,000 to make up for the fact that she had to move as a result of a transfer and she realized a loss of $12,000 on the sale of her house.

3. Celine, who is a member of her employer's group life insurance plan and her employer pays the premiums on her behalf.

4. Marge, who is a member of her employer's group disability insurance plan and her employer pays the premiums on her behalf.

A. 1 and 3 B. 2 and 4 C. 3 only D. 4 only

45. Petra was born in June of last year. Earlier this year, her mother, Wilma, set up an RESP on Petra's behalf and made an initial contribution of $36,000. How much of a CESG will be credited to Petra's RESP later his year?

A. $500 B. $1,000 C. $7,200 D. $10,000



46. Stefan worked for Greenbank Financial Services for five years. He left his

vested pension benefits in the Greenbank plan when he changed employers. When he retired from his present employer at age 65, Greenbank gave him a choice between taking the vested pension benefits in the form of a lifetime annuity of $15,000 per year paid at the end of the year or a lump sum. Stefan wants to compare the value of the annuity to the lump sum. Assuming Stefan lives for 15 years and the rate of interest is 7%, what is the value of the annuity?

A. $136,619 B. $146,182 C. $240,750 D. $16,050

47. Marnie withdrew $12,000 from her RRSP under the Home Buyers' Plan three years ago, at which time she purchased and moved into a qualifying home. She sold the house six months later, and commenced making the minimum required repayments according to schedule. This year, she decided to build another home, and withdrew an additional $10,000 from her RRSP with the intention of designating it as a withdrawal under the HBP. Which of the following statements is TRUE?

A. Marnie must include the $10,000 from the RRSP withdrawal in her

income for this year.

B. Marnie must cancel her second participation in the plan by December 31

of next year, or else she will have to include the $10,000 from the RRSP withdrawal in her income for this year.

C. Marnie must include $2,000 from the RRSP withdrawal in her income for

this year.

D. If she has already repaid at least $2,000 to her RRSP in respect of her

first withdrawal under the HBP, Marnie will not have to include any amount from the RRSP withdrawal in income for this year.



48. Andres is a United States citizen, but he is also a resident of Canada. He is

employed full-time in Canada, but has investment assets and earns investment income in both countries. Which of the following statements is TRUE?

A. He must report his worldwide income for Canadian tax purposes.

B. He must report only his Canadian source income for Canadian tax

purposes.

C. He must report his worldwide income for Canadian tax purposes, but

may claim a deduction for any income earned outside of Canada.

D. Andres will not have to pay any tax in Canada because he is exempt

under the Canada-U.S. Tax Convention.

49. Rocco has an 8% semi-annual, $20,000 put bond with a remaining term to maturity of 18 years. The put bond includes an option for the bondholder to redeem the bond at par at the end of 3 years from now. Interest rates are currently 10%. The value of the bond is:

A. $18,984.86 B. $19,005.26 C. $20,000.00 D. $22,220.07

50. Two years ago, on August 31st,Wojtek purchased a strip bond at a bond equivalent yield of 7.12315%. The bond matures on June 30th in seven years at a value of $75,000. If Wojtek sells the bond on August 31st of this year for $51,035.49, how much of a capital gain will Wojtek realize?

A. $4,547 B. $6,073 C. $11,215 D. $13,762



51. Monet Capital is a small financial company that operates as a mutual fund

trust. The company offers three equity funds that have posted substantial returns over each of the last five years. As a mutual fund trust, Monet Capital would:

1. pay tax on income and capital gains before distributing it to unitholders

2. avoid taxation on any income or capital gains not distributed to unitholders by reinvesting this amount

3. deduct the total amount of distributions from the net asset value of the units

4. eliminate its income tax liability by flowing all realized income and capital gains through to unitholders

A. 1 only B. 2 and 3 C. 3 only D. 3 and 4

52. Elaine and Jerry married when they were both 66 years of age. Jerry already had a straight life annuity that provided him with a comfortable level of income, which he was quite willing to use to help support Elaine. However, he was concerned about what would happen to Elaine's income when he died. Together, they had another $150,000 available for investment. Which of the following options would provide Elaine with the most lasting, secure and lucrative income?

A. a joint and last survivor annuity B. a pure deferred term certain annuity set to commence in 5 years C. a survivorship annuity D. a short-term guaranteed investment certificate



53. Which of the following investors has purchased a stock with the most risk,

given the following annual ranges?

A. Claudine whose stock has a 52 week low of $10 and a 52 week high of

$40.

B. Benjamin whose stock has a 52 week low of $100 and a 52 week high of

$200.

C. Rupert whose stock has a 52 week low of $50 and a 52 week high of

$75.

D. Wilfred whose stock has a 52 week low of $15 and a 52 week high of

$45.

54. Michael wants to take out a loan from his bank. He checks with his insurance company to see if he can use the cash surrender value of his whole life insurance policy as collateral. Which of the following statements are TRUE?

1. Michael can use the cash surrender value in his policy as security for the loan.

2. Michael's bank may require Michael to transfer legal right to the benefits of the policy to the bank until the loan is repaid.

3. If Michael dies before the loan is fully repaid, the entire death benefit is paid to the bank to pay off the debt and any other named beneficiaries are not entitled to the excess of the proceeds over the balance of the loan.

4. The interest rate charged on the loan from the bank is set by the insurance company and is based on the prevailing rate comparable to what the insurance company is earning on its investments.




55. Marco is an active investor who often invests in tax shelters to defer income

tax on his business income. To compare the after-tax rate of return on alternative investments, Marco uses the net present value (NPV) and internal rate of return (IRR) methods. Investment A has a NPV of $0 and an IRR of 8%. Investment B has an NPV of $10,000 and an IRR of 12%. Investment C has an NPV of minus $2,000 and an IRR of 6%. If Marco's minimum acceptable return is 8%, which investment should he consider?

A. Investment A or B B. Investment B or C C. Investment B only D. Investment A only

56. Mike is the Chief Executive Officer of a large corporation. He and his vice president, James, are both attending an important conference overseas. Mike instructs James to take a different flight to that of Mike. Mike is reducing the risk of loss through:

A. safety B. pooling C. reduction D. avoidance

57. Roberto was working as a driver earning $4,000 after-tax per month before he suffered an accident, which left him partially disabled and unable to drive. He found a clerical position that paid $2,000 after-tax per month. He had a typical disability insurance contract, which specified a maximum monthly total disability payment of $3,500. How much did his insurance company pay him after the accident in monthly residual disability benefits?

A. $0 B. $1,750 C. $2,000 D. $4,000



58. During the first half of last year, the stock market experienced a strong

bullish trend that peaked in June of last year. During the third quarter of last year, the market dropped by a small amount (i.e. less than 15%). The market then rebounded from September of last year to March of this year and regained almost all of its losses from the third quarter of last year. From March of this year, the market experienced a steep decline that lasted for four months. According to the Dow Jones Theory, what does this mean?

A. The decline that began in the third quarter of last year signalled a true

reversal to a bear market.

B. The beginning of the upward trend that began in September of last year

signalled the start of a bull market.

C. If the market falls beyond the level of the loss recorded in the third

quarter of last year, this would signal the beginning of a true bear market.

D. The first secondary trend that began in September of last year signalled

the start of a true bull market.

59. Boris purchased an exempt whole life insurance policy ten years ago with a death benefit of $200,000. This year, he cancelled the policy and received $22,480 as the cash surrender value of the policy. Over the ten years that he held the policy, Boris paid a total of $62,400 in premiums, received $13,250 in dividend payments and had a net cost of pure insurance of $42,000. Which of the following statements are TRUE?

1. Boris has taxable income of $15,330 on the disposition of the policy. 2. The dividends Boris received during the term of the policy are treated

as investment income. 3. Boris has a taxable capital gain of $7,665 from the disposition of the

policy. 4. The adjusted cost base of the policy is $7,150.

A. 1 only B. 2 and 3 C. 3 and 4 D. 1 and 4



60. Zenia owns a 5-year, $30,000 callable bond that was issued by Factory

Textiles this year. She made the investment because there was an attractive, call penalty schedule attached to the bond. Zenia felt this would provide her with adequate protection against any financial difficulties the company may encounter. The call penalty schedule is as follows:

Years prior to maturity

Redemption amount as percentage of face value

5 102.8 4 102.3 3 101.6 2 101.1 1 100.7 0 100.0

All of the following statements about Zenia's bond are true, EXCEPT:

1. If Factory calls the bond with 3 years remaining, Zenia would receive a lump-sum payment of $30,330.

2. If Zenia does not redeem her bond after it is called, she will continue to earn interest until the bond is eventually cashed.

3. The call penalty is designed to protect Zenia from reinvestment risk if Factory Textiles calls the bond early.

4. Once Factory Textiles satisfies the time period specified in the trust indenture, they can elect to call the bond at any time.


61. Shelley and Randy were recently divorced and Randy pays Shelley a basic child support amount in accordance with the federal Guidelines. Shelley's income is $42,000 and Randy's income is $48,000. Their son, B.J., has shown quite a talent for baseball, and Shelley wants to send B.J. to a special baseball camp this summer at a cost of $1,000. She wants Randy to share in this cost. According to the federal Child Support Guidelines, how much will Randy have to contribute towards the cost of the baseball camp if the special expense is accepted?

A. $0 B. $480 C. $533 D. $500



62. Four years ago, Trevor withdrew $15,000 from his RRSP under the Home Buyers' Plan. He made a scheduled HBP repayment of $1,000 two years ago and last year. Last year, he made an additional RRSP contribution of $4,000, which he designated as an HBP repayment. What is Trevor's minimum HBP repayment for this year?

A. $0.00 B. $600.00 C. $692.31 D. $1,000.00

63. Georgia wants to eliminate unsystematic risk from her securities portfolio. Which of the following strategies should she use?

1. choose stocks with high positive correlations 2. diversify her investments 3. choose stocks with a beta coefficient of less than 1 4. choose stocks with a low coefficient of variation

A. 1 only B. 2 only C. 2 and 4 D. 1 and 3

64. Sylvia withdrew $5,000 from her RRSP under the Lifelong Learning Plan to help cover household expenses while her husband, George, returned to school full time. Which of the following statements is TRUE?

A. George is the LLP participant.

B. Sylvia will have to include the $5,000 in her income because she is not

the LLP student. C. Sylvia is the LLP participant.

D. Sylvia will have to include the $5,000 in her income because the funds

were not used directly to cover George's education expenses.



65. Bianca is a CFP® licensee and she is considering her options for continuing

education, which are as follows:

1. She could subscribe to a monthly financial publication, which would take about 3 hours to read each month.

2. A commercial publisher has asked her to produce a book on investing in financial derivatives, which would take her 200 hours to produce.

3. She could take a one-day seminar on life insurance products which has been approved by the Canadian Association of Insurance and Financial Advisors (CAIFA) as qualifying for 8 CE credits.

4. She could take a 10-week, 2-hour evening course in Interpersonal Skills Development offered as a non-credit public interest course by the local community college.

Which of the following combinations of activities would meet the CE requirement?

A. 1 and 2 B. 2 and 3 C. 3 and 4 D. 1, 2 and 3

This is the end of part one of the assessment. Part two, the case studies, begins with the next question.



This is Part two of the assessment. Give yourself two hours to complete it. If you have not done so already, please print the Kurst Case Study (for questions 77-100) before you begin. Questions 66 - 70 are based on the following information. Marni and Oscar Meyer are in their early fifties and live in Halifax. Marni works part-time for a local publishing company and is not covered by her employer's group health plan. Oscar works for a consulting company that offers limited medical and dental insurance coverage. They have a twenty-one year old son, Joey, who lives and goes to school in Vancouver. They try to visit Joey at least two or three times a year for at least a week at a time. The Meyers are also planning a three-month trip to Nepal for later this year. During spring break last year, Joey and his girlfriend, Gigi, stayed with the Meyers in Halifax. Gigi is a U.S. citizen and a resident of Seattle. One day, Gigi slipped on a rock in the Meyer's backyard and broke her ankle. She required X-rays, an examination by a doctor, painkillers, and an overnight stay in the hospital. Now that they plan to travel out-of-province more often, Marni and Oscar are concerned about the adequacy of their health insurance coverage. Although they plan to spend only about two or three weeks a year travelling within Canada, they are unsure about the type of health coverage they should have for the trip to Nepal. They would like to purchase an extended travel insurance plan that offers all of the options. The Meyers like to visit Joey in early April to take advantage of Vancouver's early spring. Although they have yet to require any emergency medical services while in British Columbia, they are unsure about their health insurance coverage in the event a problem arises. 66. What statement is true?

A. Any costs incurred for necessary medical services over and above the

expenses covered by the Meyer's provincial health plan will be paid for by British Columbia's health insurance plan.

B. The Meyers are covered by the health care plan of their province of

residence for all necessary medical services.

C. If the Meyers visit for longer than two months in Vancouver, they will

automatically be covered under the province's health insurance plan as new residents.

D. While in British Columbia, the costs of any necessary medical services

required by the Meyers are paid for exclusively by that province's health insurance plan.



67. After Gigi broke her ankle and was released from hospital, she immediately

flew back home to Seattle at her own expense. Which of the following statements about Gigi's situation is TRUE?

A. The Meyers will be required to reimburse the province for Gigi's hospital

expenses since the fall happened on their property.

B. The province will cover the cost of the cast, X-rays and overnight stay in

the hospital.

C. Marni can use the cost of Gigi's hospital stay as an eligible medical

expense for the federal medical tax credit.

D. Unless Gigi purchased travel insurance before leaving Seattle she will be

required to personally pay for the full cost of her hospital stay.

68. Marni is having difficulty selecting an extended health care plan that best suits their situation. All of the following statements about extended health plans are true, EXCEPT:

A. Extended health benefit plans are designed to cover medical expenses

not covered under a provincial plan.

B. The critical care provision of a private health plan is designed to provide

a lump sum cash payment for certain critical conditions.

C. Travel health coverage is designed to reimburse Canadian residents who

decide to seek basic medical services in the U.S.

D. A travel health plan can protect the Meyers from financial loss in the

event of a medical emergency while travelling in Nepal.

69. The Meyers are thinking about buying some additional private health insurance. They would like a plan that best suits their family's needs. Which of the following statements about private health insurance plans is TRUE?

A. The Meyers can use a private health insurance plan as a substitute for

coverage of necessary medical services normally covered under their provincial plan.

B. With a private health plan, the Meyers can deduct the costs of necessary

medical services covered under their provincial plan from their taxable income for the year.

C. The Meyers may be able to use a private health insurance plan to pay

the additional costs of Marni's physiotherapy sessions not covered by the province.

D. Private health insurance for basic medical services is available only to

small business owners and entrepreneurs.



70. All of the following policy provisions are likely to be included in the Meyers' travel insurance plan, EXCEPT:

1. coverage for the total cost of a revolutionary laser eye treatment available in Nepal

2. coverage for the extra costs incurred by Oscar to change travel plans and accompany Marni home early, in the event she suffers a medical emergency

3. coverage for the total cost of a semi-private hospital room while traveling out-of-country

4. a requirement that the Meyer's complete a medical health questionnaire to screen out any pre-existing medical conditions

A. 1 only B. 2 only C. 1 and 3 D. 2 and 4



Questions 71 - 76 are based on the following information. Hank and Gertrude were both in their sixties when they came to you for advice regarding their estate plan (or rather, their current lack of estate planning). Hank and Gertrude have been married for 42 years. Over the course of their marriage they had six children. Each child eventually got married and had three children of his or her own, for a total of 18 grandchildren. Unfortunately their eldest son, Peter, and his wife, Valerie, were killed in a car accident last year. Hank and Gertrude have been taking care of their children (June, Fern and Ian) ever since the accident. Hank and Gertrude have amassed a respectable estate over the years. They currently own a comfortable home in the country, which is currently registered in joint tenancy and which is worth about $360,000. Hank also owns a cottage, which he originally bought just prior to their marriage for $18,000. On December 31, 1971, it was worth $18,000. The cottage, in the heart of Ontario's posh Muskoka district, is now worth about $320,000. Hank has RRSPs valued at $220,000, while Gertrude's RRSPs are worth $98,000. Neither of them have named beneficiaries for these RRSPs. In addition to his RRSPs, Hank has other investment assets worth $90,000, with an adjusted cost base of $32,000. Hank has a $160,000 term life policy on his own life, payable to his estate. He also owns a $50,000 term life policy on Gertrude's life, payable to her estate. Hank and Gertrude live in Ontario, where the probate fees are $5.00 per $1,000 or part thereof for the first $50,000 of the estate, plus $15 per $1,000 or part thereof for estates over $50,000. Ontario has a preferential share of $200,000. When they first approached you, they did not have a will, despite their advanced age. They have given little thought to estate planning, but a sudden rash of deaths among their close friends has made them realized that it is never too late to start planning. Hank's best friend Jack has fallen prey to terminal cancer, and is in such pain that he is almost always unaware of his own surroundings. Hank has had to watch Jack's wife and children cope with this horrible disease. Every day Hank wishes that he could do something to ease the burden on Jack's family as they bicker about his treatment methods. 71. What action by Hank and Gerdtrude could make sure the same thing

doesn't happen in their family? A. drafting an enduring power of attorney B. drafting a last will and testament C. drafting a springing power of attorney D. drafting a living will



72. If you can convince Hank to draft a will, which properties will bypass his

estate based on the existing ownership structure?

1. his RRSPs 2. the proceeds of his life insurance policy 3. his cottage 4. his house


73. If Hank does not prepare a will, what will happen to his estate? A. It will pass to the government under the escheat process.

B. Gertrude will receive the preferential share, and the remainder will be

distributed between Gertrude, Hank's surviving children, and Ian, Fern and June.

C. Everything will pass to Gertrude.

D. Gertrude will receive the preferential share, and the remainder will be

divided between Hank's surviving children.

74. If Hank died today without changing anything, how much would his estate have to pay in probate fees?

A. $11,350 B. $16,750 C. $8,850 D. $7,600

75. Hank thought about registering the cottage in joint tenancy with his favorite grandson, Ian in order to avoid probate. If he does this, he would realize a taxable capital gain of:

A. $0 B. $75,500 C. $113,250 D. $151,000



76. Hank is worried about probate fees. All of the following actions could be used to minimize probate fees without triggering an immediate tax liability, EXCEPT:

A. Registering his investment assets in joint tenancy with Gertrude. B. Making an inter vivos gift of the cottage to his surviving children.

C. Naming Fern, June and Ian as the beneficiaries of his life insurance

policy. D. Naming Gertrude as the beneficiary of his RRSPs.

Questions 77 - 100 are based on the Kurst Case Study. 77. What is the equity ratio on the Kursts' investment and business assets? A. 78.6% B. 91.4% C. 92.4% D. 93.6%

78. When preparing his estate plan, what methods could Matthew use to ensure that Richard benefits from his estate while avoiding interference from his parents?

1. He could register property jointly with Richard as tenants in common. 2. He could designate Richard as the beneficiary of his life insurance

policy. 3. He could draft a will that leaves his estate to Richard. 4. He could transfer assets into an inter vivos trust now that names

Richard as the remainderman and himself as the life tenant. 5. He could designate Richard as the beneficiary of his RRSPs.

A. 2, 4 and 5 B. 2, 3 and 5 C. 1, 3 and 4 D. 1, 2, 4 and 5



79. If Richard died today, who would be entitled to Richard's estate? A. Matthew B. the province C. Beverly and Veryl D. Beverly, Veryl and Crystal

80. Which of the following statements regarding Richard and Matthew are TRUE?

1. Richard can rollover his assets to Matthew at their adjusted cost base.

2. Between the two of them, Richard and Matthew and can designate two properties as their principal residences.

3. Any property that Richard and Matthew hold in joint tenancy will automatically be transferred to the survivor upon one of their deaths.

4. Richard has no need for life insurance.

A. 1 and 3 B. 2 and 4 C. 1, 2 and 3 D. 3 and 4

81. What statements regarding the proceeds of Daphne's insurance policy are true?

1. The proceeds will be held in a court-appointed trust on Crystal's behalf.

2. As Crystal's legal guardians, the Kursts will be responsible for managing the trust.

3. The interest earned on the death benefit will be paid to the Kursts annually to be used to meet Crystal's living expenses.

4. Once Crystal reaches the age of majority, she will be entitled to receive the entire amount held on her behalf in a single lump sum.

5. Once Crystal reaches the age of majority, she can request advances from the insurance trust to meet her living and education expenses, with the balance payable to her upon attaining age 25.

A. 1, 3, and 4 B. 1, 3 and 5 C. 1 and 4 only D. 2 and 4



82. If Veryl and Beverly were to die simultaneously, which of the followings statements would be TRUE?

1. Richard would get their entire estate. 2. Crystal would get half of the estate. 3. Part of their estate would be intestate. 4. Richard would automatically be appointed as executor of the estate. 5. The executor would also become Crystal's legal guardian.

A. 1, 4 and 5 B. 2 only C. 2 and 3 D. 1 only

83. If Veryl dies today, which of the following statements would be TRUE?

1. Veryl's shares in IronPlus will be transferred to Beverly at Veryl's adjusted cost base.

2. The executor could elect to have some or all of the shares of IronPlus transferred to Beverly at fair market value to take advantage of the lifetime capital gains exemption.

3. Beverly would receive sole title to the house after Veryl's death. 4. The rental properties would be subject to probate. 5. Beverly would receive a death benefit of $3,500 from the Canada

Pension Plan.

A. 1, 2, 3 and 5 B. 2 and 5 only C. 1 and 3 only D. 1, 3 and 4



84. Suppose that Beverly changes the beneficiary designation of her RRSP and

she dies before the value of her RRSP has changed. Which of the following statements would be TRUE?

1. Richard would receive $70,000 and Crystal would receive $70,000. 2. Richard and Crystal would each receive $39,270. 3. Richard would receive $39,270 and Crystal would receive $70,000. 4. Beverly's estate would have to report additional income of $140,000. 5. Both Richard and Crystal would be taxed on any amounts they

receive from her RRSP.

A. 1 only B. 2 only C. 3 only D. 1 and 4

85. After Veryl tells you what he has learned about XYZ Company, you begin to think about purchasing shares in this company as well. You do not believe that your purchase will negatively affect Veryl's or Richard's interests in the company. However, you decide not to pursue this opportunity because you realize that by doing so you would be violating the Principle of:

A. Confidentiality B. Integrity C. Fairness D. Objectivity



86. With respect to the Kursts' joint life insurance policy, which of the following

statements are TRUE?

1. The death benefit will be subject to probate. 2. The death benefit will not be payable until they have both died. 3. The death benefit will be subject to tax at the deceased's marginal

tax rate. 4. The Kursts can renew the policy without having the premiums

increase. 5. If the Kursts surrender the policy now, they may realize a taxable

gain.

A. 2 and 4 B. 1 only C. 1, 3 and 5 D. 1 and 4

87. Veryl is questioning his need for so much life insurance. If Veryl surrenders his whole life policy now, by now much would his taxable income increase? Assume there are no surrender charges.

A. $0 B. $8,325 C. $11,100 D. $22,900

88. Suppose Veryl had a serious accident. After a period of total disability, he was eventually able to return to work but was only able to work half time and he only drew employment income of $3,500 per month. Once the elimination period has passed, how much would he receive in monthly disability benefits from his insurance policy?

A. $0 B. $1,900 C. $2,000 D. $2,100



89. All of the following statements about Veryl's disability insurance policy are

true, EXCEPT:

A. It will provide him with a disability pension if he is unable to perform his

current job, even if he can perform some other form of work.

B. Veryl could purchase a disability policy that would provide a maximum

tax-free benefit of $6,667 per month.

C. Veryl can cancel the policy whenever he wants, but the insurance

company cannot cancel the policy during the specified term. D. Veryl's premiums will not change if his health changes.

90. Beverly is not in the habit of locking the doors at her house, especially when she is working out in the back garden on their large property. One day, a thief entered her unlocked front door while she was outside and he removed her heirloom jewelry from her bedroom, her portable CD player and CD collection, and some of Veryl's power tools before making a clean getaway. What statements are true?

1. The insurance company will cover the depreciated cost of the used tools.

2. The insurance company will cover the cost of a new CD player and the CDs.

3. The $200 deductible applies to each of the three losses for a total deductible of $600.

4. The insurance company will not pay for the loss of the jewelry.

A. 1 and 4 B. 2, 3 and 4 C. 4 only D. 1 and 3



91. Which of the following statements about Veryl's investment in the Canadian

Highgrowth Fund are TRUE?

1. Veryl paid $3,200 for his first 100 shares in the fund. 2. The fund has a current net asset value per share of $32. 3. Veryl had a taxable capital gain of $300 as a result of the capital

gains dividend paid out on December 31st of last year. 4. Veryl was able to acquire 18.75 more shares by reinvesting the

capital gains distribution. 5. If Veryl redeems all of his shares in the fund for $40 per share, he

will have a capital gain of $9.1250 per share.

A. 1, 2, 4 and 5 B. 1, 3, 4 and 5 C. 1, 2 and 3 D. 1, 3 and 5 only

92. What is the effective annual yield to call on Veryl's ABC bond? A. 5.31% B. 5.77% C. 5.79% D. 5.88%

93. Suppose Veryl decided to get out of the metal working business all together and he sold all of his shares of IronPlus Inc. for their current FMV. Based on his current marginal tax rate, how much additional tax would he have to pay?

A. $37,057 B. $38,597 C. $67,404 D. $69,864



94. How can Veryl position himself to take advantage of the expected growth in

XYZ Inc. without risking a substantial loss? A. He could buy the stock on margin.

B. He could buy a call option with an exercise price of $38 for a premium of

$2.

C. He could buy a put option with an exercise price of $38 for a premium of

$2. D. He could write a call option $38 for a premium of $2.

95. How much can Veryl expect to receive in OAS benefits in January of this year?

A. $0.00 B. $301.95 C. $311.01 D. $502.31

96. Suppose Veryl and Beverly retire at the end of this year. Which of the following statements would be TRUE?

1. The last year for which Beverly or Veryl could make RRSP contributions would be this year.

2. Next year, Veryl could continue to act as a part-time consultant to IronPlus Inc. and earn annual employment income of $15,000 without affecting his ability to receive a CPP retirement pension.

3. Veryl can continue to earn dividend income from IronPlus after he retires.

4. Once Veryl retires, he will have to convert his RRSP into a RRIF. 5. Once Veryl begins receive a CPP retirement pension, he will be able

to claim the pension tax credit based on that pension income.

A. 2, 3 and 5 B. 1, 2 and 4 C. 3 only D. 2 and 3



97. If they need to draw on their savings during retirement, which of the

following sources of funds should the Kursts use first? A. Veryl's RRSPs B. Beverly's RRSPs C. Veryl's mutual funds included in his tax-paid capital D. Veryl's bonds included in his tax-paid capital

98. Veryl has been working since he was 18 years old; as stated in the case study, he intends to retire effective next year when he turns 60 years of age. Beverly and Veryl plan to assign their CPP retirement pensions once Veryl is 65 years of age. Prior to applying for assignment, assume Veryl's CPP pension at age 65 will be $800 and Beverly's CPP pension at that time will be $400. What will be the CPP retirement benefit for each person following the assignment?

A. Veryl's pension will be $600.00 and Beverly's will be $600.00. B. Veryl's pension will be $704.76 and Beverly's will be $495.24. C. Veryl's pension will be $657.14 and Beverly's will be $542.86. D. Veryl's pension will be $400 and Beverly's will be $800.

99. Beverly would prefer not to deduct any CCA on her home. How much could Beverly have saved in income tax by deducting a business-use-of-home expense last year?

A. $0 B. $362.18 C. $600.00 D. $658.50




100. Suppose Veryl gave 150 shares in IronPlus to Richard now, and that he

transferred another 150 shares into a trust for Crystal, and another 180 shares into a spousal trust for Beverly. Which of the following statements would be TRUE?

1. Veryl would realize a capital gain of $364,800 prior to any capital gains deductions.

2. Any future growth in the shares held by Crystal's trust would be attributed to Veryl.

3. Any dividend income earned by the shares held in the spousal trust would be attributed to Veryl.

4. Any future growth in the shares held by Richard would be attributed to Richard.

5. Any dividend income earned by the shares held by Richard would be attributed to Veryl.

A. 3 and 4 only B. 1, 4 and 5 C. 2, 3 and 4 D. 1, 2, 3 and 5

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