Chapter 25: Canadian Taxation - Not Finished

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annuity

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a contract usually sold by life insurance companies that guarantees an income to the beneficiary or annuitant at some time in the future. the income stream can be very flexible. the original purchase price may be either a lump sum or a stream of payments.

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attribution rules

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a canada revenue agency rule starting that an investor cannot avoid paying taxes at heir marginal rate by transferring assets to other family members who have lower personal tax rates.

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canadian education savings grant

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an incentive program for those investing in a registered education savings plan whereby the federal government will make a matching grant of a maximum of $500 to $600 per year of the first $2500 contributed each year to the RESP of a child under ag 18. also known as CESG

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capital loss

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selling a security for less than its purchase price. capital losses can only be applied against capital gains. surplus losses can be carried forward indefinitely and used against future capital gains. only 50% of the loss can be used to offset any taxable capital loss.

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carrying charge

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tax rules permit individuals to deduct this certain type of charge for tax purposes.

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contribution in kind

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transferring securities into an RRSP. the general rules are that when an asset is transferred there is a deemed disposition. any capital gain would be reported and taxes paid. any capital losses that result cannot be claimed.

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deemed disposition

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under certain circumstances, taxation rules state that a transfer of peroperty has occurred, even without a purchase or sale, e.g., there is a deemed disposition on death or emigration from canada.

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deferred annuity

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this type of contract, usually sold by life insurance companies, pays a regular stream of income to the beneficiary or annuitant at some agreed-upon start date in the future. the original payment is usually a stream of payments made over time, ending prior to the beginning of the annuity payments.

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defined benefit plan

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a type of registered pension plan in which the annual payout is based on a formula. the plan pays a specific dollar amount at retirement using a predetermined formula. also known as DBP

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defined contribution plan

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a type of registered pension plan where the amount contributed is known but the dollar amount of the pension to be received is unknown. also known as DCP

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fiscal year

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a company's accounting year. due to the nature of particular businesses, some companies do not use the calendar year for their bookkeeping. a typical example is the department store that finds december 31 too early a date to close its books after the christmas rush and so ends its fiscal year on january 31.

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income splitting

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a tax planning strategy whereby the higher-earning spouse transfers income to the lower-earning spouse to reudce taxable income.

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marginal tax rate

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the tax rate that would have to be paid on any additional dollars of taxable income earned.

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money purchase plans

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a type of registered pension plan; also called a defined contribution plan. in this type of plan, the annual payout is based on the contributions to the plan and the amounts those contributions have earned over the years preceeding retirement. in other words, the benefits are not knwon but the contributions are. also known as MPP

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past service pension adjustment

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an employer may increase a member's pension by the granting of additional past service benefits to an employee in a defined benefit plan. plan members who incur a PSPA will have their RRSP contribution room reduced by the amount of this adjusment. also knwon as PSPA

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pension adjustment

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the amount of contributions made or the value of benefits accrued to a member of an employer-sponsored retirement plan for a calendar year. the PA enables the individual to determine the amount that may be contributed to an RRSP that would be in addition to contributions into a registered pension plan. also known as PA

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pooled registered pension plan

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also known as PRPP

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registered education savings plan

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also known as RESP

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registered pension plan

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also known as RPP

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registered retirement income fund

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also known as RRIF

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registered retirement savings plan

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also known as RRSP

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self directed rrsp

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a

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spousal rrsp

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a

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stock savings plan

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also known as SSP

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superficial loss

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a

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tax free saving account

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also known as TFSA

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tax loss selling

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a