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Find the answers to your financial questions below, don't hesitate to contact me and my team of experts for any clarification on what you find below.
- Do I have to tell my old advisor to transfer my assets in to my new account(s) with you?
- No. You tell us, give us a copy of your last available statement, we have you sign a transfer form; we send either an electronic or paper notice to them and the assets come over automatically – either exactly as they are already invested, or in cash, or some combination of both, depending on your wishes.
- Is there a cost to transfer assets to you?
- There may be, depending on the institution and type of investment. We are more than willing to discuss with you the option of our covering the transfer costs.
- What is a money market/cash equivalent fund/ High Interest Savings Account?
- Money-market funds invest in short-term debt securities such as commercial paper, certificates of deposit, bankers' acceptances, and federal and provincial treasury bills (T-bills), all generically known as money-market instruments. This means the money you invest in a money-market fund is used for short-term loans to various Canadian companies and government bodies. A money-market fund is the ideal place for money that will be needed in the near future, to keep an emergency cash fund, or to park your money while seeking more attractive investment opportunities. Unlike other mutual funds' unit prices, which reflect the market in which those funds invest, the unit prices of money-market funds are usually fixed at $1 or $10. The funds pay you your income by giving you more units - the quantity depends on what the fund earns each month after fees. A more recent variation, with names like "High Interest Savings" included in their description, are not really mutual funds, but actual deposits with a scheduled bank, and offer Canada Deposit Insurance on these deposits up to $100,000.
- Do I have to claim income earned on investments held in a registered account?
- No. Any income earned on investments held within your registered account, including dividends, interest, and distributions, do not incur tax while they remain in a registered account. Tax is incurred when the money is withdrawn from the account.
- In a non-registered (taxable) account what is the tax treatment of:
- Mutual Funds - Distributions made by Canadian mutual funds to shareholders can consist of:
- Canadian dividends eligible for dividend tax credit
- capital gains, only 50% taxable
- return of capital - this amount is not taxable, but reduces the adjusted cost base of the shares in the ETF
- other income, 100%
- taxable foreign income,
- 100% taxable reduction of foreign income tax withheld
The distributions that are declared may not necessarily be paid to shareholders. Part or all of the distribution may be reinvested, not paid in cash. The amount of the reinvested distribution is added by the shareholder to the adjusted cost base of the shares in the mutual fund.
Shares of Corporations - When shares in corporations are purchased, the adjusted cost base is the amount paid for the shares, including any commission paid. When the shares are sold, the adjusted cost base of the shares is deducted from the proceeds of sale (after deducting commission paid on the sale) to determine the capital gain or loss. Only 50% of capital gains are included in taxable income. Capital losses cannot usually be deducted from other income. They can only be used to reduce or eliminate capital gains, except in the year of death.
The dividend income received from Canadian corporations gets favourable tax treatment in the form of a dividend tax credit. This results in much less personal income tax being paid on dividend income than on interest income, or on dividends from foreign corporations.
The dividend income received from foreign corporations does not qualify for a dividend tax credit, so tax is paid on 100% of the dividend (before deduction of withholding tax). There will be withholding tax deducted from the dividends.
Term deposits and guaranteed income certificates (GICs) - generate interest income, which is 100% taxable.
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- What is an ‘in-kind’ contribution?
- If you hold mutual funds or shares of a corporation in a non-registered investment account, you can use them as your registered retirement savings plan (RRSP) contribution by transferring them to your RRSP as an in kind contribution. You can also use them as a contribution (not tax deductible) to your tax-free savings account (TFSA), or some other registered accounts. Your contribution amount is the market value at the time of the transfer. For tax purposes, you have effectively disposed of the shares (deemed disposition), so any gain will be taxable to you. However, if you have a loss on shares transferred to a registered account, the loss is not deductible. If you sell the shares and contribute the cash to the registered account and then repurchase the same shares in the registered account within 30 days, a superficial loss will occur. Superficial losses cannot be deducted as a capital loss.
- If I've made a withdrawal from my RRSP under the Home Buyer's plan or the Life Long Learning Plan, will I receive a T4RSP receipt?
- You will be issued a T4RSP receipt for any type of withdrawal from your RRSP or RSP plan.
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- Who receives the receipt for contributions to Spousal RRSP's?
- The contributing spouse will receive the receipt to use as a deduction on their tax return.
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- The cost basis is calculated separately for each security owned. It is the total cost of all shares owned, and is divided by the total number of shares owned to get the cost basis per share, or weighted average cost per share. This cost per share is used in calculating any capital gains or losses when some or all of the shares are sold. Accountants call this your "ACB", or Adjusted Cost Base.
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- What is the settlement date?
- The settlement date for securities transactions is the date on which payment is made to settle the trade. The settlement date for stocks and bonds is usually three business days after the trade was executed. For government securities and options, the settlement date is usually the next business day. The settlement date is the date on which possession of the security is transferred from the seller to the buyer. If you sell an investment at the end of the year, and the settlement date is after Dec.31 (in the new year), then the sale is recorded for tax purposes as being in the new year.
- Can I convert my RSP to a RIF at any time?
- Yes. Your RSPs can be converted to retirement income at any time, but no later than the end of the year in which you turn 71.
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- What is the minimum withdrawal amount required for a Registered Retirement Income Fund (RIF)?
- The federal government requires that holders of Registered Retirement Income Funds (RIF) withdraw a minimum amount of retirement income from their RIFs each year. There is no withdrawal necessary in the year a RIF is opened, but there are minimum amounts that must be withdrawn annually starting in the year after. The minimum can be withdrawn without withholding tax. Amounts over and above the minimum will have taxes withheld. Your minimum annual withdrawal amount changes each calendar year according to the value of your RIF on December 31st of the previous year and the prescribed minimum withdrawal schedule. There is no maximum withdrawal amount for RIFs, unless they are locked-in, such as an LRIF or LIF.
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- Can I have extra income tax withheld from my RIF payments?
- If you wish to have extra tax withheld and forwarded to Canada Customs and Revenue Agency on your behalf, you can instruct us to deduct the additional tax from your regular RIF withdrawals. This will potentially help you to avoid having to make a large lump-sum payment at tax time.
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- Can the funds in my locked-in retirement account be un-locked?
- Some provinces allow for the the "unlocking" of all or a portion of a LIRA, LIF or LRIF under certain circumstances. Some of the circumstances include:
- small balances in the account, under a specified threshold amount
- becoming a non-resident of Canada
- shortened life expectancy
- financial hardship
- spousal or child maintenance enforcement orders
Some provinces allow the "unlocking" of all or a portion of a locked-in account without the above restrictions. Nova Scotia regulated locked-in accounts allow for temporary income. If you are between the ages of 54 and 65, you may use your life income fund as a source of temporary income. The maximum life income paid from the life income fund is adjusted when temporary income is received.
The following three provisions apply to Federally-regulated LIFs:
- Individuals 55 or older with LIF holdings of up to $22,450 will be able to wind up their accounts with the option to convert to a tax-deferred savings vehicle, such as an RRSP or RRIF.
- Individuals 55 or older will be entitled to a one-time conversion of up to 50% of LIF holdings into a tax-deferred savings vehicle with no maximum withdrawal limits.
- All individuals facing financial hardship (low income, high disability or medical-related costs) will be able to unlock up to $22,450 per year.
The threshold of $22,450 is 50% of the yearly maximum pensionable earnings (YMPE), which is the maximum amount on which contributions to the Canada Pension Plan (CPP) are based. This threshold will change each year as the YMPE changes.
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- What is the tax reporting of the unlocking from a Federal LIF?
- The amount "unlocked" from a Federal LIF or new Federal RLIF will be reported in box 16 of the T4RIF slip which will be issued before the end of the following year’s February month end. Also, if the unlocked portion was transferred to your RRSP, an official contribution receipt will be issued as well.
The T4RIF slip issued from the RLIF or LIF will be a total of the values of the regular LIF/LRIF payment(s) and the “unlocking” amount transferred to the “RRSP” plan (if applicable). Please note that the offsetting contribution receipt for the transfer to the RRSP plan will only be for the “unlocked” portion which was transferred to the RRSP plan; therefore the T4RIF slip and the contribution receipt will not necessarily be for the same amount.
If the unlocking from a LIF or LRIF is transferred to a RRIF, the T4RIF tax slip issued from the LIF or RLIF will not contain the unlocking amount since the transfer is between two “Income Plans”. Similarly, if the unlocking is from a Locked-In RRSP or RLSP is transferred to an RRSP, no tax slips are issued since the transfer is between two “Savings Plans"
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