an amount that has been accrued (i.e., that has been earned and reported for tax purposes, even though it has not yet been received in cash or kind).

a method of accounting whereby the taxpayer reports income in the fiscal period earned, regardless of when the income was received in cash; and deducts expenses in the fiscal period incurred, whether paid in that period or not.

Interest that has been earned but not received.

payments to the subscriber of the RESP’s investment earnings, including earnings on the Canada Education Savings Grant (ITA 146.1(1), "accumulated income payments").

 

an annuity whereby a single premium, annual premiums or other varying premiums are accumulated for the purpose of providing a lump sum at some point in the future. The policyholder then has the option of rolling the lump sum into an annuity, or receiving the cash surrender value.

 

An arrangement that enables an investor to purchase mutual fund shares regularly in large or small amounts.

the process of setting specific financial goals and determining how to reach those goals, transforming vague statements and wishful thinking into workable action plans.

assigning your assets to a trustee, in a manner that is not satisfactory to your creditors, fraudulently transferring your assets to a third party in anticipation of bankruptcy, with the intention of withholding those assets from distribution to your creditors, paying off one creditor in preference to the outstanding claims of other creditors (referred to as fraudulent preference), failing to give up goods that are to be seized from you under an execution order, trying to depart secretly and suddenly, with the intention of defrauding your creditors, and failing to meet your liabilities as they come due.

any business carried on by a corporation, other than a specified investment business or a personal services business. It includes an adventure in the nature of trade (ITA 248(1)).

any income pertaining to or incident to an active business, but not including income from property (ITA 248 (1)).

assumptions made by an actuary regarding future trends in factors that may affect the cost and value of future pension benefits, such as mortality, interest, wage increases, etc.

the pension paid following early retirement, based on an actuarial reduction of what the pension would have been if it had commenced at normal retirement age.

Most pension plans will permit members to retire early, up to 10 years before the normal retirement age, and still collect a retirement pension. However, the benefit entitlement will be reduced to account for the fact that contributions were not made until normal retirement age (i.e., less pension credits will have been earned by the plan member), resulting in a smaller pension.

 

the present value at retirement of the shortfalls in projected retirement income based upon known sources of income and current savings.

the original cost of purchasing a capital or depreciable property plus the cost of additions less certain adjustments for specific types of income tax relief, such as the deduction for an RRSP contribution, but not for others, such as CCA.

the price of an annuity, adjusted to be the equivalent of an immediate annuity purchased with cash.

 

in the alternative minimum tax calculation, this amount is the sum of the net additions to taxable income plus taxable income.

includes a legal adoption and an adoption in fact.

 

an official interpretation issued by CCRA at the request of a specific taxpayer who wants confirmation of the tax implications of a contemplated transaction. CCRA will assess the transaction, interpret the provisions of the Income Tax Act, the Excise Tax Act, and related statutes, and establish its interpretation in the form of an advance tax ruling.

 

a client who is both confident and impetuous. Entrepreneurial in nature, willing to go out on a limb in career choices or money management strategies. Although the adventurer is willing to assume a high level of risk in return for high potential gains, an adventurer is always confident that the right decision has been made. An adventurer places confidence in fate.

the internal arrangements among those responsible for running the corporation and its main beneficiaries, the shareholders.

in the context of applying the superficial loss rules, persons affiliated with each other generally include the following (ITA 251.1):

• the taxpayer and his spouse or common-law partner
• a corporation and any person or affiliated group of people who control that corporation
• two corporations if each corporation is controlled by an affiliated person
• a partnership and a majority interest partner
• two partnerships if there is an affiliation between the majority-interest partners of each partnership
• and a partnership and a corporation if there is an affiliation between a majority-interest partner and a person who controls the corporation

the nominal rate of return adjusted for taxes, calculated as (i × (1 - MTR)), where i is the nominal interest rate and MTR is the marginal tax rate.

an amount for a non-refundable tax credit for those aged 65 or older on December 31^st of the tax year.

a federal tax credit for taxpayers who are at least 65 years of age by December 31 of a taxation year.

 

a graphic depicting the relative proportion of the population in each age group; in a stable population (where the birth and death rates are constant from year to year) the graph would resemble a pyramid, being broad at the base and tapering to a peak as a result of mortality.

periodic payments made under a court order or written agreement; to the taxpayer or to someone else on the taxpayer’s behalf, to maintain the taxpayer, his children, or both.

a type of allowable capital loss that is calculated as 50% of a business investment loss (ITA 38(c)), and that is deductible from any other source of income for the year of the loss.

that portion of a capital loss that can be deducted from taxable capital gains, based on an inclusion rate of 50% for dispositions after October 17, 2000.

 

(a) an income-tested benefit for a pensioner’s spouse or common-law partner, widow or widower aged 60 to 64 who has resided in Canada for at least 10 years since reaching 18 years of age, and who qualifies under the net income test, is eligible for a monthly allowance.

(b) Income supplement for the spouse or common-law partner of a low income senior.

an alternative tax calculation that was introduced in 1986 as a political solution to the perception that many high-income taxpayers were avoiding taxes though the use of tax shelters.

the period of time over which a mortgage is to be paid off, assuming no early payment, missed payments and constant interest rates.

the monthly payment includes interest and principal, the portions of which change with each payment. Calculation of these two components of each payment and can be prepared with either a financial calculator or computer software.

an amount of $40,000, which is deducted from the adjusted taxable income. So, effectively only adjusted taxable income in excess of $40,000 is subject to the alternative minimum tax. This means that someone can have up to $40,000 of adjusted taxable income and still pay no AMT.

 

(a) fees imposed by universities, colleges and other post-secondary institutions and which include fees for health services, athletics and various other services. The amount does not include student association fees.

Contributions to all RESPs on behalf of one beneficiary cannot exceed the annual limit of $4,000. (ITA 146.1(1), "RESP annual limit"). This annual limit cannot be carried forward if it is not used.

An LLP participant can withdraw a total of $10,000 in a calendar year from any combination of her RRSPs. (ITA 146.02(1), "eligible amount").

A financial report sent yearly to a publicly held firm's shareholders. This report must be audited by independent auditors.

(a) An individual who purchases an annuity and will receive payments from that annuity.

(b) the recipient or beneficiary of an annuity. An annuity contract can have more than one annuitant.

(a) a series of income payments or receipts made yearly or at other regular intervals.

(b) A contract that guarantees a series of payments in exchange for a lump sum investment.

an agreement with a financial institution or life insurance company to provide the annuitant with an annuity. The owner of the annuity contract may or may not be the annuitant.

a series of consecutive periodic payments or receipts of equal amounts made or received at the beginning of each period.

an unrealized increase in the value of an asset over time.

someone that is in no way related to the employer.

a document that must be included with the application for incorporation and that described the fundamental characteristics of the corporation, including the business name; the number of directors; the number and classes of shares that the corporation is authorized to issue; and any restrictions on the business activities that the corporation can undertake.

A proposal to sell a specific quantity of securities at a named price.

the process of determining what portions of different assets such as stocks, bonds and money market instruments are to be included in an investment portfolio.

What a firm or individual owns.

things of value owned by your client.

filing a petition for bankruptcy under the Bankruptcy and Insolvency Act.

an income splitting process whereby spouses or common-law partners choose to share their Canada Pension Plan retirement pensions with each other to minimize their tax burden.

 

contributions that are made to an RESP after 1997 in respect of which a CESG has been or will be paid.

two or more corporations are considered to be associated corporations if, at any time in the taxation year:

• one corporation controlled the other corporation
• both of the corporations were controlled by the same person or group of persons
• the people or group of people who control each corporation were related to each other and one of them owns at least 25% of the shares in both corporations (ITA 256(1))

a rule under the Income Tax Act that prohibits limited partners from taking deductions for more than the amount of money the investor actually stands to lose (ITA 96(2.1 to 2.6)).

a review process that CCRA uses to verify the accuracy of amounts reported on a tax return and to ensure that the taxpayer is in compliance with the Income Tax Act.

the total income tax payable for a year divided by the taxable income for a year.

 

the strategy of avoiding or reducing taxes by making use of various exemptions.

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the period of time between about 1947 and 1966, during which the rate of live births in Canada rose from about 240,000 per year to a peak of about 480,000 births per year in 1959, and subsequently declined to about 360,000 per year in 1966. Also, refers to the group of individuals born during this time period.

the combination of the baby boom followed by the baby bust.

the period of time after 1966, when the baby boom ended and the birth rate stabilized at a lower level. Also, refers to the group of individuals born during this time period.

A sales charge levied when mutual funds mutual fund units are redeemed.

a debt owing to the taxpayer that he is virtually certain he will not be able to collect. A debt will not be uncollectable at the end of a particular taxation year unless the creditor has exhausted all legal means of collecting it or the debtor has become insolvent and has not means of paying it.

 

(a) provides a clear picture of your assets and liabilities, including short-term debt obligations that are of particular concern in money management.

(b) A financial statement showing the nature and amount of a company's assets, liabilities and shareholders' equity.

the day all taxes are due for the last taxation year and it varies depending on the taxpayer as follows (ITA 248(1)):

• a trust, 90 days after the end of the trust's fiscal year
• an individual who died after October in the year and before May in the following taxation year, the day that is 6 months after the day of death
• for other individuals, April 30th in the following taxation year

A mutual fund which has an investment policy of "balancing" it's portfolio, generally by including bonds and shares in varying proportions influenced by the fund's investment  outlook.

The rate at which the Bank of Canada makes short-term loans to chartered banks and other financial institutions, and the benchmark for prime rates set by financial institutions.

Short-term bank paper with the repayment of principal and payment of interest guaranteed by the issuer's bank.

you are bankrupt if you are insolvent and either you voluntarily make an assignment or your creditors are successful in lodging a receiving order against you.

equals net income, excluding OAS benefits, of the previous year.

 

include perceiving, thinking and remembering, feeding and dressing oneself, speaking, hearing, eliminating and walking. An individual’s ability to perform these activities is markedly restricted only where, even with the use of appropriate devices, medication and therapy, the individual is blind, or unable to perform the activity.

a basic progressive tax that is calculated as a percentage of income, which increases according to specific rates and income levels.

(a) an RRSP established to hold a specific investment product.

(b) Also called a regular RRSP. Typically holds a single type of investment such as a GIC, Canada Savings Bond, or mutual fund. Basic RRSPs are held and managed by a trustee, such as trust company or bank and are therefore considered to be managed accounts.

A declining financial market.

(a) Of an RESP contract is the person named by the subscriber as the person who is the intended recipient of the educational assistance payments from an RESP plan.

(b) any person entitled to benefits from a DPSP and includes an employee or former employee for whom the employer has contributed amounts to the plan; or in the case of death, the estate or person designated as the beneficiary by the employee or former employee.

(c) a person to whom, or for whom, a promoter agrees to pay educational assistance payments when the beneficiary is qualified to receive them (ITA 146.1(1), “beneficiary”). Generally, there are no restrictions on who can become a beneficiary.

the retirement benefits earned under a pension plan during the year, measured in dollars per year at retirement; used for the purpose of calculating an individual’s pension adjustment and RRSP contribution room.

a defined-benefit plan that relates the amount of pension benefit payable at retirement to the best-earnings of an employee’s career (usually over a three to five consecutive year period), as well as his number of years of credited service.

A statistical term used to illustrate the relationship of the price of an individual security or mutual fund unit to similar securities or financial market indexes.

A proposal to buy a specific quantity of securities at a named price.

A descriptive term usually applied to high grade equity securities.

the provision of meals and other services

A standard number of shares for trading transactions. The number of shares in a board lot varies with the price level of the security, although in most cases a board lot is 100 shares.

A committee elected by the shareholder's of a company, empowered to act on their behalf in the management of company affairs. Directors are normally elected each year at an annual meeting.

A long-term debt instrument with the promise to pay a specified amount of interest and to return the principal amount on a specified maturity date.

A mutual fund whose portfolio consists primarily of bonds.

(a) The value of net assets that belong to a company's shareholders, as stated on the balance sheet.

(b) the adjusted cost base of the investment.

(c) when this term is used from the point of view of a corporation and its financial statements, it refers to the company’s total shareholders’ equity, or the sum of all initial capital investments plus any earnings of the corporation that have been retained (i.e., the profits that are left in the company after it pays dividends). When this term is used from the point of view of the investor, it refers to the amount that the investor paid for the shares. The two book values may differ, depending on the market demand for the corporation’s shares.

writing cheques with insufficient funds in the account to cover the cheque amount.

an additional benefit, of a value that approximates anticipated CPP/QPP benefits, provided by some plans to members who retire before age 65, and until such time as they reach age 65 and CPP/QPP benefits commence.

An agent who handles the public's orders to buy and sell securities, commodities, or other property. A commission is generally charged for this service.

a plan for how you are going to allocate your money.

 

An advancing financial market.

includes a profession, calling, trade, manufacture or undertaking of any kind, and with a few exceptions, an adventure or concern in the nature of trade (ITA 248(1)).

any step in the process of creating, producing or delivering a good or service in exchange for payment in money or other valuable consideration.

any income that a proprietor or partner (other than a limited partner) earned as a result of carrying out business activities

a loss incurred by the taxpayer when he disposes of shares of a small business corporation or a debt owed to him by a Canadian-controlled private corporation for proceeds less than ACB plus expenses. The disposition must be to an arm’s length person; or the disposition must be deemed to have occurred as a result of the recognition of a bad debt or shares of an insolvent company under ITA 50(1).

occurs when business expenses exceed revenue. A business loss is reported on the taxpayer’s general tax return as a negative amount and is thus effectively deducted from other income.

the external relations between a corporation and those who deal with it as a business enterprise, such as its customers, suppliers, employees, government regulators and society as a whole.

includes tax deductible expenses for the business use of a work space in the taxpayer's home, as long as one of these conditions is met (ITA 18(12)):

• it is the taxpayer's principal place of business
• the taxpayer uses the space only to earn business income and uses it on a regular and ongoing basis to meet clients, customers or patients

Purchasing a security partly with  borrowed money.

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includes the 365 consecutive days (366 days during a leap year) from January 1 to December 31.

 

gives the owner the right to purchase a particular stock at a certain price until a particular date.

Preferred shares or bonds that give the issuing corporation an option to repurchase , or "call" those securities at a stated price. These are also known as redeemable securities.

(a) A federal program that will provide a grant of 20% of certain RESP contributions for beneficiaries under age18. Also known as CESG.

(b) a federal program that will provide a grant of 20% of certain RESP contributions for beneficiaries under age18.

(c) a grant that is paid by Human Resources Development Canada (HRDC) to the trustee of an RESP for deposit on behalf of the beneficiary.

(b) a federal government program designed to provide monthly pensions to contributors in retirement, to disabled contributors and their children, and to the widows, widowers and orphaned children of deceased contributors.

(a) A federally sponsored retirement program designed to provide retirement benefits, disability benefits, survivor benefits, and death benefits. The Canadian Pension Plan does not apply in Quebec. Also known as CPP.

A bond issued each year by the federal government. These bonds can be cashed in at any time for their full face value.

(a) This financial aid program established by the federal government is used to help students cover the cost of post-secondary education. Also known as CSLP.

(b) this financial aid program established by the federal government is used to help students cover the cost of post-secondary education.

Small business investment trusts. Also known as CCPC.

a corporation resident in Canada.

 

The Canadian Securities Administrators is a policy making body composed of members from each provincial securities commission. Its mandate is to draft national policy statements for the securities industry. Also known as CSA.

a Canadian private corporation that is not controlled directly or indirectly by one or more non-residents or public corporations (ITA 125(7)).

 

Generally, the money or property used in a business. The term is also used to apply to cash in reserve, savings, or other property of value.

generally means the full cost to the taxpayer of acquiring the depreciable property, including legal, accounting or other fees incurred to acquire the property.

 

(b) a tax concept that recognizes that assets lose value through depreciation, but it does not necessarily measure it in the same way as depreciation for accounting purposes.

(a) A taxation term, equivalent to depreciation, that makes allowance for wearing away of a fixed asset.

a debt receivable, other than accounts receivable, acquired by the taxpayer for the purpose of producing non-exempt income from a business or property; or as consideration for the disposition of capital property.

a notional account in a corporation’s accounting system that records the total of the tax-free 50% of capital gains, part of the death benefits from company-held life insurance policies and the tax-free portion of sales of goodwill (ITA 89(1)).

payments that the shareholders receive from the corporation’s capital dividend account. Because the capital dividend account represents income or gains that are not otherwise taxable, the capital account dividend income is not taxable to the shareholders when it is received. This type of dividend is not paid regularly (ITA 89(1)).

(a) a gain resulting from the disposition of most types of property as long as that gain is not included in the taxpayer's income under any other provision of the Income Tax Act (ITA 39(1)(a)). This definition of capital gain specifically excludes gains on the disposition of certain types of property, including:

• eligible capital property
• gains on inventory (i.e., profits on goods held for resale)
• the unpaid interest on bonds that are sold between coupon dates
• insurance policies (except for gains on related segregated funds)

A capital gain is calculated as the amount by which the taxpayer's proceeds of disposition exceed his adjusted cost base and any outlays or expenses he incurred for the purpose of making the disposition (ITA 40(1)(a)).

(b) Profit that is gained from the sale of real estate, securities , or another capital asset.

a deduction that a taxpayer may be able to make for the current taxation year. He must have included in his income taxable capital gains (including reserve amounts) that have resulted from the disposition of either qualified farm property or qualified small business corporation shares (ITA 110.6).

the payment made by an investment corporation when it realizes a capital gain on an investment. The dividend flows through to the shareholder as a capital gain.

a provision that allows a taxpayer to defer, within limits, reporting a portion of the realized capital gain to the year in which he receives the proceeds of the disposition (ITA 40(1)(a)(iii)).

(a) a loss resulting from the disposition of most types of property, unless it is deductible from the taxpayer’s income under any other provision of the Income Tax Act (ITA 39(1)(b)). This definition thus excludes losses on those properties listed as exclusions under the term “capital gain”, plus losses on any depreciable capital property. A capital loss is calculated as the amount by which the sum of the taxpayer’s adjusted cost base and any outlays or expenses that he incurred for the purpose of making the disposition exceed the proceeds of the disposition (ITA 40(1)(b)).

(b) The loss that results when a capital asset is sold for less than its purchase price.

any depreciable property of the taxpayer, plus any property (other than depreciable property) that would result in a capital gain or capital loss when the taxpayer disposes of it (ITA 54(b)).

All ownership shares of a company, both common and preferred.

The total amount of all securities, including  long-term debt, common and preferred stock, issued by a company.

a defined-benefit plan that relates the amount of pension benefit payable at retirement to average earnings during an employee’s career, as well as his number of years of credited service.

Unused RRSP contribution room that is carried forward to a later year.

a process by which the balance of RRSP contribution room remaining after that year’s contributions may be carried forward to be used in a future calendar year.

a tax deduction for fees incurred from management or safe custody of investments, safety deposit box charges, accounting for recording investment income and investment council fees.

Assets that can be quickly converted to cash. These include receivables, Treasury bills, short-term commercial paper and short-term municipal and corporate bonds and notes.

the actual after-tax cash distributed to, or realized by, the investor while he holds the investment and upon the liquidation of the investment.

the routine, day-to-day administration of your cash resources.

a method of accounting for business income whereby the taxpayer reports income in the year received and deducts expenses in the year paid.

The amount of cash a person may obtain by voluntarily surrendering a life insurance policy.

the equity amount available to the annuitant of a commutable annuity if he decides to surrender the policy back to the provider — depending on the contract it may be the full equity value, or the equity value less a surrender charge.

See Canadian Controlled Private Companies.

a reduction in federal tax of 7% that is available to Canadian controlled private corporations, beginning in 2001, on up to $100,000 of active business income that is in excess of the income that is eligible for the small business deduction (draft ITA 123.4 (3)).

Both impetuous and anxious, a dangerous combination. They are the individuals who must keep up with every fad and new scheme for fear of missing something good or being left out. Doctors and dentists often fall within this category, as well as the more obvious celebrities and entertainment personalities.

 

A document providing evidence of ownership of a security such as a stock or bond.

(a) Certificate that acknowledges a student as eligible for the Canada Student Loans Program.

(b) certificate that acknowledges a student as eligible for the Canada Student Loans Program.

a PSPA that has been reviewed and approved by CCRA because it can be accommodated by the taxpayer’s available RRSP contribution room.

See Canada Education Savings Grant.

a document that transfers the ownership of collateral assets to your lender if you default on your debt.

for the purpose of the farm rollover rules, this includes a child of the taxpayer, a stepchild, an adopted child (including a child adopted in fact), a grandchild, a great-grandchild or the spouse or common-law partner of any child as previously defined.

 

Permits the deduction of up to $7,000 of child care costs for children under 7 years, $4,000 for children who are under 16 years of age at some point during the year or $10,000 for children of any age for whom the disability tax credit applies.

(a) Is a federal tax credit aimed at low- and middle-income families. The amount is based on the ages and number of children, family income and care expenses. The basic benefit is $1,110 per year or $92.50 per month for each child under 18.

(b) is a federal tax credit aimed at low- and middle-income families. The amount is based on the ages and number of children, family income and care expenses. The basic benefit is $1,110 per year or $92.50 per month for each child under 18.

reduction of social security benefits based upon net income.

the clawback threshold is indexed by the CPI. For 2001, the age credit clawback threshold is $26,941. The clawback rate is 15%.

a 100% repayment of, or tax on, OAS benefits at a rate of 15% of net income above a threshold amount. For 2001, the OAS clawback threshold is $55,309.

see RRSP wrapper.

A fund company that issues a fixed number of shares. It shares are not redeemable, but are bought and sold on stock exchanges or over-the-counter market.

an investment corporation that issues a fixed number of shares that are subsequently bought and sold on a stock exchange in the secondary security market or in the over-the-counter market. Once all of the shares are sold, the investment corporation does not issue any new shares.

a private corporation where there are only a few shareholders (or even only one shareholder) and where shares are not distributed to the publicy.

is equally responsible for the debt with the principal debtor whether or not the principal debtor defaults on the loan.

assets used to secure a loan.

A negotiable corporate promissory note with a term of a few days to a year. It is generally not secured by company assets.

shares that represent the true equity ownership of the corporation, such that the shares will increase in value as the shareholders’ equity increases.

A security representing ownership of a corporation's assets. Voting rights are normally accorded holder's of common stock.

for the purpose of the Income Tax Act, a person of the same or opposite sex who, at that particular time, is living with you in a conjugal relationship, and is the natural or adoptive parent (legal or in fact) of your child; or had been living with you in such a relationship for at least 12 continuous months, or had previously lived with you in such a relationship for at least 12 continuous months (when you calculate the 12 continuous months, include any period of separation of less than 90 days). Common-law partners have all of the same rights and obligations as spouses under the Income Tax Act.

any trust created by the taxpayer under which:

• his common-law partner is entitled to receive all of the income of the trust that arises before her death
• no person except his common-law partner may, before her death, receive or otherwise obtain the use of any of the income or capital of the trust (ITA 73(1.01)(c)(i))

a single lump-sum payment from an annuity that is equal to the present value of the future annuity payments from the plan.

 

convert an annuity to a single sum that represents the present value of all future payments.

the single sum that represents the present value of all future pension payments that an individual is entitled to receive.

converting an annuity to its equivalent lump sum value.

The process by which income is earned on income that has previously been earned. The end value of the investment includes both the original amount invested and the reinvested income.

requires projecting your cash flow pattern into the future in a way that reflects your new objectives and money management strategies. This cash flow projection then becomes your budget for the coming year.

for the purpose of determining whether Part IV Tax applies, two corporations are deemed to be connected if, at any time in a taxation year of the recipient corporation the payer corporation was controlled by the recipient corporation; or the recipient corporation owned more than 10% of the payer corporation (as measured by specific rules) (ITA 186(2)).

(a) shareholders owning at least 10% of the issued shares.

(b) someone who has the influence to affect business policies, either because of his direct involvement in the company, or because he is related to someone of influence.

A document, which consolidates student loan(s) and establishes the repayment terms.

a loan for a fixed amount and for a fixed purpose, usually repayable in regular installments (also called a direct or fixed loan).

A statistical device that measures the change in the cost of living for consumers. It is used to illustrate the extent that prices have risen or the amount of inflation that has taken place.

measures the price of a specific basket of goods on a national basis.

a proposal that you prepare, with the assistance of a licensed trustee, asking your creditors to reduce your debt or extend the schedule for repayment of your debts.

An arrangement whereby an investor contracts to purchase a given amount of a security by a certain date and agrees to make partial payments at specified intervals.

(a) The amount you can contribute to your RRSP each year.

(b) the amount that an individual may contribute to an RRSP and deduct from his current income, after accounting for current income and any pension adjustments and carry-forward amounts.

(a) earnings that are subject to pension contributions. This amount may or may not be the same as taxable income as reported for income tax purposes.

(b) all employment earnings above a basic exemption level, up to a yearly maximum, upon which Canada Pension Plan premiums are payable.

the period which commences on the later of January 1, 1966 or a person’s 18^th birthday, and which extends to age 60, or to age 70 if the individual continues to work and does not apply for a retirement pension.

pension plans that require the employee to contribute to the pension fund.

in the context of determining whether two corporations are associated, this refers to de facto control, or control in fact, regardless of actual share ownership (ITA 256(5.1)). In the context of determining whether two corporations are connected for the purpose of determining Part IV tax, a corporation is controlled if more than 50% of its voting shares are held by another corporation or by persons with whom the other corporation does not deal at arm’s length (ITA 186(2), (4)).

changing highly taxed income into more favourably taxed income.

the rate that is applied to the eligible amount to calculate the amount of the tax credit. The conversion rate for most federal and provincial tax credits is the tax rate for the first tax bracket.

A security that can be exchanged for another. Bonds or preferred shares are often convertible into common shares of the same company.

(a) A legal business entity created under federal  or provincial statutes. Because the corporation is a separate entity from its owner, shareholders have no legal liability for its debts.

(b) a business form that is recognized by the legal system as being a non-human individual with its own rights and duties, defined by the following characteristics: limited liability; continuous existence; separation of management and ownership; ease of transfer of ownership; and no duty of loyalty from the owners.

The annual interest rate of a bond.

See Canadian Pension Plan.

the taxpayer’s pensionable earnings, and the contributions the taxpayer pays on them over the years.

 

for employees who retire before age 65 a CPP supplement is added to the employer pension until age 65 to provide a 2% benefit.

an amount that a taxpayer can claim on his tax return to offset the amount of tax that he has to pay on his taxable income.

 

a financial advisor who specializes in credit problems

 

consists of a series of ratings provided by the lenders of previously- or currently-held loans and credit cards

 

a historical record of your past credit history, maintained by a credit bureau.

the division of the CPP pension credits which the couple built up during the time they lived together can be divided equally between them when a relationship ends.

 

See Canadian Securities Administrators.

See Canada Student Loans Program.

for the purpose of determining civil liability for advisors, this is conduct, whether it be an act or a failure to act, that:

• is tantamount to intentional conduct
• shows an indifference as to whether the Act is complied with
• shows a wilful, a reckless or a wanton disregard of the law (draft ITA 163.2(1))

the amount by which the aggregate of a taxpayer’s investment expenses exceeds the aggregate of his investment income for all taxation years after 1987 (ITA 110.6(1)).

 

Currency Risk- Also known as exhange rate risk. This is the risk that exists when dealing in investments denominated in different currencies. Contrary movements in the currencies may create or increase a loss.

An asset that could be converted into cash within 12 months.

the lesser of (18% of earned income in the previous year and the maximum current contribution limit). Also referred to as the RRSP dollar limit.

 

A liablity that has to be paid within 12 months.

The annual rate of return that an investor purchasing a security at its market price would realize. This is the annual income from a security divided by the current price of the security. It is also known as the return on investment.

an alternative method of calculating required tax instalments, whereby the taxpayer can pay one quarter of his estimated net tax owing and CPP contributions payable for the current taxation year on each instalment date (ITA 156(1)(a)(i)).

A financial institution, usually a bank or trust company, that holds a mutual fund's securities and cash in safekeeping.

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a lump sum benefit of a maximum of $2,500 payable under the Canada Pension Plan to the spouse or common-law partner or estate of a deceased contributor.

 

A bond unsecured by any pledge of property. It is supported by the general credit of issuing corporation.

An obligation to repay a sum of principal, plus interest. In corporate terms, debts often refers to bonds or similar securities.

an amount that a taxpayer can deduct on his tax return to reduce the amount of income that is subject to tax.

situations in which the Income Tax Act presumes a disposition to have occurred; generally involves transactions that do not give rise to proceeds.

the amount that the taxpayer is deemed to have received upon an actual or deemed disposition as a result of the many rules contained in the Income Tax Act.

 

(a) the strategy of postponing the payment of taxes.

(b) A form of tax sheltering that results from an investment that offers deductions during the investor's high-income years, and/or postpones capital gains or other income until after retirement or during another period when income level is expected to change.

a life or term annuity that does not commence to be payable until some point at least one year in the future (as opposed to an immediate annuity, which must commence payments within one year of purchase).

 

A plan that allows an employer to set aside a portion of company profits for the benefit of employees. A corporation makes a contribution to the plan on behalf of an employee.

a form of trust fund, registered with CCRA in accordance with the Income Tax Act, to which an employer makes contributions on behalf of its employees.

A registered pension plan that guarantees a specific income at retirement, based on earnings and the number of years worked.

An employer-sponsored pension plan. The employer guarantees a specific amount of pension at retirement. This amount is usually calculated based on earnings and the number of years of service.

A registered pension plan that does not promise an employer a specified benefit upon retirement. Benefits depend on the performance of investments made with contributions to the plan

Also known as a money purchase plan. The employer guarantees the contributions made to the employee's plan but not the income at retirement. Retirement income is determined by the performance of the underlying investments.

any plan that defines the amount of the pension benefit payable at retirement, usually by way of a formula that relates the value of the pension benefits to earning levels and years of service.

any plan that defines the amount of the pension benefit payable at retirement, usually by way of a formula that relates the value of the pension benefits to earning levels and years of service.

a plan in which the contribution required from the employer and the employee is known up-front, but for which the ultimate benefits are not known. The value of the pension will depend on what can be purchased by the total accumulation of contributions plus interest — hence the alternate term of money-purchase plan.

 

a plan in which the contribution required from the employer and the employee is known up-front, but for which the ultimate retirement benefits are not known.

the study of the age distribution of a population and its effect upon the social and economic structure of that population.

The principal amount, or value at maturity, of a debt obligation. Also known as the par value or face value.

a tax liability that may arise as a result of the deemed disposition of capital property at fair market value that occurs when a taxpayer ceases to be a resident of Canada.

a child who is under the age of 18, or who is between the ages of 18 and 25 and who is in full-time attendance at an approved educational institution.

 

generally any tangible or intangible property that fits into one of the prescribed classes for which CCA can be claimed.

(a) or depreciation expense is an accounting concept that recognizes as an expense an estimate of the decline in value of an asset used to produce income as the result of exhaustion, wear and tear, and obsolescence.

(b) Charges made against earnings to write off the cost of a fixed asset over its estimated useful life. Depreciation does not represent a cash outlay. It is a bookkeeping entry representing the decline in value of an asset that is wearing out.

Derivative products are investments whose value and returns depend on the value of the underlying securities.

a lump-sum amount that a spouse or common-law partner, child or grandchild is entitled to receive from a RRIF as a result of the death of the annuitant.

a university, college or other educational institution that qualifies for the purposes of the education tax credit that a taxpayer can claim on her tax return.

 

in the context of the income attribution rules, includes the spouse or common-law partner of the taxpayer, as well as any person who is under 18 years of age as of December 31 of the year and who does not deal with the taxpayer at arm’s length, or is the niece or nephew of the taxpayer (ITA 74.5(5)).

IPPs that are established primarily for connected persons or high earners. They are subject to numerous special rules related to funding, pensionable service, and the salary on which benefits can be based.

an audit in which CCRA’s scrutiny is limited to requesting that the taxpayer mail in supporting documentation or receipts.

see consumer loan.

individuals who are appointed to manage the business and affairs of the corporation.

 

a non-refundable tax credit for mental or physical impairment based upon an indexed amount. For 2001, the amount is $6,000.

a monthly benefit payable under the Canada Pension Plan to a disabled contributor.

under the CPP, suffering from a prolonged and severe medical impairment of a physical or mental nature, such that the disabled individual is medically incapable of regularly pursuing any substantially gainful employment.

includes the taxpayer, or a person related to the taxpayer by blood, marriage or adoption, where that person is entitled to claim the disability amount for the year of the HBP withdrawal.

an official act in a bankruptcy that cancels the unpaid portions of any debts that remain after they have been reduced by proceeds from the liquidation of your estate.

The amount by which a bond sells on the secondary market at less than its par value or face value.

any transaction or event that entitles a taxpayer to proceeds of disposition (ITA 54), as well as:

• any redemption or cancellation of a taxpayer's interest in shares, bonds, debentures, notes, certificates, mortgages, agreements of sale or similar property
• any expiration of options held by the taxpayer to acquire or dispose of property
• any transfer of property to a trust, including transfers to RRSPs, deferred profit sharing plans, employees' profit sharing plans or registered retirement income funds

Payments to investors by a mutual fund from income or profit realized from sales of securities.

The investment in a number of different  securities. This reduces the risks inherent in investing. Diversification may be among types of securities, companies, industries or geographical locations.

 

(a) A per-share payment designated by a company's board of directors to be distributed among shareholder's. For preferred shares, it is generally a fixed amount. For common shares, the dividend varies with the fortunes of the company and the amount of cash on hand. It may be omitted if business is poor or the directors withhold earnings to invest in plant and equipment.

(b) a payment by a corporation of a share of the earnings of the corporation to a shareholder. It is included in taxable income of shareholders.

A mutual fund that invest in common shares of senior Canadian corporations with a history of regular dividend payments at above average rates, as well as preferred shares.

the first part of the dividend gross-up and tax credit scheme, which requires the taxpayer to include 125% of dividends from taxable Canadian corporations in his taxable income for the year (ITA 82(1)). The second part of the scheme allows him to claim a federal dividend tax credit of 13¹/₃% of the grossed-up dividend, or 16²/₃% of the original dividend amount (ITA 121). A provincial dividend tax credit is also available.

 

a dividend that is paid in the form of shares in a corporation other than the payer corporation, such that it is not considered to be a stock dividend.

(a) the second part of the dividend gross-up and tax credit scheme that allows a taxpayer to claim a federal tax credit of 13¹/₃% of the grossed-up dividend (ITA 121).

(b) An income tax credit available to investors who earn dividend income through investments in the shares of Canadian corporations.

A principal of investing which entails the use of equal payments for investment at regular intervals in the hope of reducing average share cost by acquiring more shares in periods of lower securities prices and fewer shares in periods of higher securities prices.

bonds and money market investments that are issued by a Canadian borrower, but denominated in a foreign currency.

 

obtaining an extra year’s worth of deductible contribution to a registered plan.

 

a reasonable and well-researched basis for an investment recommendation.

Subscribers can contribute to an RESP until the end of the 21st year after the year in which they make the first contribution, for a total of 22 years of contributions.

an obligation to gather and analyze all relevant information with respect to a client’s situation and the potential investment strategy before a recommendation is made.

 

an obligation to clearly and accurately describe conclusions regarding his financial situation to a client, as well as the recommended wealth accumulation strategies, and the levels and types of risk associated with those strategies.

 

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See Educational Assistance Payment.

(a) For tax purposes, earned income is generally the money made by an individual from employment. It also includes some taxable benefits. Earned income is used as the basis for calculating RRSP maximum contribution limits.

(b) the basis for calculating the current RRSP contribution limit; generally includes net income from employment, business and rentals.

A financial statement showing the income and expenses of a business over a period of time. Also known as an income statement or profit and loss statement.

(a) An amount of $400 per month for full-time students and $120 per month for part-time students.

(b) An amount for each whole or part month enrolled in a qualifying educational program for a non-refundable tax credit.

The federal education tax credit is calculated as (the education amount × the rate for non-refundable tax credits) for each month enrolled as a student (ITA 118.6 (2)).

Another name for a Registered Education Savings Plan (RESP).

any amount paid, or payable under an RESP to, or for a beneficiary to assist with that individual’s education at the post-secondary school level (ITA 146.1(1), "educational assistance payment").

the portion of a designated benefit that may be transferred to the beneficiary’s RRIF.

 

includes goodwill and other "nothings", the cost of which neither qualifies for capital cost allowance nor is deductible in the year of its acquisition as a current expense.

 

in the context of the childcare expense deduction, this includes the child of the taxpayer or his spouse or common-law partner, or a child who was dependent on the taxpayer or his spouse or common-law partner and who had a net income of less than $6,956 in 1998 (ITA 63(3)).

for the purpose of calculating the small business deduction, eligible income is the lesser of active business income, taxable income and $200,000.

any of the following:

• a university, college or other educational institution that has been designated for purposes of the Canada Students Loans Act or the Canada Student Financial Assistance Act, or is recognized for purposes of the Quebec Student Loans and Scholarship Act
• an educational institution in Canada that is certified by the Minister of Human Resources Development to be providing courses, other than courses designed for university credit, that give a person occupational skills or that improve a person's occupational skills
• a university, college or other educational institution outside Canada that provides courses at a post-secondary school level, provided that the beneficiary is enrolled in a course that runs at least 13 weeks (ITA 146.1(1), "post-secondary educational institution").

an employment benefit by which a corporation gives or sells stock options to its employees as an incentive for them to work towards increasing the market value of the corporation.

certain rights that a corporation may grant to its employees or to the employees of a non-arm’s length corporation that allow the employee to acquire shares of either of those corporations.

anything a taxpayer receives in respect of an office or employment including salary, wages and other remuneration, such as gratuities. It also includes the value of certain fringe benefits. Employment income is fully taxable (ITA 5(1) and 6(1)).

 

The net worth of a company. This represents the ownership interest of the shareholders (common and preferred) of a company. For this reason, shares are often known as equities.

A mutual fund whose portfolio  consists primarily of common stocks.

the ratio of net assets (i.e., assets minus liabilities) to total assets.

Equity Ratio = ((assets – liabilities) ÷ assets)

 

the investment return required before tax to be as well off as paying down debt.

 

an amount for a non-refundable tax credit claimed by anyone who was single, divorced, separated or widowed at any time in the tax year and who supported a dependent who was under 18, related by blood or marriage, living with you in a home which you maintained and residing in Canada, during that tax year.

a tax planning strategy that freezes the value of an asset at the time the freeze is effected, such that any future growth in those assets will be passed on to the owner’s intended beneficiaries, ultimately to be taxed in their hands when they dispose of them.

any withdrawals from a RRIF in excess of the minimum amount.

 

the possibility of loss, as measured in a specific currency, arising from an increase in the value of that currency relative to the currency in which the property is denominated. Also called exchange risk.

See individual pension plan.

a PSPA that does not have to be certified by CCRA. This occurs in situations where the past service event applies to most of the plan members, and where few of those members are highly paid.

 

see technical notes.

 

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The principal amount, or value at maturity, of a debt obligation. Also known as the par value or denomination

the amount of principal repayment.

the interest payment.

(a) The price at which the property could have reasonably been expected to be sold if it was sold in an open market.

(b) The price a willing buyer would pay a willing seller if neither was under a compulsion to buy or sell. The standard at which property is valued for a deemed disposition.

a direct falsehood, as well as statement that is misleading because of an omission from the statement.

An inter vivos trust established with family members as beneficiaries.

for the purpose of the rollover rules this includes land and depreciable property used in the business of farming (ITA 73(3)), as well as capital stock of a family farm corporation or an interest in a family farm partnership (ITA 73(4)).

a reduction of corporate federal tax in the amount of 10% of taxable income intended to make room for the provinces to levy their own corporate tax (ITA 124(1)).

the net adjusted taxable income is multiplied by 17% (16% after 2000), to give the gross minimum amount.

an annual disclosure by the federal government outlining the government’s anticipated revenues and expenditures for the year; also a source of most proposals for major income tax changes.

13.33 % of taxable dividends from taxable Canadian corporations.

 

a tax credit that reduces the taxpayer’s basic federal tax by the same amount regardless of her marginal tax rate.

An individual or institution occupying a position of trust. An executor, administrator or trustee. Hence, " fiduciary" duties.

a more comprehensive form of audit in which CCRA will send an auditor to the taxpayer’s residence or place of business, where the auditor will take a detailed look at the taxpayer’s records and receipts.

a defined-benefit plan that relates the amount of pension benefit payable at retirement to the average final-earnings of an employee’s career (usually over the last three to five years), as well as his number of years of credited service.

in the context of determining a designated benefit, a child or grandchild who is considered to have been financially dependent on a deceased RRIF annuitant, if that child or grandchild’s income in the year preceding the death of the annuitant was less than or equal to the basic personal amount as it relates to personal tax credits.

 

a financial instrument whose value is based upon another more elementary financial instrument.

 

anyone who has not owned a home that she occupied as her principal residence at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal.

 

The policy pursued by government to manage the economy through its spending and taxation powers.

an accounting period that normally covers 365 consecutive days (366 days during a leap year) such that at the end of this period the business closes its books for the year and determines its profit or loss for that period. Also called a taxation year.

 

a term of life, indexed or non-indexed annuity with the amounts of the payments based upon a specified interest rate at the time of purchase.

Assets of a long-term nature, such as land and buildings.

Investments that generate a fixed amount of income that does not vary over the life of the investment.

Any corporate liability that will not mature within the following fiscal period. For example, long-term mortgages or outstanding bonds.

see consumer loan.

A plan that provides the mutual fund investor with fixed-dollar payments at specified intervals, usually monthly or quarterly.

A plan through which the mutual fund investor's holdings are fully depleted through regular withdrawals over a set period of time. A specific amount of capital together with accrued income, is systematically exhausted.

a defined-benefit plan where retiring members receive a flat rate benefit, regardless of their earnings.

 

a tax concept whereby investment and property income, including capital gains, dividends and interest, pass to the investor while retaining its character for tax purposes.

The portion of an RRSP that can be held in foreign investments. The current limit is 30% of the book value of the total assets held in an RRSP.

generally consists of shares, units and debt issued by non-resident entities.

 

the Income Tax Act imposes a limit on the foreign property for each RRSP. The limit was 20% for years prior to 2000, but it was increased to 25% for 2000 and 30% for years after 2000.

 

in respect of deferred income plans generally limits the amount of foreign property that such a plan can hold. This limit applies to each RRSP of an individual.

the limit is 30%.

in the context of calculating a Section 80 gain, this is generally calculated as the principal amount of the loan, reduced by any amount paid at the time of settlement in satisfaction of the principal amount.

real property, other than certain rental properties, that was used primarily by the taxpayer or someone related to the taxpayer for the purpose of earning business income (ITA 248(1)).

see Act of Bankruptcy.

 

the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer by virtue his employment or office is also taxable as employment income (ITA 6(1)(a)).

A sales charge levied on the purchase of mutual fund units.

with interest means that the payments in the early period of your loan consist mostly of interest.

corporate income that does not benefit from any other special effective rates provided for under the Income Tax Act than the general rate reduction (draft ITA 123.4(1)). It does not include manufacturing and processing income, investment income earned by a CCPC, income eligible for the small business deduction, or income that is eligible for the accelerated general CCPC rate reduction.

 

Also referred to as portfolio manager. A fund manager is a trained investment professional who is responsible for managing a fund's portfolio. Among other things, the fund manager makes all the decisions regarding the buying and selling of the securities in the fund.

A method of evaluating the future prospects of a company by analyzing its financial statements. It may also involve interviewing the management of the company.

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a new reporting format introduced by CCRA for the purpose of standardizing the reporting of financial statement information. The GIFI assigns a code number to items that are typically reported on financial statements and the corporation must enter all of its information using these codes.

a member of either a general partnership or a limited partnership who has unlimited personal liability for the debts and liabilities of the partnership.

 

a partnership that consists only of general partners.

a reduction to the general federal tax rate of 38% that can be applied to full-rate taxable income, beginning in 2001 (draft ITA 123.4(1)). The reduction is 1% for the portion of qualifying income that falls in 2001, 3% for 2002, 5% for 2003, and 7% for 2004 and later years.

See Guaranteed Income Supplement.

the amount required in order to meet an objective which requires an accumulation of funds.

Is a tax credit introduced to help low income families compensate for any increase in living cost resulting from the Goods and Services Tax (GST). Most secondary students do not have significant income and are eligible for the tax credit worth about $300 per year.

is a tax credit introduced to help low income families compensate for any increase in living cost resulting from the Goods and Services Tax (GST). Most secondary students do not have significant income and are eligible for the tax credit worth about $300 per year.

in cases where the tax rules have changed over time, these are special provisions in the Income Tax Act that ensure that the old rules still apply to situations that already existed before the new rules were introduced.

Beginning with 1998, each child under age 18 who is resident in Canada accumulates grant contribution room at a rate of $2,000 per year up to and including the year in which the child turns 17. The grant room accumulates whether or not the child is currently an RESP beneficiary, and any unused contribution room is carried forward.

 

amounts that a taxpayer receives either from her employer or from others in respect of her service with that employer.

(b) Employment and business income before-taxes.

(a) Income before taxes including wages, liquid assets, income from investments, and monetary gifts.

 

RESPs that operate on a pooling principle, where the beneficiary named under a contract by a subscriber will receive educational assistance payments only if he enrolls in a qualifying program. These are also referred to as pooled RESPs, education trusts or scholarship trusts.

 

(a) A variation on basic RRSPs, typically sponsored by an employer, union or professional association and managed by a trust or insurance company on behalf of the group.

(b) Company sponsored retirement group savings plan.

Shares of companies whose earnings are expected to increase at an above-average rate. Growth stocks are often typified by their low yields and relatively high price/earnings ratios. Their prices reflect investors' belief in the future earnings growth.

See Goods and Services Tax.

a pension that is payable for life, with a provision that payments are guaranteed to continue for a minimum number of years (such as five years), even if death occurs before the end of the guaranteed period.

(a) Non-taxable benefits available to low-income pensioners in addition to old-age security benefits. Also known as GIS.

(b) Provides additional benefits to low-income pensioners who meet a basic income test and is reduced by $1 for every $2 of income excluding OAS benefits.

(a) A deposit instrument paying a predetermined rate of interest for a specified term, available from banks, trust companies and other financial institutions.

(b) Investments purchased through banks and trust companies for one to five years maturity and with a fixed interest rate. Also called certificates of deposit (CDs).

a life annuity that includes a guarantee that at least the full amount of the initial investment or premium will be paid out before payments cease as a result of death.

 

a third party who agrees to repay any outstanding balance on your loan if you fail to do so. A guarantor is responsible for the debt only if the principal debtor defaults on the loan.

Both careful and somewhat worried about their money. People approaching retirement often migrate into this category as they realize that their future earnings are limited and they must preserve what they have to support themselves in the future.

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at any point in time is calculated as:

• the total of all eligible withdrawals that he made from his RRSPs under the HBP; minus
• the total of all amounts that he designated as an HBP repayment or that were included in his income because he failed to repay the required amounts to his RRSPs in previous years

for individual pension plans, are those earning more than 2.5 times the Yearly Maximum Pensionable Earnings.

a corporation that exists primarily for the purpose of holding or owning property.

Those purchasing a home for the first time can borrow up to $20,000 from their RRSPs. The borrowed funds must be repaid within 15 years in equal annual instalments. Also known as HBP.

see Reverse Annuity Mortgage (RAM).

a loan that the taxpayer uses to acquire a dwelling or a share in a co-operative housing corporation to live in, or that is used to repay a loan that was previously incurred for such a purpose (ITA 80.4(7)).

a loan that the taxpayer uses to acquire a new home in a new location as a result of a change in job location, provided that the distance between the old residence and the new work location is at least 40 kilometres greater than the distance between the new residence and the new work location (ITA 248(1)).

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See Investment Dealers Association.

properties that are the same in all material respects, such that a prospective buyer would not have a preference for one as opposed to another.

See the Investment Funds Institute of Canada.

usually, an annuity that yields its first payment one month after the annuity is purchased, although by strict definition it could take place within one year of purchase.

The designation specified when an account is established for another as beneficiary, usually for a minor.

the proportion of a capital gain that must be included in income, currently set at 50% for dispositions of capital property after October 17, 2000.

(a) deems the investment income to be taxable to the transferor, regardless of the legal ownership of the assets.

(b) A process specified under the Income Tax Act where certain investment income may be deemed taxable to a person other than the recipient if the investment income was the result of certain transactions between family members.

Mutual funds that invest primarily in fixed-income securities such as bonds,mortgages and preferred shares. Their primary objective is to produce income for investors, while preserving capital.

a tax planning strategy in which various techniques are used to minimize income taxes by establishing the same taxable income for each spouse or common-law partner or other members of a family unit.

The goal of income splitting is to build two streams of retirement income that are similar. The advantage is tax savings.

a tax that imposes the top federal tax rate of 29%, instead of the normal graduated rates, on split income earned by individuals under 18 years of age, (ITA 120.4(2)).

a federal statute documenting the majority of Canada’s income tax laws.

transitional rules introduced when the major overhaul of the tax system came into effect beginning in 1972.

the base income amount of base income at which the social security benefit is entirely clawed back

A mutual fund that matches its portfolio to that of a specific financial market index, with the objective of duplicating the general performance of the market in which it invests.

for a given taxation year beginning January 1 is the percentage change in the average CPI for the 12-month period ending on September 30 of the previous year relative to the average CPI for the 12-month period ending on September 30 of the year earlier.

an annuity that includes a provision for increased payments over time, as a hedge against inflation.

an RESP that can have multiple beneficiaries, provided that they are under 21 years old when named and they are all related to the subscriber by blood or adoption (ITA 146.1(2)(j)). Individuals who are related to the subscriber by blood or adoption could include parents, siblings, children or grandchildren, but the list does not include nieces or nephews (ITA 251(6)).

an RESP that can have only one beneficiary at any time. The beneficiary does not have to be related to the subscriber and can be over 21 when named.

 

an employer-sponsored, defined-benefit registered pension plan specifically established for the benefit of significant connected individuals or other highly-paid employees. Also called executive pension plan.

 

Confident, but unlike the adventurer, confidence is based on careful, methodical research and analysis. Lawyers, engineers and accountants are typically labelled as individualists.

A condition of increasing prices. In Canada, inflation is generally measured by the Consumer Price Index.

see real rate of return.

special bulletins published by CCRA that deal with the Department’s administrative and procedural practices, such as its collection policies, or objection and appeal procedures.

you are insolvent if you have debt obligations in excess of $1,000 and are unable to meet your obligations as they come due, have ceased making payments, or have debts due and accruing which exceed the value of your assets.

required to repay in fixed monthly payments, which consist of a blend of principal and interest.

a penalty that may be imposed on a taxpayer if her instalment payments are late or less than the required amount, and if the instalment interest charges for the taxation year are more than $1,000 (ITA 163.1)).

a sale of capital property in which the taxpayer receives the proceeds in installments over a period of several years.

periodic payments of income tax that some taxpayers pay to CCRA four times a year on March 15, June 15, September 15 and December 15.

a defined-benefit pension plan that is designed to build upon standard government benefits, such as those provided by the Canada or Quebec pension plans.

 

a trust created while still alive.

 

Payments made by a borrower to a lender for the use of the lender's money. A corporation pays interest on bonds to its bondholders.

the right to a semi-annual interest payment.

interest paid on money borrowed to earn property or business income.

on a mortgage, this is the present value of the difference between the interest expense to the end of the mortgage term or the borrower’s life expectancy at the original interest rate and at the current interest rate.

 

Helps full-time and part-time students who are finding it difficult to pay back their federal student loans because of low income. Relief is normally approved for 3-month periods for a maximum lifetime benefit of up to 30 months within the first five years of repayment when for this period the federal government pays the interest and she does not have to make any loan repayments.

A mutual fund that invests in securities of a number of countries.

special bulletins published by CCRA that outline the Department’s interpretation of specific sections or areas of income tax law, generally in something approximating plain language. In addition to explaining the basic rules, these bulletins often cover some of the more unique applications of, or exceptions to, the rules and sometimes provide useful illustrative examples.

The amount by which the price of a warrant or call option exceeds the price at which the warrant or option maybe exercised.

an asset that is used to store and earn value for future use.

Investment counsel to a mutual fund. Also may be the manager of a mutual fund.

personal or business assets that are meant to be liquidated to fund financial objectives.

 

ways that an investment can improve the financial situation of the investor, including increases in immediate cash flow, long-term appreciation or current tax deductions.

 

A corporation or trust whose primary purpose is to invest the funds of its shareholders.

a corporation that sells shares to investors or subscribers and uses the proceeds to purchase financial securities (ITA 130(3))

A firm or individual which furnishes investment advice for a fee.

A securities firm.

The national self-regulatory organization (SRO) for the securities industry. Also known as IDA.

A term generally interchangeable with "mutual fund."

The mutual fund industry trade association set up to serve its members, co-operate with regulatory bodies, and protect the interests of the investing public that use mutual funds as a medium for their investments.

The number of securities of a company outstanding. This may be equal to or less than the number of shares a company is authorized to use.

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a pension that is payable to two annuitants, and that includes a provision that payments will continue for the life of the survivor after the first annuitant dies.

 

an annuity in which it is payable to 2 people, but payments cease upon the death of either of the annuitants.

a "partnership-like" entity that is usually formed to carry out one transaction or a series of related transactions over a short period of time.

means that a creditor can obtain a judgement against the partnership and demand payment of the entire amount from any one or all of the partners.

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Information that mutual fund salespersons are required to gather on all clients in order to make appropriate investment decisions. Questions include: the client's age, annual income and net worth, occupation, tolerance for risk, investment objectives, investment knowledge, and experience.Also known as KYC.

See Know Your Client rule.

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Similar to mutual funds but must be sponsored by organized labour organizations. They offer federal and provincial tax breaks to encourage investment in small and medium-sized Canadian companies. Also known as LSIF.

a penalty that may be imposed on an individual who fails to file an income tax return, of 5% of the tax owing at the time the return was due; plus 1% of the tax owing times the number of complete months the return is not filed, to a maximum of 12 (ITA 162(1)).

 

An agreement whereby an investor agrees to make a series of purchases of mutual fund units.

The financial advantage of an investment that controls property of greater value than the cash invested. Leverage is usually achieved through the use of borrowed money.

(a) All debts or amounts owing by a company in the form of accounts payable, loans, mortgages and long-term debts.

(b) Debts or obligations that commit your client to making payments in the future.

the legal claim of one person upon the immovable property of another person for the payment of a debt or the satisfaction of an obligation.

(a) An annuity where payments are guaranteed for the duration of the lifetime of the annuitant(s), regardless of how long (or short) a period that the annuitant survives.

(b) An annuity under which payments are guaranteed for the life of the annuitant.

a life annuity that includes a clause that guarantees that payments will continue for a specified period, even if the annuitant dies before the guaranteed period expires.

 

the average number of years of life remaining for a person at a specific age, assuming the current mortality rates prevail for the remainder of that person’s life.

 

A plan through which a mutual fund investor's holdings are fully depleted while providing maximum periodic income over the investor's lifetime.

a RRIF that receives funds from a locked-in retirement account that provides for a life income by restricting both the minimum and maximum withdrawals from the plan. Furthermore, property held within a LIF must be used to purchase a life annuity by age 80. Also called as locked-in RRIF.

(a) An eligible individual is allowed to make tax-free withdrawals from an RRSP to finance full-time training or education for herself, and her spouse or common-law partner.

(b) An eligible individual is allowed to make tax-free withdrawals from an RRSP to finance full-time training or education for herself, and her spouse or common-law partner. Also known as LLP.

a provision in the Income Tax Act that sheltered $100,000 of total gains (or $75,000 of taxable capital gains) from taxation. The LCGE was eliminated by the Federal Budget of February 22, 1994.

 

Contributions to all RESPs on behalf of a beneficiary are subject to a lifetime limit of $42,000 for 1997 and later years.

refers to the basic benefit amount that is payable for life, calculated without any temporary supplements such as bridging benefits, or without any actuarial surpluses.

a term often used to refer to corporations because they give shareholders limited liability.

essentially the same as a general partnership, with the important exception that limited liability partners are not personally liable for the negligence of another partner.

a member of a limited partnership who has limited liability for the debts and liabilities of the partnership.

a partnership in which one or more of the partners has limited liability for the debts and liabilities of the partnership.

(a) The ease of converting an asset into cash without significant loss.

(b) Refers to the ease with which an investment may be converted to cash at a reasonable price.

a subset of personal-use property that includes only the following items (ITA 54):

• a print, etching, drawing, painting, sculpture or similar work of art
• jewellery
• a rare folio, rare manuscript or rare book
• a stamp
• a coin

See Lifelong Learning Plan.

A participant's LLP balance at any point in time is calculated as:

• the total of all eligible withdrawals that he made from his RRSPs under the LLP; minus
• the total of all amounts that he designated as an LPP repayment, or that were included in his income because he failed to repay the required amounts to his RRSPs in previous years

someone who withdraws money from her RRSP under the LLP. The LLP participant cannot fund the education of both himself and his spouse or common-law partner as students at the same time.

 

the person whose education is being financed using the LLP. The LLP student can be the same person as the LLP participant, or he can be the spouse or common-law partner of the LLP participant.

Commissions charged to holders of mutual fund units. ( See sales charge.)

A mutual fund that charges a commission to purchase its shares.

a loan from a taxpayer where:

• interest is charged at a rate equal to or greater than the lesser of:
• the prescribed rate as set by ITR 4301
• a rate that would have otherwise been considered reasonable for parties dealing at arm's length
• the specified person actually pays the interest to the taxpayer no later than 30 days after then end of the taxation year
• the specified person has consistently paid the interest owing no later than 30 days after the end of previous taxation years

refers to pension contributions that can no longer be taken out of the pension fund, but that instead must be used to provide a lifetime retirement income. While provincial pension legislation specifies that the funds must be used to provide a retirement income, the Income Tax Act specifies that the pension must begin no later than the end of the year in which the annuitant attains 69 years of age (ITR 8502e).

 

funds in a Locked-in retirement account (LIRA), Life income fund (LIF), or Locked-in retirement income fund (LRIF).

 

an RRSP from which the release of funds is prohibited, by pension legislation, unless the release is in the form of a retirement income from a life-income fund. Used to receive a transfer of vested benefits from a pension plan following termination of employment prior to retirement. Also called locked-in RRSP.

 

a RRIF, available in certain provinces that receives funds from a locked-in retirement account and provides for a life income by restricting both the minimum and maximum plan withdrawals. Unlike a LIF, there is no requirement to convert the amount in a locked-in retirement income fund to an annuity at any age.

see locked-in retirement income fund and life income fund.

an outdated term for a locked-in retirement account.

the provision of a place to live.

An asset that is expected to last (or to be held) for more than one year.

Debt that becomes due after more than one year.

See Labour Sponsored Investment Fund.

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The entity within a mutual fund complex responsible for the investment of the fund's portfolio  and/or the administration of the fund. It is compensated on a percentage of the fund's total assets.

A measure of the total costs of operating a fund as a percentage of average total assets.

The sum paid to the investment company's adviser or manager for supervising its portfolio and administrating its operations.

An investor's equity in the securities in his or her account. The margin purchaser puts up a portion of the value of the securities, borrowing the remainder from the investment dealer.

The rate of tax on the last dollar of taxable income.

the rate of tax that a taxpayer will have to pay on his next dollar of income.

 

A vehicle used to denote trends in securities markets. The most popular in Canada is the Toronto Stock Exchange 300 Composite Index. (TSE 300).

In the case of a security, market price is usually considered the last reported price at which the stock or bond was sold.

The current value of a security.

the ease with which an asset can be bought or sold.

 

(a) An RRSP matures when it begins to provide retirement income. All plans must mature by the end of the year in which the annuitant turns age 69.

(b) An RRSP matures when it begins to provide retirement income. All plans must mature by the end of the year in which the annuitant turns age 69.

(a) The date for the repayment of a bond.

(b) The date at which a loan or bond or debenture comes due and must be redeemed or paid off.

provides tax recognition for above-average medical expenses incurred by individuals. For 2001, the METC reduces the federal tax of a claimant by a conversion rate of qualifying unreimbursed medical expenses in excess of the lesser of (3% of net income and the 3% net income ceiling). For 2001, the conversion rate is 16% and the 3% net income ceiling is $1,677.

 

See Mutual Fund Dealer Association.

the amount that must be withdrawn from a RRIF each year, in accordance with the Income Tax Act beginning the year after the RRIF is established. (ITA 146.3(1))

see Alternative Minimum Tax.

the excess of minimum tax over regular tax. If your client paid minimum tax for any of the past seven years, but does not have to pay minimum tax for the current tax year, he may be able to apply the minimum tax he paid in those seven years against this year’s taxes.

a medium of exchange or a measure of value that you can use to pay for goods and services and to settle debts.

 

an essential component of any financial planning process. In fact, good money management mirrors the five-step financial planning process.

A sector of the capital market where short term obligations such as Treasury bills, commercial paper and bankers' acceptance are bought and sold.

A type of mutual fund that invests primarily in treasury bills and other low-risk short-term investments.

the maximum annual contribution permitted to a defined-contribution pension plan. The limit is $13,5000 from 1996 to 2002, increased thereafter.

Another term for defined contribution pension plan.

a common name for defined-contribution pension plan.

A mutual fund that invests in mortgages. Portfolios of mortgage funds usually consists of first mortgages on Canadian residential property, although some funds also invest in commercial mortgages.

Certificates that represent ownership in a pool of mortgages. The holders of these securities receive regular payments of principal and interest.

total operating expenses (including leasing charges, fuel, maintenance, repairs, car washes, licenses and insurance), capital cost allowance and interest on loans used to acquire the vehicle.

the method for determining the ACB of each identical property acquired after 1971, which involves calculating a new average cost for each property at the time of each purchase.

An investment entity that pools shareholder or unitholder funds and invests in various securities. The units or shares are redeemable by the fund on demand of the investor. The value of the underlying assets of the fund influences the current price of units.

The MFDA is the self-regulatory organization (SRO) for the distribution side of the mutual fund industry. Also known as MFDA.

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Covers the disclosure rules for the simplified prospectus, annual information form, and annual reports.

Covers the operation and administration of mutual funds, including the kinds of investments a mutual fund can make, how units are redeemed, how the mutual fund manager can make changes to the mutual fund, and how the mutual fund can advertise.

Covers mutual fund sales practices, which all mutual fund distributors and managers must follow.

occurs if a partner omits to do something that a reasonable person would do or does something that a reasonable person would not do given the same circumstances, such that his conduct falls below the standard of care expected of someone in his position.

in the alternative minimum tax calculation, this amount is the taxable income plus net additions to taxable income minus the basic exemption.

The value of all the holdings of a mutual fund, less the fund's liabilities.

a measure of the value of shares in either a closed-end or open-end investment corporation, calculated as the fair market value of the investments held by the investment corporation divided by the number of shares issued by that corporation.