Capital Gains for Investors

KNOWLEDGE EXPECTED OF: QAFP® Professionals

Highest Knowledge Level: Application

Knowledge Levels and Associated Verbs


Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
Define
To state exactly the meaning of
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
Compare
To note the similarities and differences between two or more things
Estimate
To determine an approximate value for
Calculate
To find the value using mathematics
Convert
To change from one form or purpose to another
Evaluate
To reach a conclusion or make a through careful study
Interpret
To give the meaning of / to construe or understand / to translate orally

Hold cursor over or click on each term to read its definition.

Capital Property  

  • Identify factors that the Canada Revenue Agency considers when determining whether property is capital property, such as: 
    • Intention at purchase date
    • Frequency of disposition 
  • Identify that property acquired for the purpose of generating income may be disallowed by the Canada Revenue Agency as capital property.   
  • Define types of capital property, such as:
    • Non-depreciable capital property
      • Personal-use property2
      • Listed personal property3
      • Other property
    • Depreciable capital property4
    • Eligible capital property5

Acquisition and Disposition of Property  

  • Identify when the Canada Revenue Agency considers that an individual has disposed of property.6
  • Define terms associated with the acquisition and disposition of property, such as:
    • Adjusted cost base7
    • Deemed acquisition8
    • Deemed cost9
    • Fair market value10
    • Proceeds of disposition11
    • Deemed proceeds of disposition12
    • Undepreciated capital cost (for depreciable property)13
    • Outlays and expenses14
    • Inclusion rate15
    • Inadequate consideration 
  • Explain when inadequate consideration applies to the disposition of property. 
  • Explain the tax impact of inadequate consideration.  
  • Define types of dispositions, such as:
    • Actual disposition
      • Voluntary disposition16
      • Involuntary disposition17
    • Deemed disposition18

Capital Gains  

  • Define terms associated with capital gains, such as:
    • Capital gain22
    • Taxable capital gain23
  • Explain the impact of a capital gain when property is transferred between spouses or common-law partners on:
    • Taxation
    • Adjusted cost base 
  • Estimate the capital gain and taxable capital gain resulting from the disposition of capital property.
    • Non-depreciable capital property 
      • Personal-use property24
      • Listed personal property25
      • Other property26
    • Depreciable capital property27
  • Explain the income tax treatment to an individual from a capital gain.  
  • Estimate the income tax impact to an individual from a capital gain.

Principal Residence Exemption  

  • Identify criteria for a property to qualify as a principal residence in Canada.28
  • Identify that a process exists for claiming the principal residence exemption. 

REFERENCES

KNOWLEDGE EXPECTED OF: CFP® Professionals

Highest Knowledge Level: Application

Knowledge Levels and Associated Verbs


Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
Define
To state exactly the meaning of
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
Compare
To note the similarities and differences between two or more things
Estimate
To determine an approximate value for
Calculate
To find the value using mathematics
Convert
To change from one form or purpose to another
Evaluate
To reach a conclusion or make a through careful study
Interpret
To give the meaning of / to construe or understand / to translate orally

Hold cursor over or click on each term to read its definition.

Capital Property   

  • Identify factors that the Canada Revenue Agency considers when determining whether property is capital property, such as: 
    • Intention at purchase date
    • Frequency of disposition 
  • Identify that property acquired for the purpose of generating income may be disallowed by the Canada Revenue Agency as capital property.   
  • Define types of capital property, such as:
    • Non-depreciable capital property
      • Personal-use property2
      • Listed personal property3
      • Other property
    • Depreciable capital property4
    • Eligible capital property5

Acquisition and Disposition of Property  

  • Identify when the Canada Revenue Agency considers that an individual has disposed of property.6
  • Define terms associated with the acquisition and disposition of property, such as:
    • Adjusted cost base7
    • Deemed acquisition8
    • Deemed cost9
    • Fair market value10
    • Proceeds of disposition11
    • Deemed proceeds of disposition12
    • Undepreciated capital cost (for depreciable property)13
    • Outlays and expenses14
    • Inclusion rate15
    • Inadequate consideration 
  • Explain when inadequate consideration applies to the disposition of property. 
  • Explain the tax impact of inadequate consideration.  
  • Define types of dispositions, such as:
    • Actual disposition
      • Voluntary disposition16
      • Involuntary disposition17
    • Deemed disposition18

Capital Gains  

  • Define terms associated with capital gains, such as:
    • Capital gain22
    • Taxable capital gain23
  • Explain the impact of a capital gain when property is transferred between spouses or common-law partners on:
    • Taxation
    • Adjusted cost base 
  • Estimate the capital gain and taxable capital gain resulting from the disposition of capital property.
    • Non-depreciable capital property
      • Personal-use property24
      • Listed personal property25
      • Other property26
    • Depreciable capital property27
  • Explain the income tax treatment to an individual from a capital gain.  
  • Estimate the income tax impact to an individual from a capital gain.

Principal Residence Exemption  

  • Identify criteria for a property to qualify as a principal residence in Canada.28
  • Identify that a process exists for claiming the principal residence exemption.
Additional Knowledge Expected of CFP Professionals

Capital Property

  • Define Valuation Day.1

Acquisition and Disposition of Property 

  • Define former business property (FBP).19
  • Explain ways in which former business property may be disposed.20
    • Involuntary
    • Voluntary 
  • Explain the eligibility requirements for property to qualify as replacement property under the replacement property rules.21

REFERENCES

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