Foundations of Tax

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.

  • Define taxation. 
  • Explain the purpose of taxation. 
  • Explain types of taxation that exist in Canada, such as:
    • Income tax
    • Sales tax
    • Excise tax
    • Property tax 
  • Explain the impact of taxation.
    • On income
    • On consumption 
  • Define income taxation (income tax) structures, such as: 
    • Progressive
    • Flat
    • Surtax
  • Define types of income tax rates, such as:
    • Marginal income tax rate
    • Average income tax rate
    • Effective marginal income tax rate 
  • Compare a marginal and average income tax rate. 
  • Define income tax avoidance.1 
  • Define income tax evasion.2 
  • Compare tax avoidance and tax evasion.3
    • Letter of the law versus spirit of the law
    • Potential for criminal consequences 
  • Explain the purpose of the General Anti-Avoidance Rule (GAAR) under the Canadian Income Tax Act.4  
  • Explain the purpose of income tax advice, such as:
    • Minimize income tax
    • Defer income tax 
  • Explain the factors that may affect income taxes, such as:
    • Fair market value of assets 
    • Adjusted cost base of assets
    • Liquidity of assets
    • Ownership structure of assets
    • Potential for capital gains / losses
    • Availability of capital gains exemptions
    • Availability of capital losses
    • Sources of income
    • Eligible tax deductions and credits
    • Marginal tax rates 
    • Family circumstances
    • Business interests 

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.

  • Define taxation. 
  • Explain the purpose of taxation. 
  • Explain types of taxation that exist in Canada, such as:
    • Income tax
    • Sales tax
    • Excise tax
    • Property tax
  • Explain the impact of taxation.
    • On income
    • On consumption 
  • Define income taxation (income tax) structures, such as: 
    • Progressive
    • Flat
    • Surtax 
  • Define types of income tax rates, such as:
    • Marginal income tax rate
    • Average income tax rate
    • Effective marginal income tax rate 
  • Compare a marginal and average income tax rate. 
  • Define income tax avoidance.1 
  • Define income tax evasion.2 
  • Compare tax avoidance and tax evasion.3
    • Letter of the law versus spirit of the law
    • Potential for criminal consequences 
  • Explain the purpose of the General Anti-Avoidance Rule (GAAR) under the Canadian Income Tax Act.4 
  • Explain the purpose of income tax advice, such as:
    • Minimize income tax
    • Defer income tax 
  • Explain the factors that may affect income taxes, such as:
    • Fair market value of assets 
    • Adjusted cost base of assets
    • Liquidity of assets
    • Ownership structure of assets
    • Potential for capital gains / losses
    • Availability of capital gains exemptions
    • Availability of capital losses
    • Sources of income
    • Eligible tax deductions and credits
    • Marginal tax rates 
    • Family circumstances
    • Business interests 

REFERENCES