LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client's existing non-registered account holds units bought years ago that are now worth less than she paid. The review should note that:
- Athe insurer will reimburse the shortfall because the units are held in a managed portfolio
- Bthe loss is permanently forfeited once the units have been held for more than five years
- Cunrealized losses may be claimed on the tax return without any disposition taking place
- selling would realize a capital loss that can be applied against capital gains
Correct answer: D) selling would realize a capital loss that can be applied against capital gains
A loss has no tax value until it is realized. Once crystallized, a capital loss can be applied against capital gains in the year, carried back three years or carried forward indefinitely, which may make a restructuring cheaper than it first appears.
Why the other options are wrong
- ANo insurer reimburses an investment loss in an ordinary investment account.
- BCapital losses do not expire with the passage of time.
- CA loss must be realized through a disposition before it can be claimed.
Exam tip
An existing unrealized loss is an asset in a restructuring discussion, not just bad news.
Common mistake
Reviewing an existing holding without checking its adjusted cost base.
What this tests
CISRO competency component 1.2 — Assess the client's needs and situation — which is weighted at 35% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 1
- The first step before recommending a segregated fund or annuity is to:
- A client's 'time horizon' for an investment is:
- 'Risk tolerance' in an investor profile refers to:
- A client says he wants 'high returns with no risk of losing money'. The agent should:
- Investment objectives are commonly classified as:
- Why is the client's marginal tax rate relevant to a segregated fund recommendation?
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.