LLQP Segregated Funds & Annuities · Component 1.3 · 35% of the exam
A client wants to give money to adult children now rather than at death. The analysis should raise:
- That giving appreciated property triggers a disposition, while cash gifts do not
- BThat gifts to adult children are limited to a maximum amount each calendar year
- CThat gifts to adult children are taxable in the children's hands in the year received
- DThat the client must retain a legal interest in the gift for it to be effective
Correct answer: A) That giving appreciated property triggers a disposition, while cash gifts do not
Canada has no gift tax, but transferring an appreciated asset is treated as a sale at fair market value, so the choice of what to give matters more than whether to give.
Why the other options are wrong
- BNo annual limit applies to gifts between adults.
- CRecipients are not taxed on gifts.
- DRetaining an interest would undermine the gift entirely.
Exam tip
Cash is clean; appreciated property triggers tax.
Common mistake
Gifting appreciated investments without calculating the disposition.
What this tests
CISRO competency component 1.3 — 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.