LLQP Segregated Funds & Annuities · Component 1.1 · 35% of the exam
A client with a large unused RRSP deduction room and a low current income should have recorded in the profile:
- AThat unused contribution room expires at the end of the calendar year in which it first arose
- BThat his low income makes him ineligible to contribute to a registered plan this year
- CThat contributions must be made immediately, since room cannot be carried into future years
- That the deduction is worth little at his current rate, so the room may be better carried forward
Correct answer: D) That the deduction is worth little at his current rate, so the room may be better carried forward
A deduction claimed in a low-bracket year buys little tax relief, and the room and the deduction can both be kept for a year in which the client's rate is higher.
Why the other options are wrong
- AUnused deduction room carries forward indefinitely.
- BA low income does not bar a contribution where room exists.
- CRoom accumulates and does not have to be used in the year it arises.
Exam tip
Contribution and deduction can be separated in time.
Common mistake
Claiming a deduction in the client's lowest-income year.
What this tests
CISRO competency component 1.1 — 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.