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Welcome

Congratulations to all of you (86% in Ontario) who wrote for the first time and passed the provincial LLQP exam in February 2010. Our challenge to those of you writing in April or May is to bring the pass rate up over 90%.

Sample LLQP Multiple Choice Exam Questions

We are now into the 2009 income tax filing season, with the filing deadline of April 30, 2010 fast approaching. See how well you do answering the following tax related questions. Good luck!

1. Mary Martin earned $80,000 in 2009 and has earned $90,000 in 2010. In 2009, her employer contributed $1,000 to her Defined Contribution Pension Plan which she matched. In 2010, her employer contributed $1,200 to her Defined Contribution Pension Plan which she also matched. In 2009 and 2010, her employer made contributions of $11,000 and $11,250 to her Deferred Profit Sharing Plan on her behalf. Based only on the information provided, what is the maximum that Mary can contribute to her RRSP for the 2010 RRSP year? Assume that all of her earned income is from salary.

  1. $2,400
  2. $1,400
  3. $14,400
  4. $15,300

2. Fred’s salary is $36,000 per year. The Canada Pension Plan YMPE is $43,700. The Yearly Basic Exemption (YBE) is $3,500. If Fred contributes 4.95% to Canada Pension Plan (CPP), what is Fred’s total yearly CPP premium?

  1. $1,861.00
  2. $3,722.00
  3. $1,608.75
  4. $3,217.50

3. Bob and his brother Barnard are 50/50 partners of a Qualified Farm Property near Saskatoon, Saskatchewan. They bought their farm twenty five years ago for $500,000 apiece. Bob and Barnard are thinking of selling the farm for its $ 8,000,000 fair market value (FMV) and from the sale proceeds purchase a farm machinery distribution franchise that was recently put up for sale. If Bob and Barnard sell their farm property for its FMV, how much capital gains tax will each have to pay? Assume that they are both in the 43% marginal tax rate (MTR) and that they have never used any of their $750,000 Lifetime Capital Gains Exemption (LCGE).

  1. No tax is payable when a qualified farm property is sold, provided it was owned by the sellers for the previous 20 years.
  2. $1,182,500
  3. $430,000
  4. $591,250

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Answers

1. – b.  $1,400

Rationale: Lesser of 18% of $80,000 (last year’s earned income) or $22,000 (RRSP maximum contribution amount for 2010) equals $14,400 minus Pension Adjustment (P.A.) of $13,000 = $1,400.
Pension Adjustment is contributions made to Pension Plan and DPSP for 2009. Therefore, $1,000 + $1,000 + $11,000 = $13,000.

Reference: Module 10:7 Retirement

2. – d. $3,217.50 

Rationale: Lesser of the YMPE ($43,700) or salary ($36,000) less the CPP Yearly Basic Exemption (YBE) of $3,500 = $32,500. You then multiply $32,500 x 9.9% (4.95% x 2). Employer and employee each contribute 4.95%.

Reference: Module 10:2 Retirement

3. – d. $591,250

Rationale: $8,000,000 - $1,000,000 = $7,000,000 capital gains. $7,000,000 /2 = $3,500,000 capital gains for each brother. $3,500,000 -$750,000 LCGE = $2,750,000.
$2,750,000 / 50% = $1,375,000 taxable capital gains for each brother. $1,375,000 taxable capital gains x 43% marginal tax rate (MTR) = $591,250 tax payable by each brother.

Reference: Module 11:3 Taxation
 
Below are exam writing strategies you may wish to use during your LLQP exam.

  • Underline or circle key words in both the question and answer choices.
  • Always read all choices, even if the first or second choice seems correct.
  • Think of multiple choice options as a series of true or false statements.
  • If the answer is not immediately apparent, use the process of elimination. First cross of the least likely answer; repeat until you are left with only the most likely of the bunch.
  • Watch for absolutes such as: all, none, always, never, only. Circle these words because they often indicate a false choice.
  • Look out for choices that are opposites of each other or have a difference of just one or two words; usually one is the correct answer.
  • Don’t worry about choices with words such as: all of the above, both A & C, etc. Use the process of elimination to determine what choices are incorrect. Sometimes these choices are the correct answer, but remember, sometimes they are filler.

Doug Planche, CFP, CLU, CH.F.C., F.L.M.I.,
Senior Vice President
Foran Financial Institute

Doug Planche is the instructor for the Foran LLQP 4-Day Exam Preparation Seminars. For information on the Foran LLQP seminars, please contact Foran Financial Institute at 1-800-565-0374 or visit  www.foranfinancial.com.

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Additional study aids

Preparatory Seminars and Practice Exams

LLQP Prep Seminars – A comprehensive four-day classroom-based seminar intended to prepare you for writing the certification and final licence exams: $545+ taxes
Contact Foran Financial at: 416-947-1922 or 1-800-565-0374.

Please contact Advocis Member Services at 1-877-773-6765 for more details.

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