Chartered Investment Manager (CIM) Practice Exam · Question
What is the primary objective of tax-loss harvesting in a Canadian non-registered investment account?
Tax-loss harvesting involves selling investments that have declined in value to realize a capital loss, which can then be used to offset capital gains and, in s
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Question: What is the primary objective of tax-loss harvesting in a Canadian non-registered investment account?
Answer options:
- To avoid paying any capital gains tax indefinitely.
- To intentionally incur losses for the purpose of claiming tax credits. ✅ To sell securities at a loss to offset capital gains or income, thereby reducing taxable income.
- To ensure all investment income is entirely tax-free.
Correct answer: To sell securities at a loss to offset capital gains or income, thereby reducing taxable income.
Explanation: Tax-loss harvesting involves selling investments that have declined in value to realize a capital loss, which can then be used to offset capital gains and, in some cases, a limited amount of other income, reducing current tax liabilities.
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