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Our readers (barely) pass a tough investing test

The results from Investor Clinic's year-end quiz are in and … you passed!


The average score on the 15-question quiz was 52 per cent, or just under eight answers correct. I'm impressed, actually, because I went out of my way to make the questions extra challenging. (Spoiler alert: I discuss several questions below, so if you haven't taken the quiz already, you can find it here.)

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For example, I thought question 14 – "A capital loss can be carried back _____ and carried forward _____" would stump a lot of people. Yet more than 60 per cent of you chose the correct answer, that losses can be carried back up to three years and forward indefinitely.

Similarly, I tried my best to trip you up on question 15, but nearly 70 per cent of you answered correctly that the dividend tax credit applies both to common and preferred dividends from Canadian corporations.

A few questions did, however, leave some of you scratching your heads.

Question 3 generated, by far, the most e-mail queries from readers, so let's look at that one in detail. The question was:

"On Dec. 28, 2012, Bob sells 100 shares of Research in Motion for a capital loss of $4,500. The portion of the loss he can use to offset capital gains on his 2012 return is:"

The correct answer is zero, but just 19 per cent of participants got it right. Why can't Bob claim a capital loss on his 2012 return? Because when you buy or sell a stock, the trade settles – that is, the transaction is finalized – three business days after the trade date. This is when the buyers actually pays for the securities and the seller hands over the shares.

If Bob had sold his shares on Dec. 28, 2012, which was a Friday, the next two days wouldn't have counted because they weren't business days. Jan. 1, 2013, was a holiday, so the trade would not have settled until Jan. 3 – too late to claim on

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the 2012 return. For tax

purposes, it's the settlement date that counts, not the trade date.

In fact, because of Christmas Day and Boxing Day, the last date for a trade to settle in 2012 was Dec. 24. By the way, if you want to start planning ahead, the last date for trades to settle in 2013 is also Dec. 24.

Another question that threw people off was No. 4:

"As of Jan. 1, 2013, the individual income thresholds at which Old Age Security benefits start getting clawed back, and at which they are eliminated entirely, are, respectively:"

The correct answer was was $70,954 and $114,640, which was also the highest income range of the four possible answers. But just 17 per cent got it right, which indicates that most

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people don't appreciate how much income they can have and still collect OAS benefits. What's more, the thresholds

are indexed to inflation, so they rise with the consumer price index.

More than half of people also got question 5 wrong:

"If you own U.S. stocks, you can avoid U.S. withholding tax on the dividends by holding the shares in your:"

The correct answer was registered retirement savings plan, registered retirement income fund or locked-in retirement account, but many readers thought they could avoid U.S. withholding taxes in a tax-free savings account or registered education savings plan. Not so. TFSAs and RESPs are not strictly retirement or pension vehicles, so they don't qualify for the exemption under the Canada-U.S. tax treaty

Thanks to the 3,500 readers who took the quiz. I hope you had as much fun doing it as I did putting it together. I'll be back with another quiz later this year.

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