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Thanks to everyone who tackled the New Year’s investing quiz and sent in their comments. Today, based on your e-mails, I’ll explore some of the questions that gave readers the most grief.

If you missed the quiz, you can still take it online at

Here, in the order that they appeared in the quiz, are the top five questions that stumped readers.

3. Justin made the maximum annual deposit to his tax-free savings account every year from 2009 through 2021, representing a total contribution of $75,500. However, because he put all of the money into cannabis stocks a few years ago, his TFSA’s value plunged to just $10,500 as of Dec. 21. If he withdrew half of the remaining value on Dec. 22 to buy Christmas presents, how much could he contribute to his TFSA on Jan. 1, 2022?

a) $76,250 b) $70,250 c) $11,250 d) $6,000

Gains and losses inside a TFSA do not affect a person’s contribution room, so the fact that Justin lost a bundle on marijuana stocks is irrelevant. What is relevant, however, is that he withdrew $5,250 (half of $10,500) from his TFSA on Dec. 21. TFSA withdrawals are added to one’s contribution room on Jan. 1 of the following year, which means Justin would get $5,250 of additional contribution room at the beginning of 2022, plus the $6,000 that every TFSA holder receives, for a total of $11,250. Correct answer: c.

4. Celine holds an exchange-traded fund in her tax-free savings account and noticed that the ETF had a reinvested or “phantom” distribution in December. For tax purposes, she is required to:

a) Do nothing b) Add the amount to her adjusted cost base (ACB) c) Report the amount as a capital gain d) Subtract the amount from her ACB

This was a trick question. If Celine had held the ETF in a non-registered account, she would have added the amount of the reinvested distribution to her cost base in order to reduce her capital gain when she eventually sells her units. However, she held the ETF in her TFSA, in which capital gains taxes do not apply, so her ACB is irrelevant for tax purposes. Correct answer: a.

8. Shania bought 1,000 shares of Royal Bank of Canada in March, 2020, when the price had dropped to $78 in the early days of the pandemic. She later sold 300 shares in July, 2020, when the price had rebounded to $95. Finally, she sold her remaining 700 shares at $130 in December, 2021. Ignoring commissions, the capital gain on the sale of 700 shares would result in ____ being included in Shania’s 2021 taxable income:

a) $18,200 b) $20,750 c) $36,400 d) $41,500

Another trick question! Shania’s cost per share was $78 for her initial 1,000 shares. The first thing you need to understand is that when she sells 300 of those shares, the cost per share of her remaining 700 shares doesn’t change. It’s still $78 a share, or $54,600 in total ($78 times 700). When she disposes of those 700 shares, her capital gain would therefore be the proceeds of $91,000 ($130 times 700) minus the cost of $54,600, which works out to answer c) $36,400. But that’s not the correct answer. Because only half of capital gains are included in income, the correct answer is a) $18,200.

13. Which statement is false?

a) Old Age Security benefits are taxable b) Published ETF returns are before expenses c) Return of capital reduces an investment’s cost base d) Reinvested distributions increase the cost base

Answers a, c, and d are all true. The only false answer is b. Exchange-traded funds and mutual funds report their performance on a total return basis, which includes capital appreciation and reinvested dividends. Total returns are reported after deducting the fund’s management expense ratio (MER), which includes its management fee, operating expenses and taxes. Rather than deduct the MER all in one shot annually, however, fund companies subtract it on a daily, pro-rated basis so it is reflected in net asset value of the fund.

14. Drake buys 100 shares of U.S.-based Cannabis Crypto-Cloud Solutions Inc. for US$75 each when the Canadian dollar is trading at 70 US cents. He later sells the shares for US$85 each when the loonie is at 83 US cents. His total capital gain, or loss, in Canadian dollars, is:

a) Capital gain of $1,204.82 b) Capital gain of $1,428.57 c) Capital loss of $714.29 d) Capital loss of $473.33

This was the toughest question of the bunch, based on the responses I received from readers. To answer it correctly, you need to know a key point: Capital gains (or losses) on a U.S. dollar investment are based on the difference between the sale proceeds and cost, both expressed in Canadian dollars using the exchange rates in effect at the time of each transaction. Ignoring commissions, Drake’s 100 shares of Cannabis Crypto-Cloud cost him US$7,500 which, using an exchange rate of 70 US cents for each Canadian dollar, works out to $10,714.29 (7,500/0.7). His sale proceeds of US$8,500 would translate into $10,240.96 (8,500/0.83). Subtracting his purchase cost from his sale proceeds produces a loss, in Canadian dollars, of $473.33, which is answer d.

E-mail your questions to I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.

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