The Finance Dictionary

This information provides users with thorough and reliable meanings to all the most common, and even uncommon, financial terms

Financial Terms Beginning With The Letter T

Target overnight rate

The target overnight rate is the key Bank of Canada interest rate which is usually quoted in the press. This is the rate that the Bank of Canada would like financial institutions to use when they borrow and lend one day funds to each other. When the Bank of Canada changes the target overnight rate, this affects the interest rates charged and paid by financial institutions. See also Bank of Canada rate, overnight rate and prime rate.

Taxable capital gain

See capital gain or loss.

Taxable income, net income and total income

Personal income taxes are calculated on Taxable Income.

To calculate Taxable Income, first Total Income is calculated, then items are deducted to get Net Income, then other items are deducted to get Taxable Income.

Total Income:

To calculate Total Income, add:

  • income from employment and commissions

  • other employment income, including income from wage loss replacement plans

  • Old Age Security pension from T4A(OAS) slips

  • Canada Pension Plan or Quebec Pension Plan benefits from T4A(P) slips

  • other pensions or superannuation

  • eligible pension income transferred from spouse

  • Universal Child Care Benefit (UCCB) payments of $100 per month for each dependent child under 6 (claimed on the tax return of the lower income spouse)

  • employment insurance and other benefits from T4E slips

  • grossed-up Canadian dividends (see dividend tax credit in Glossary)

  • interest and other investment income

  • net income from partnerships (limited or non-active partners only)

  • net rental income

  • current year taxable capital gains in excess of current year allowable capital losses, including gains from the sale of personal use property or listed personal property with a cost exceeding $1,000

  • taxable support payments received - see CRA pamphlet P102 for information on when support payments are taxable (and deductible to the payer)

  • RRSP income from T4RSP slips

  • other income, including taxable scholarships, apprenticeship incentive grants, lump sum payments from pensions and deferred profit sharing plans, severance pay and retiring allowances, etc.

  • net income from self-employment (business, professional, commission, farming, and fishing)

  • workers' compensation benefits from T5007 slip (this amount is deducted later)

  • social assistance payments (this amount is deducted later)

  • net federal supplements from T4A(OAS) slip (this amount is deducted later)

Net Income:

To calculate Net Income, deduct the following items from Total Income:

  • registered pension plan deduction from T4 and T4A slips

  • RRSP deduction

  • Saskatchewan pension plan deduction

  • eligible pension income transferred from spouse

  • annual union, professional, or like dues

  • child care expenses

  • disability supports deduction

  • allowable business investment losses

  • moving expenses

  • deductible support payments - see CRA pamphlet P102 for information on when support payments are taxable (and deductible to the payer)

  • carrying charges and interest expense

  • deduction for CPP or QPP contributions on self-employment and other earnings

  • exploration and development expenses

  • other employment expenses

  • clergy residence deduction

  • other deductions

    • repayment of certain amounts (other than salary and wages) that you included in income in the current year or a previous year, such as OAS benefits

    • repayment of EI benefits (from box 30 of T4E slip)

    • deductible legal fees

    • depletion allowances - see CRA topic Line 224 - exploration and development expenses and depletion allowance

    • unused RRSP contributions refunded to you or your spouse in the current year (and included in Total Income) - see CRA forms

      • T476 - calculating your deduction for refund of unused RRSP contributions, and

      • T3012A - tax deduction waver on the refund of your unused RRSP contributions

    • excess registered pension plan transfers withdrawn from an RRSP or RRIF, and included in Total Income - see CRA form T1043Deduction for Excess Registered Pension Plan Transfers You Withdrew From an RRSP or RRIF

    • capital cost allowance on a Canadian certified feature film or production as per T1-CP slip

  • social benefits repayment re OAS pension (clawback), employment insurance, or net federal supplements

Taxable Income:

To calculate Taxable Income, deduct the following items from Net Income:

  • Canadian Forces personnel and police deduction

  • employee home relocation loan deduction

  • security options deductions

  • allowable other payments deduction re workers' compensation benefits, social assistance payments, and net federal supplements

  • limited partnership losses of other years

  • non-capital losses of other years

  • net capital losses of other years

  • capital gains deduction

  • northern residents deductions

  • additional deductions:

    • foreign income exempt under a tax treaty (if included in Total Income)

    • 15% of U.S. social security benefits included in Total Income as other pensions or superannuation

    • vow of perpetual poverty - deduct earned income and pension benefits given to a religious order

    • qualifying adult basic education tuition assistance, if included in Total Income, from box 21 of T4E slip

    • net employment income from prescribed international organizations

The Net Income amount is used in calculating eligibility for income-tested benefits such as the GST/HST credit, and Child Tax Benefit. It is used in the calculation of the medical expense tax credit and other personal tax credits, and affects the ability of a spouse to claim a spousal tax credit for the taxpayer. Certain non-taxable items affect these benefits and tax credits, as they are included in Net Income, and deducted later so that they are not included in Taxable Income. Some of these non-taxable items are:

  • workers' compensation benefits

  • social assistance payments, and

  • net federal supplements from T4(OAS) slip

Losses of other years reduce Taxable Income, but not Net Income, so are of no benefit when calculating eligibility for income-tested benefits.

Many non-refundable tax credits use the Net Income amount in their calculation.

Non-taxable amounts include:

  • Guaranteed Income Supplements (GIS) for Canadian seniors, and the Allowance

  • GST/HST credits

  • Federal child tax benefit payments and related provincial and territorial child benefits and credits

  • lottery winnings

  • most gifts and inheritances

See the CRA page on amounts that are not taxed.

Technical analysis

Analysis of stocks and markets based on historical trends, in order to predict which trends will continue into the future.

Terminal loss

When a depreciable fixed asset is sold, its capital cost allowance (CCA) class is reduced by deducting the lower of its original cost, or its proceeds of sale. If all the assets in a class have been sold, but at the end of the fiscal year there is still a balance of undepreciated capital cost (UCC) remaining in the class, this balance can be fully written off against business or property income as a "terminal loss". This terminal loss is not deductible in some situations, such as when a "luxury vehicle" in class 10.1 is sold.

Ticker symbol

A ticker symbol is a 1 to 5 letter symbol which is used to represent a security listed on a stock exchange. The ticker symbol for General Motors, for instance, is GM, and for Intel is INTC.

Times interest earned

Also called interest coverage, times interest earned reflects the ability of the company to pay its interest. It is calculated as annual operating earnings (income before interest and taxes) divided by annual interest expense. If the result of this calculation is 2, it means that the company's operating earnings are 2x its interest expense.

Trade date

The trade date for securities transactions is the date the the transaction was entered into. Payment is made for the transactions on the settlement date. When the transaction is made in a foreign currency, such as when foreign shares are purchased using a US dollar trading account, for calculating the cost basis in Canadian funds, the exchange rate on the trade date should be used.

Trade deficit

If a country imports more goods and services than it exports, it has a trade deficit.

Trade surplus

If a country exports more goods and services than it imports, it has a trade surplus.

Trader

A person who buys and sells stocks looking for short term profits.

Trailer fees

Mutual funds pay a trailer fee to the advisor, broker, or dealer where you hold your mutual funds. This annual fee is part of the management expense ratio (MER), so is not a fee that you see being deducted from your account. See also front-end load fund, back-end load fund, and no-load fund.

Treasury bills (T-bills)

Short term government debt, which is sold to investors at a discount from face value, and matures at face value.

When a treasury bill is held to maturity, the difference between proceeds and adjusted cost base (purchase price) is considered interest income for tax purposes. If the treasury bill is purchased in one year and matures in the next year, the amount of accrued interest must be calculated at December 31 to include in the income tax return for that year. If a treasury bill is disposed of prior to maturity, a capital gain or loss may result, as well as the interest income. Example:
A T-bill with face value of $20,000 is purchased on June 1, with a maturity date of September 1 (92 days). The purchase price is $19,750, giving a yield of 5.022%. The interest income is $250 if the T-bill is held to maturity.
The T-bill is sold on August 1 after being held for 61 days, for proceeds of $19,975. Interest income can be calculated in 2 ways - using the yield rate, or using the number of days.
Using yield rate, interest income = $19,750 x 5.022% x 61days divided by 365 days = $165.76
Using # of days, interest income = $250 x 61 days divided by 92 days = $165.76
The capital gain or loss is calculated as:

proceeds $19,975.00
less interest $ 165.76
net proceeds $19,809.24
adjusted cost base $19.750.00
capital gain $59.24

Treasury shares

Shares that have been bought back by the issuing corporation. Shares bought back can be cancelled, or retained as treasury shares. Treasury shares are issued, but not outstanding, and do not receive dividends or have voting rights.

TTM (trailing twelve months)

Trailing twelve months is usually the total of the last 4 quarters of financial information reported by the company. Companies produce annual financial statements at the end of their fiscal year, and usually produce interim financial statements every 3 months.

Trustee

An individual or other entity who holds or manages assets for the benefit of others. Examples are Trust Companies, trustees of income trusts, and executors of wills.