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PAGE The 18% RRSP (NC) â€" In this month of February the papers, TV, and radio are full of ads telling about the RRSP‘s availâ€" able, and how good they are. Many ads are featuring Sâ€"year rates of return of 11% and even betâ€" ter. In practice, many pay even less. And then we see ads featuring 18% and better rates of return over specific years. S It‘s strange, isn‘t it, that almost all the ads with the higher rates of return, are from investment (muâ€" tual) funds, and mutual fund dealers. â€" And . .. none of them tell you what you will earn in the future. Reason: nobody knows yet. The pastâ€"performances | were . also achieved, and 5, 10, 15, 20 years ago, no one knew what the results would be either. The fact that many have 10 and 15 year records of 15% and better is actual pastâ€"perforâ€" mance, and cannot be denied. Inâ€" vestment funds work in a "goidfish bowl"‘ in that their results are printed daily in almost every major newspaper in Canada. The past staâ€" tistics for one, three, five and ten years are published monthly and quarterly in Canada‘s two major fiâ€" nancial newspapers, the Financial Times and the Financial Post. Bill Kaveiman Chronicle Special If you borrow money for business or investments, the interest paid on the loan is a tax deductible expense. However you should be aware of some eligibility restrictions. Interest does not remain deductible for the life of the loan just because its original purpose was to earn income from a business or property. The source of income must also be maintained for the same period. If circum» stances change, interest which was once an eligible deduction may no longer be allowed. For example, if you borrow money to buy shares of a corporation, you can deduct the interest on the loan. If you later sell the shares, but do not pay off the loan used to buy them, the interest paid on the remaining debt cannot be deducted. This is because there is no longer a source of income against which the interest expense can be claimed. The same restrictions on the deductibility of interest will occur if the company goes out of business and the shares become worthless. Canadian tax law_ is very specific: interest expense is deductible only for those years in which a source of income is available from the investment of the borrowed funds. What if you had started your 14 â€" WATERLOO ChHRONICLE, WEDNESDAY, FEBRUARY 19, 1986 Tax tips ‘86 The Volunteer Committee of the Kitchenerâ€"Waterioo Art Gallery Wednesday, Feb. 26, 7:30 p.m. in the Kâ€"W Art Gallery The Centre in the Square, 101 Queen N., Kitchener INFORMATION NIGHT Refreshments served â€" Everyone welcome! invite you to an RRSP 18 years ago? What if you had chosen that fund that is now advertising 18% per year past reâ€" sults, namely Industrial Growth Fund? What if you had put the maximum _ allowable into your RRSP, starting with $2,500 per year, then increasing to $4,000 per year, and the last few years to $5,500? You would have invested $72,500 into the fund, and the value (as of Dec. 31/84) would be $317,615. If you had chosen Sâ€"year GIC‘s, instead of the fund, you would have a value of $162,864 for your $72,500 invested. And ... if you‘d simply put it into a savings account (as many, many people do) rate, you‘d be worth $147,963. â€" Wow, it makes quite a difference, doesn‘t it? The fund investment has $154,751 more dollars than the 5â€" year G.L.C. investment over the past 17 years. What really bothers us is that 95% of all Canadians continue to choose the RRSP‘s which pastâ€"perâ€" formance has shown do not give the same return over a longâ€"term (§ years or more) as investment funds have achieved. Mind you, we are also finding more and more Canadians making a choice for investment funds. After all, performance in the past has shown, over all, a much better reâ€" sult. For a chart showing Industrial Growth Fund vs. 5â€"YÂ¥ear G.J.C.‘s ask for ‘‘Industrial Growth RRSP (1)"‘ and write: Paul J. Rocke!l, 153 Union St. E., Waterloo, Onâ€" tario, N2J 1C4. Paul J. Rockel is President of Regal Capital Planners Ltd. and of the Independent Investment Fund Dealers Association of Where is your RRSP? IT‘S YOUR MONEY Paul J. Rockel If you‘re claiming interest expense on the money you borrowed, make sure you can establish a direct relationship between the funds and the investment for which they are Consider the borrower who has $50,000 dollars worth of Canada Savings Bonds. He wants to buy an item for personal use that also costs $50,000, but does not want to cash the bonds because they are earning a high interest rate. Instead, he borrows money to purchase the personal item, then tries to deduct the interest on the basis that the money was used to protect his savings bond investment. Revenue Canada says no. In order for the interest expense to be deductible, borrowed money must be directly linked to an income â€" producing asset. _ ADVERTISEMENT When you borrow for investment you should also avoid mixing the borrowed funds with other money before you make your purchase. If you don‘t, you risk being unable to trace the funds directly to your investment. You should always make repayment of investmentâ€"bearing debt a priority. If you‘re paying both interest which is tax deductible and interest which is not t:x deductible, the * inued on page 31 ELECTRIC WATER HEATERS HOLD UP TO 40% MORE & Your team gives that extra effort... 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