PAE20,WHFBYFEE PflESS-,#DNESbÀ'Y, jÀNUÀIW26;'1989 ýX ¶IETA[IM AXTMETX ITAXAX TIME TAX TIME TTAX Caitalgin 'lanning a'la o tax Avrg applying thc rulcs on whiat really qual ifiîes for a capital gain. The tax dcpartmcent has outlined its guidelines for csîa, blishing whethcryoucanclaim capital gains or income in its Interpretation Bulletin No. 218R. In theýmean- time, though, here arc some ques- tions Revenue Canada might ask. Lct's say, for instance, you own some property. What was your primary intention when you bought it? Was it to earn income or did you intend to seli it? If you bought -iean expejiencd t tie bas ij WHITJBY TAX SERVICE LTD. With thîs years tax reforinwe wÎllget you al posssîble deducUons, non refundable credits and refundable credits. We offer a year round service. Four your Personal & Confidential Appt. Cail 430-1166 965 Dundas St. W., Suite 202, West Lynde Plaza Lrripl Ax-k Trig WE ARE...a A2 leaâfri in 'qyaaty Income 'Ta Services, setting many of today ý industnj standars OUR TEAM S e.. *Specially qualified to explain in clear, practical terms the impact of *Able to ensure that every benefit allowed by Iaw has been applied to your Income Tax Return *Accurate in Income Tax the preparation of ail Returns .. . 78 Simcoe St. N. Oshawa, Ontario 579-1911 Nationide Services 152 Harwood Ave. S. Suite 201 Ajax, Ontario 428-7384 (Harwood Plaza) Il> Sheldo)n Buehll.ilter, CA (niý of thc niccst things about gctiing capiuil gainis,as opposcd to income, is that it attracis Icss tax. Instead of bcing taxcd fully, as inconjc is, capital gains are only partly taxcd. This ycar and ncxt, two-thirds of the gain will bc sub- jecC to tax; thc rcst is tax frc. But don't get too cxcitcd about Uhc prospect of channeilingas much as you can into capital gains. Revenue Canada is on thc lookout these days, with a vicw to strictly the property to re-scl it, then- the resulting profit is not Iikely to be treatcd by Revenue Canada as a capital gain. Flowcver, as a mile, Uic longer you own the property Uic more li kcly your profit will be treatcd as a capital gain. .What was your secondary inten- tion, Revenue Canada may ask, if you werc unable to fulfili your primary intention? That is, if you bought a condominium and couldn't rent it out, nor could you cover Uic expenses and you sold the propcrty and made a profit, what would Rcvenue Canada's position bc? Revenue Canada will likely take thc position that your secondary intention was to re-seli the property ail along. Thirdly, how many transactions did you make, and how frequent were thcy? If you seli one property during your lifetime, you have a goodchanccof gettingcapital gains trcatmcnL. But if you sell thrce properties at once, or several dur- ing a short timne, Revenue Canada may say that you are in the busi- ncss of sclling properties and there- fore your gains should bc treated as regular income. Here's how affects retirement savings It's been a long and rocky road for thc govcrnment to pin down the new ground rules for retirement savings in thc first phase of tax rcform, while nail-chewing tax- payers waited apprchiensively on Uic sidelines. WVc may not havc heard the last word even now, but most recently - in August, 1988 -- the Minister <of Finance rcvcailed a onc-ycar dolay In imiplernentaý,tion of'pre- V luu s ~ a ibu n c< c an~csta sanie of the mites IlOr Regisrceredl Retirenient Savings Plans. So, as inatters stand, your 19)8 RRSI) contribution v,,111he calcu- Iedon dic saine basis as in 1987. But you should also hear in minc [fiat hoth the SI ,(X)0 invesinient in- Corne exenmption taxpaycrs have corne to know and love and the federal ernploymcnt expense deduction ha vo alrca,.dy been eliminated. Whatever thc dotai Is, RRSPs will stili provido a significant tax shel- ten for most Canadians - almost Uic only one to survive. They mnean taxation on part of youn ineome is dcfcrred unùl you retire or choose to draw income from your plan at any trne up to the ycar in which you become 71. In the "shelter" period, your savings earn compound intcncst yca-by-year and can build up to bc- corne thc basis of a solid and as- surod income for your retirement ycars. These arc dic RRSP limits for Uic 1988 tax year: If you arc a member of a coin pany or other pension plan, your mnaxiimm contribution is 20 percent of carnied incoine to, a max- imnunmof S3,50(), minus your own andl your employer 's contributions to thc plan in the ycar. Or if you are not a memiber of a pension plan, as an cuiilovee or if self-employed, R & STAXSERVICE Sërving Durharm Region Since 1979. j Personal - Small Business - Rentai'- Farming Commissioned Sales Pro fessional Tax Preparation from $ 15.00O Free EstimnateI Year Round Service 153 Brock St. N. Unit 6, Whltby Lanes 430-1986 DUPMAM w EION S . ff miPECwAIST mn 4 The Perfect RRSP Investment Liniited Tine Only-Minimum Investment $5000 Cail Now For More Information Richard S. Price Fortune Financial Group 133-1508 or 683m7755 FAM# 1-649-5151 you cari contrîbute 20 per cent of, camced income to a maximum of, $7,500. As matters now stand, these same limits will also apply for Uic 1989 tax year. Contributions for 1988 must bo made by March 1, 1989. That's Uic deadline. But it makes good sense to get the job donc as soon aspos- sible before that. You can still beat most of the annual RRSP stampede that way, advisers will have more ime to talk to, you and, of course, you carn even more intcrcst. In fact, it's flot too early to mako your 1989 contribution too. That way, you'l earn almost a full yean of additional intcrest. If you don't have cash on hand to make your 1988 RRSP contribu- tions (or those f'or 1989 cither), should you borrow money to do, so? The answer is probably <y>s". But make Uic decision on the basis of your own specific circumstances. Flow much tax would you bo able to defer by borrowing? How much would the boan cost? How much in- terest will the contribution earn? There's no doubt thc tax rules romnain complex. Also therc's a hc- wildering choice (if plans to choose among - practically cvery finan- cial institution of every kind wants your money at this time of ycar,- h sccms. So, if you'rc relatively unsophis- ticated in financial matters, it's a good idea to geL professional advice to revicw Uic rules relative to Uic circumstances and necds of you and your family. But don't put it off. Don't misso(ut on Uic important savings available through RRSPs. In Uic short tcrm, if you haven't yet been able Lo make up your mmdt, Uic bcst bot may bo to deposit your contributions in a special RRSPsavings account or a one-ycar guarantccd investment certificate in one of Uic major finan- cial institutions. Ih can st.av thene in comfort and ecarn interost until you decide on the ncxt move. Fourthl1y, isthere a relationship betwcen Uic sale of Uic propcrty and your business or profession? Suppose you wcre a building con-, tractor. You bought a house, fixed it up nicely and sold it after rcnting it for th.ree years. Revenue Canada can say that because you were in ticconuraetrng business, that trans- action was "rolatod" to your busi- ness and therefore you are not qualificd to dlaim capital gains. Fifthly, if you had a partner, what was his or her intention? Your intentions to buy and hold a prop- erty may bc taintcd by a partnrie who wanted to seli Uic property soon after buying iL It's difficuit to prcdicthow Reve- nue Canada may pursue thcsc questions. And there is more at stake thanever, especially because of the lifetime capital gains ex- emption. However, it's vcry time- consumning for Revenue Canada to dispute evcry tax return, deal with every objection and any court cases. So Revenue Canada will probably be selective and just prosecute the mostblatant abuses. In the meantime, here arc somne tax, p lanning points to consider: 1. Arrange your affairs so, that. farnily members makeuse of the capital gains exemptiont-o. 2. Consider the timing of your prop- crty sale. In 1990, thrce quarters of the capital gain will be taxed. 3. You get only one lifetime exemp- tion, so use it wisely - and prefera- bly during your high income years.4. Consider taking back a mortgage and claiming the capital gains reserve. 5. Make sure, if you have shares in a corporation. that the corporation kceps its statui-as a 44small business corporation." This will allow you to take advan- tage of Uic $500.000 ciapital.gains exemption grantcd to thfose who sel sharesof certain types of small, Canadian-owncd businesses. For CA's advice on TV - sec Your WealUi, available on broad- cast channels in Ontario and on. satellite across Canada or sec Money in Uic Bank, on your com- munity cable channel. Moneycare is general financial advice by Canadals chartered accountants. Sheldon Buchal- ter is with Tepperman & Part- ners. 'tax ref orm' That's * Gurnee 1% or 9