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Article Archive: Taxes The myth of the mobile millionaire 04/21/24   Taxes "The notion that rich taxpayers will flee if the state comes for their money is mostly fiction." Gains from corporate tax cuts 06/04/23   Taxes "Goods producers increase their capital expenditure and employment in response to a cut in marginal corporate income tax rates or an increase in investment tax credits. In contrast, companies in the service sector mostly use any tax windfall to increase dividend payouts. We base our conclusions on a novel measure of U.S. firm-specific tax shocks that combines changes in statutory tax rates faced by each firm with narrative identified legislated U.S. federal tax changes between 1950 and 2006." Spiderwebs 07/07/22   Taxes "After receiving an erroneous tax notice, Remy is convinced that the IRS is ghosting him." [video] Superpower of mini-retirement 02/13/22   Taxes "These steps allow the mini-retiree with low or no income to make massive changes to the amount of future taxes owed, all because they have planned ahead a little bit. This is not 'cheating' the (U.S.) tax code - it is making smart decisions and paying only the taxes due and not a dollar more." Billionaire tax 10/26/21   Taxes "I am constantly amazed by the capacity of legislatures to write bad tax law, but this one takes the cake as perhaps the worst thought-through and most ineffective attempt ever, at rewriting tax code." ETF taxation in the crosshairs 09/19/21   Taxes "The real damage will be done to anyone who's had the temerity to do a little investing outside their 401(k). ETFs have been an incredible boon for smaller investors, giving them access to the same funds, the same fees, and the same tax advantages wealthy investors have so many other ways to access." A wealth tax will disappoint 08/21/21   Taxes "Such a tax would be an exercise in futility. And this isn't simply conjecture - wealth taxes have been tried. In 1990, 12 European countries had a wealth tax. By 2018, that number dropped to four" Capital gains planning to save tax 01/10/21   Taxes "There's a difference between good tax planning, and tax evasion. Claiming your parrot as a dependant won't work, unfortunately. The good news? There are some legitimate planning ideas you might want to consider in the short term. Today, I want to talk about capital gains." CPP premiums go up 01/03/21   Taxes "For next year, the earnings ceiling, known as the yearly maximum pensionable earnings or YMPE, was supposed to be $60,200, an increase of $1,500 from the 2020 limit. But the actual amount is going to be higher at $61,600." Simple fix for those facing CERB repayments 12/19/20   Taxes "Self-employed CERB recipients who have filed their 2019 taxes should be able to easily amend their return by filing a T1-ADJ form on which they can reduce the expenses they claimed so that their net income rises above the $5,000 eligibility threshold, Rotfleisch says." Relief for RDSP holders 12/05/20   Taxes "The federal government has affirmed its timeline for removing the limitation on the period that a Registered Disability Savings Plan (RDSP) may remain open after a beneficiary becomes ineligible for the disability tax credit (DTC)." A work-from-home tax 11/14/20   Taxes "One economist thinks there are negative externalities and even net costs to the individual in working from home; the other thinks it is an inarguable optimum" Moving in a canoe 11/16/19   Taxes "A teacher who relocated for work by loading his belongings into a canoe and paddling up the Rideau Canal to Ottawa has convinced Canada's tax agency to allow him to claim his moving expenses." Tax-loss harvesting alpha 04/13/19   Taxes "We find that a tax-loss harvesting strategy yields a geometric average of 51 basis points per year from 1926 to 2018. However, this tax alpha is highly variable: over four successive 23-year periods, the tax alpha ranged from 26 to 88 basis points per annum" A leader in tax compliance 03/11/19   Taxes "Then there's Greece, where economists have struggled to even calculate a VCR. According to the International Monetary Fund, more than half of Greek households pay zero income tax. Indeed, tax evasion is practically a national sport. Take the swimming-pool trick. After the 2008 recession, the government placed a luxury tax on private pools. When only 324 residents in the ritzy suburbs of Athens admitted to having one, tax collectors knew they were being swindled - but didn't know how badly until Google Earth photos revealed the real pool count: 16,974. It's now common to conceal chlorinated assets with floating tiles, army nets, and pool interiors painted to mimic grass." Tax reform 01/28/19   Taxes "We have to do better, not just for the sake of convenience, but for reasons of fairness. As things now stand, the staggering amount of red tape discourages people from applying for credits they deserve. In 2018, a Senate committee discovered that fewer than 40% of the adults who were entitled to the disability tax credit in 2012 succeeded in claiming it, in large part because of the daunting amount of paperwork required. The question is how to reform a system that has sprawled in every direction" Bad economics 01/08/19   Taxes "A top marginal income tax rate of 70 percent is bad economics and even worse politics." After-tax alpha 01/01/19   Taxes "The costs of our active strategies are high enough without paying Uncle Sam. Capital gains taxes, when combined with transactions costs and fees, make indexing profoundly advantaged, I am sorry to say." A warning to home buyers 09/10/18   Taxes "So, the onus is now on the buyer of real estate to not only collect taxes on behalf of the CRA when a non-resident is selling a property, but to also make a judgment on when to investigate further the tax residency of the seller - as though a layperson is qualified to know when and how to make that inquiry." Appalling problem for small businesses 01/22/18   Taxes "The income the 'passive-income' proposal would hit may be far from passive and the rate on taxable capital gains will often exceed 100 per cent" Passive income changes create big concerns 12/11/17   Taxes "The proposed measures around passive income will apply only to Canadian-controlled private corporations. What about public companies? Or foreign-controlled private companies? It hardly seems fair to put Canada's private business owners at a disadvantage here. If revisions are made to affect public and foreign private corporations, how will the changes impact foreign investment in Canada? The issue gets a lot more complicated - and political - than even the Liberals were expecting." CRA gives taxpayers wrong info 11/27/17   Taxes "The Canada Revenue Agency's call centres blocked more than half the calls they received and gave taxpayers the wrong answers to their questions nearly one third of the time, the federal Auditor-General says." Tax-avoiding whales swim free 10/07/17   Taxes "We know for certain, however, that when it comes to tax neutrality, owners of private corporations are mere tiny fish swimming among the tax-avoiding whales. Millions of Canadians use equivalent passive-investment vehicles to duck billions in taxes on personal and investment income every year. They're called pension plans." Tax bill higher than 90 per cent 09/23/17   Taxes "On $8-million of total income, this is a tax rate of just more than 93 per cent. You might believe that these proposed tax changes are fair because business owners should pay their fair share. But how high a tax rate is fair?" [$] A 93% tax rate 08/07/17   Taxes "Small business owners across the land are still reeling from last month's announcement by Finance Minister Bill Morneau targeting private corporations and fundamentally changing the way businesses and incorporated professionals are taxed." Capital gains tax is already unjust 03/19/17   Taxes "the current Liberal government's rumoured plan to increase the capital gains tax can be expected to hammer another nail in the coffin for Canadian investments, particularly at a time when our economic outlook is already relatively weak." Tax court justice seen at KPMG-linked party 03/12/17   Taxes "The Canadian Judicial Council began the review following the documentaries that showed two judges attending evening social events during a KPMG-sponsored tax conference in Madrid last fall. A third judge, the chief justice of the Tax Court of Canada, was revealed making a speech in which he promoted drinking alcohol with the tax industry." A taxing trend 02/12/17   Taxes "The odds of a federal budget that targets investors with higher taxes on capital gains or even dividends are rising." Trump's tax break 10/09/16   Taxes "The prevailing wisdom that has emerged in the past week among accounting experts is that Trump was able to use more than $900 million in paper losses to reduce his taxable income via a loophole in the code that allowed losses of private businesses registered as S-Corporations to flow to their owners, even when they didn't put an of their own cash into the companies, which is where the name double dip comes from." Apple took tax game too far 09/04/16   Taxes "When the corporate structures you devise cross the line from frugality into utter absurdity - and a 'head office' with no employees or premises is pretty absurd - you are asking for trouble." RBC fund became a tax headache 03/19/16   Taxes "RBC had triggered the capital gain - and a related one in 2014 - when it sold the fund's individual stocks and bonds and replaced them with RBC's own mutual funds." Consider the last great tax shelter 01/09/16   Taxes "Self-employment is the last of the great tax shelters." The impact of taxes 12/26/15   Taxes "Consider the financial options of a high net worth individual living in California. She can choose to hold her wealth in shares of Berkshire and pay no tax at all on the returns unless or until she needs to consume out of them, at which point she will be able to monetize them at a preferential long-term rate, or she can own fixed income securities - say, a 30 year treasury bond - and pay a whopping 56.7% tax rate on the earnings. In the case of the 30 year bond, at a 2.90% yield, her after-tax yield would be a paltry 1.26%. Unless equities were in an outright bubble, with extremely low imputed returns, what reason could she possibly have, as a long-term investor, to choose the fixed income option?" Clarity on TFSA contribution limits 12/13/15   Taxes "Earlier this year, the Conservative government increased the annual contribution limit to $10,000. The Liberal government confirmed on Monday, however, that it will be rolled back to $5,500 in 2016. Going forward, the limit will be indexed to inflation, as it was prior to this year's increase." TFSA criticisms miss key points 03/14/15   Taxes "The TFSA isn't just a popular savings instrument among Canadians, especially for many middle-income Canadians facing retirement. It is also an economic tool, generating economic growth, jobs - and ultimately government revenues. Anyone examining the 'costs' of TFSAs must also look at the benefits." Claiming a loss 01/18/15   Taxes "It makes sense, then, to segregate any day trading activity (sometimes considered on income account) into a separate account from your buy-and-hold securities." Give to charity and get back 12/20/14   Taxes "The First-Time Donor's Super Credit (FDSC) makes it possible to donate a lot of money to charity - with a much lower overall cost." Buffett's tax plan 04/12/14   Taxes "Allowing companies to split into separate parts, tax-free, is a long-accepted practice. But now it seems that practice has been twisted into a very effective tax-dodge." Boost after-tax returns 04/05/14   Taxes "If you happen to be an investor, you're no doubt looking for ways to increase your returns. Look no further than your own tax return. If you can achieve tax savings related to your investments, this will increase your after-tax returns. So, consider the following ideas when filing your tax return this year." Moguls shelter wealth forever 12/29/13   Taxes "In the past four years, the amount of money administered by South Dakota trust companies like these has tripled to $121 billion, almost all of it from out of state. The families needn't actually move to South Dakota, or deposit their money at a local bank, or even touch down in the private jet. Little more than renting an address in Sioux Falls is required to take advantage of South Dakota's tax-friendly trust laws." Accidental tax break 12/29/13   Taxes "Federal law requires billionaires such as Adelson who want to leave fortunes to their children to pay estate or gift taxes of 40 percent on those assets. Adelson has blunted that bite by exploiting a loophole that Congress unintentionally created and that the Internal Revenue Service unsuccessfully challenged." Where will the boot land next? 11/17/13   Taxes "But there is another kind of political risk: the temptation for governments of all political colours to change the rules, whether they relate to tax, the way that companies operate or how markets behave. And that risk has increased significantly since the 2008 crisis." IRS: not good at math 05/11/13   Taxes "About a half-hour into a conference call with reporters Friday afternoon, senior Internal Revenue Service official Lois Lerner said something she will regret. 'I'm not good at math,' she confessed as she tried to summon a statistic." G rard Depardieu, the heroic exile 12/22/12   Taxes "Over 45 years, Depardieu said, he had paid 145 million euros in tax, and to this day employs 80 people. Last year he paid taxes amounting to 85 per cent of his income. 'I am neither worthy of pity nor admirable, but I shall not be called 'pathetic',' he concluded, saying that he was sending back his French passport." Income malaise complicates tax talks 12/13/12   Taxes "If the two parties fail to come to a deal by Jan. 1, taxes on the average middle-income family would rise about $2,000 over the next year. That would follow a 12-year period in which median inflation-adjusted income dropped 8.9 percent, from $54,932 in 1999 to $50,054 in 2011." How Apple avoids paying billions in taxes 11/10/12   Taxes "Thanks to a complex network of offshore accounts and cleverly named subsidiaries, Apple, the world's most valuable company, paid just $713 million on its $36.8 billion in foreign earnings last quarter. That amounts to a rate of just 1.9 percent, a figure that makes Mitt Romney's 14.1 percent effective tax rate look downright generous. And believe it or not, Apple actually reduced its foreign tax rate by nearly 25 percent as the company's market cap soared to new heights this year. According to the Associated Press, it was 2.5 percent at this time in 2011. Did Apple get a tax cut? Nah, it just got better at avoiding the IRS." Sponging boomers 10/19/12   Taxes "The IMF estimates that fixing America's fiscal imbalance would require a 35% cut in all transfer payments and a 35% rise in all taxes - too big a pill for a creaky political system to swallow." The long arm of Uncle Sam 10/06/12   Taxes "New U.S. laws targeting overseas tax cheats have not only left a million Canadians facing the potential of financial ruin, but have put local credit unions in an impossible bind." Tax amnesty offered to Americans in Canada 06/27/12   Taxes "The United States has announced details of a long-promised amnesty program for the millions of Americans living in Canada and offshore - many who haven't filed taxes for years." McGuinty's high-income tax 04/24/12   Taxes "The new, higher marginal tax rate proposed comes dangerously close to the psychological threshold of 50 per cent where individuals become extremely frustrated with the prospect of paying more to the government than they keep for themselves. Mr. McGuinty is only fooling himself if he thinks that wealthy Ontarians will do nothing about it." Art donation scheme raises questions 12/17/11   Taxes "The biggest and longest-running financial fiascos in Canada have been 'donate low, deduct high' charitable donation tax-credit schemes. These schemes are all variations on the same theme: The donor purchases something for 'x' dollars and then donates it for 'x plus y' dollars, generating a tax credit that exceeds the original out-of-pocket costs. One of the most outrageous was the art-donation scheme. The participant would, for example, buy a piece of art for $10,000, get it appraised for $30,000, and then donate it to a university or hospital. The donor would receive a tax credit equal to 43.7 per cent of the appraised value, or $13,110, which was $3,110 more than his original cost. Problem is, Canada Revenue Agency has consistently rejected such schemes. To date, it has disallowed a stunning $4.5 billion in donations claimed by more than 130,000 Canadian taxpayers on account of these dodgy deals." U.S. taxman to go easy 12/03/11   Taxes "Americans living in Canada who've neglected to pay their U.S. taxes are getting a big break from Uncle Sam. The U.S. Internal Revenue Service is poised to waive potentially massive penalties for Americans who agree to come clean and don't owe any taxes, The Globe and Mail has learned." Why taxing the rich won't help 11/23/11   Taxes "It's tempting to look to our millionaires and demand they pay more in taxes, but the same inconvenient truth applies. When you add up all the money made by all the people who earn more than $1 million a year, it amounts to around $700 billion. But since the millionaires already pay close to $200 billion in taxes, the government would have to increase rates to nearly 100 percent - which is about the worst idea ever - for it to have any real impact." More corporate tax won't help 11/23/11   Taxes "A tax rate is one thing. Tax collected is another. Indeed, in Canada progressives like to point out that there's no need for corporate income tax cuts, since the rates in the U.S. are much higher. But no one pays the posted rate in the U.S." Tax math 10/19/11   Taxes "Let's consider two key areas of the tax code, where "first-stage thinking" allows Buffett to conclude that he's paying a lower tax rate than his secretary. Once we view the picture from the proper perspective and engage in "second-stage thinking," you'll see that Buffett's effective tax rate is much higher than it seems." A Short History of the Income Tax 10/08/11   Taxes "The other pernicious consequence of the separate corporate and personal income taxes has been a field day for demagogues and the misguided to claim that the rich are not paying their 'fair share.' Warren Buffett recently claimed that he had paid only $6.9 million in taxes last year. But Berkshire Hathaway, of which Mr. Buffett owns 30%, paid $5.6 billion in corporate income taxes. Were Berkshire Hathaway a Subchapter S corporation and exempt from corporate income taxes, Mr. Buffett's personal tax bill would have been 231 times higher, at $1.6 billion. Just as in the late 19th century, the tax code is now hopelessly arbitrary and unfair. It requires a complete overhaul." Buffett on taxes 09/30/11   Taxes "Warren Buffett, the billionaire who runs Berkshire Hathaway Inc., talks about the need for the ultra-rich, who 'make money with money' to pay more in taxes." There's no free lunch 09/14/11   Taxes "It's widely known in tax circles that only 50% of the cost of meals and entertainment, when incurred as a legitimate business expense, is tax-deductible. What's not as well-known, however, is the rationale for this rule. A recent Tax Court decision deals with this rule and delves into the fascinating yet underappreciated world of statutory interpretation." A response to Buffett and Obama 08/23/11   Taxes "Governments have an obligation to spend our tax money on programs that work. They fail at this fundamental task. Do we really need dozens of retraining programs with no measure of performance or results? Do we really need to spend money on solar panels, windmills and battery-operated cars when we have ample energy supplies in this country? Do we really need all the regulations that put an estimated $2 trillion burden on our economy by raising the price of things we buy? Do we really need subsidies for domestic sugar farmers and ethanol producers? Why do we require that public projects pay above-market labor costs? Why do we spend billions on trains that no one will ride? Why do we keep post offices open in places no one lives? Why do we subsidize small airports in communities close to larger ones? Why do we pay government workers above-market rates and outlandish benefits? Do we really need an energy department or an education department at all? Here's my message: Before you 'ask' for more tax money from me and others, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely. Then you'll need less of my money." Buffett misses mark 08/18/11   Taxes "The United States needs to get out of its box of low growth. Current proposals for tax increases are the wrong medicine. Instead, a rate-reducing cum base-broadening tax reform would be more powerful by reducing the economic cost of taxation. Buffett pays too little tax, not because he's so rich but because the U.S. tax system is so poor." U.S. taxman reaches north 06/14/11   Taxes "Janet Selby never imagined she was anything other than a Canadian. After all, she has lived in Canada for all of her 47 years. She went to school here, voted in elections, travelled on a Canadian passport and built a successful career as an accountant and corporate recruiter. But a recent call from her online broker forced her to confront a long-forgotten past. Ms. Selby spent the first four days of her life in the United States, born in 1963 to two Canadians pursuing graduate work at the University of Illinois in Champaign, Ill. That makes Ms. Selby an accidental American - a reality that comes with sweeping tax and reporting obligations that could now cost her thousands of dollars and a monster headache." Lessons from Ronaldinho and Beckham 06/04/11   Taxes "How high can you tax the rich before they decide to pack up and move somewhere cheaper? For states teetering on the edge of bankruptcy, this is no theoretical question. Set taxes too low, and you miss out on valuable revenue - set them too high, and your powerhouse workers might move away.Now, by looking at the mobility of soccer stars in Europe, three economists say they are closer to understanding an ideal tax rate for the super-wealthy." Scraping by on $250k a year? 05/23/11   Taxes "As educated professionals, they buy books, newspapers and magazines they own computers and pay for Internet access. But the Joneses don't take lavish vacations, don't belong to a country club, don't play golf, don't drive luxury cars, don't have a swimming pool, don't buy designer clothes, don't own or rent a second home, and don't send their kids to private school. They don't even shop for groceries at high-end markets. (They spend what the United States Department of Agriculture defines as a "moderate" amount on food for the average family of four.) In short, they're not "wealthy," even if they're in the top 5 percent of earners. ..." Top Marginal Tax Rates 1916-2010 04/15/11   Taxes "Over the years, changing the amount of taxes people pay was accomplished not just by changing rates but by changing the income limits of the tax brackets. Just looking at the top rates does not give the whole picture about who is paying taxes. Before the 1986 tax reform, the income tax had 15 brackets. In the 1930s, there were more than 50. The Wealth Tax Act of 1935, applied the top rate to income over $5 million and had only a single taxpayer: John D. Rockefeller, Jr. As the number of tax brackets decrease, the the top rate was applied to more people over the decades. Since 1987 the income tax brackets were combined so now more than a million people "qualify" for the top marginal rate." Death by a thousand credits 04/09/11   Taxes "...a tax-credit announcement allows a party to look pro-family, or pro-green, or whatever the cause du jour may be. They're mainly symbolic gestures parties use to make sure they have something for every interest group - symbolic gestures that add up to a big price we all pay." A Tax Code for the Digital Age 04/08/11   Taxes "Anyone who wants a Nintendo Wii console or the latest John Grisham novel can pick it up at the nearest Target (TGT) store or log on to Amazon.com (AMZN) and have it delivered. The similarities between the two retailers aren't as apparent when it comes to taxes. Amazon's effective rate - the total it pays in federal, state, local, and international income taxes after deductions, along with its sales and property levies - has been more than 10 percentage points lower than Target's for the past four years. Target's effective tax rate in 2010 was 35.1 percent, compared with Amazon's 23.5 percent. Amazon in 2010 owed $352 million in income taxes worldwide on income of $1.5 billion, according to its SEC filings, while Target owed $1.58 billion on income of $4.5 billion." The Price of Taxing the Rich 04/02/11   Taxes "Nearly half of California's income taxes before the recession came from the top 1% of earners: households that took in more than $490,000 a year. High earners, it turns out, have especially volatile incomes - their earnings fell by more than twice as much as the rest of the population's during the recession. When they crashed, they took California's finances down with them." Why Investors Can't Get More Cash 02/20/11   Taxes "Earlier this month, Microsoft borrowed $2.25 billion in unsecured debt. What in the world possesses a company with $40 billion in cash and short-term securities to go out and borrow money? Rock-bottom interest rates are one reason. But the bizarre, byzantine U.S. tax code seems to be another." A Brief Visual History of U.S. Taxes 01/14/11   Taxes "Tax reform might be The Issue of 2011. Or, like most years, it might linger on the sidelines of the national debate, but never press its way into the limelight. Either way, the Senate Finance Committee is hearing the case for tax reform today -- and who better to hear from first than the head of the Joint Committee on Taxation, Congress' official oracle and arbiter of tax policy. You can download the full testimony here, but I wanted to pass along four easy charts from the presentation that explain some major developments in the tax code over the last 40 years. I don't want to say too much, as these charts speak for themselves." The Tax Haven 10/21/10   Taxes "Google uses a complicated structure to send most of its overseas profits to tax havens, keeping its corporate rate at a super-low 2.4 percent " Soak the very, very rich 08/12/10   Taxes "In a society that's becoming more stratified, a sensible tax system should draw more distinctions, not fewer. The U.S. is now a place where the rich and the ultra-rich really inhabit different worlds. (A couple of years ago, Barron's declared, 'Yes, it takes more than $10 million to be seen as rich these days.') They should probably inhabit different tax brackets, too." Fun tax facts 04/15/10   Taxes "Centuries ago, when the Papal State dominated Tuscany, these rulers imposed an extremely high tax on salt. As a form of protest, Tuscan bakers began to make their bread without salt. Gradually, the taste for bread made entirely without salt became widespread, and to this day, Tuscan bread is salt less" Special interest 03/15/10   Taxes "It's the time of year when a young man's fancy lightly turns to thoughts of deductions and write-offs. One select group of Americans, though, has a more pressing tax-season task on its mind: preserving a lucrative loophole in the I.R.S. code. The provision allows money managers at privately held partnerships - like hedge and private-equity funds - to treat most of the money they make as capital gains rather than as ordinary income. That means that their income is often taxed at fifteen per cent, a much lower rate than it otherwise would be." Tax system full of it 02/22/10   Taxes "Canada's tax system has become so complex and confusing, and revenue staff so unsympathetic, that a judge has awarded legal costs to an Ontario couple despite ruling against their case with the Canada Revenue Agency." Six RRSP pitfalls 02/05/10   Taxes "It's RRSP season, and you're going to get a lot of advice about how to maximize your contributions, borrowing to contribute, the benefits of contributing, and how to invest inside your registered retirement savings plan. It's all good stuff when the advice comes from the right sources. But I want to talk about the six most common mistakes that people make with their RRSPs. If you avoid these blunders, you'll save tax, create greater retirement savings for yourself, and protect those assets." Comparing taxes on RRSPs and TFSAs 02/02/10   Taxes "Comparing marginal effective tax rates across income levels suggests that many Canadians with savings in tax-deferred vehicles, like Registered Retirement Savings Plans, should put more future saving in tax-prepaid savings plans, particularly Tax-Free Savings Accounts." $10 an hour with 2 kids? IRS pounces 01/30/10   Taxes "Rachel Porcaro knows she's hardly rich. When you're a single mom making 10 bucks an hour, you don't need government experts to tell you how broke you are. But that's what happened. The government not only told Porcaro she was poor. They said she was too poor to make it in Seattle." An immodest proposal 01/12/10   Taxes "In other words, the estate tax is really a capital gains tax, but triggered by death, not sale of the capital asset. So why not eliminate the estate tax, but then have the heirs inherit not only the stock in Amalgamated Widget but granddad's cost basis as well? Then, when Junior sells a million shares in order to pursue his dream of winning back the America's Cup or whatever, he has to pay a substantial capital gains tax on those shares. A possible compromise would be to set the capital gains on inherited assets at a higher rate than on assets bought by the person himself. This would allow the Democrats to feel all warm and fuzzy for having still socked it to the rich and allow the Republicans to claim credit for having eliminated an unfair, arbitrary, expensive, and economically pernicious tax." Internet sales tax scofflaws 12/29/09   Taxes "Today the major resistor against online collection of sales tax is, unsurprisingly, Amazon.com, the world's largest online retailer. Amazon, which has no retail stores anywhere, has become a target of state tax collectors because as its business has expanded, so has the value of its inventory." Congress throws estate plans into disarray 12/26/09   Taxes "Barring a last-minute political deal, the federal estate tax is set to disappear as of Jan. 1, 2010--for just one year. Democratic leaders of Congress are vowing to resurrect the tax retroactively sometime next year, but the impending lapse has estate planners in a tizzy. They worry the lapse could turn into a nightmare for some families." 2009 year-end financial deadlines 12/10/09   Taxes "With the end of this year just around the corner, here are some personal finance deadlines to note" Marriage is a costly luxury 09/25/09   Taxes "The working poor, by contrast, are in a highly undesirable position when it comes to marital status and taxes. It literally doesn't pay for working poor parents to marry. Instead, it costs them precious money in the form of lost tax credits. We researched the tax consequences in 2008 for two working poor individuals and their dependents and made some significant (some would say startling) discoveries." Farewell America 09/21/09   Taxes "Our bank is in the process of recommending our clients to exit from all direct investments in US securities. This, on the grounds of the threat of inheritance tax coupled with the uncertainty as to whether one might not, one way or another, be turned into a US person." When work doesn't pay 09/18/09   Taxes "Middle-class folks are finding that a raise or second paycheck doesn't always mean living better. Time to work less?" A surtax on the top 1% 07/31/09   Taxes "It seems almost certain at this point that whatever health reform legislation is ultimately enacted by Congress, its principal funding will come from a surtax on the top 1% or so of taxpayers. This is a very bad idea for reasons that have little to do with the economic effects of taxation." The small business surtax 07/15/09   Taxes "Jason Furman owes an apology to Michael Boskin, the Stanford economist who wrote a year ago on these pages that Barack Obama would raise American income tax rates nearly to 60%. Mr. Furman, then in the Obama campaign and now at the White House, claimed this was wrong and that Democrats would merely raise taxes back to their Clinton-era level. House Democrats are now proving that Mr. Boskin had it right, and before it's over even he may have underestimated how high taxes will go." Tax fantasies of the right and left 04/17/09   Taxes "At the same time, it's not a good idea to try to raise all that extra money just from households with annual incomes of more than $250,000. That may have been a winning campaign promise for candidate Obama, but it makes for lousy economic policy. A quick back-of-the-envelope calculation suggests that balancing the budget solely on the backs of those making more than $250,000 a year would almost surely require pushing marginal income tax rates well above 50 percent. That's a level at which taxes begin to discourage people from working and investing. Almost certainly, it is a level that would prompt them to invest significant time and money to find new ways to evade taxes." Unintended consequences 04/13/09   Taxes "The recent Ontario budget contains a massive tax grab that our Investment Partners should be aware of. The McGuinty government is proposing the harmonization of Ontario.s provincial sales tax with the federal GST. The decision to jam an additional 8% tax on the management expense ratios (MER) of your investment products is shockingly unwise and dangerous." Make interest tax deductible 01/25/09   Taxes "Take a look at your balance sheet. Do you have any debt? If so, are you entitled to deduct the interest? Chances are, you've got some debt that is costing you interest that is simply not deductible for tax purposes." Court ruling offers a lesson on avoiding tax 01/16/09   Taxes "The court did confirm that GAAR should not generally apply when taxpayers rearrange their borrowings to minimize their taxes. In the Lipson case, the court was fine with the interest deduction itself, but took offence to Mr. Lipson claiming the deduction by relying on the attribution rules to give him the deduction (he was the higher-income spouse, and therefore benefited more from the interest deduction). And so, we should spend some time looking at ways to arrange debt to make the interest deductible." Self-employed? Make sure business is for real 12/13/08   Taxes "Take a business-like approach to pursuing revenues in your business. Have a marketing plan, and be prepared to explain how you plan to increase revenues over time. Next, make sure you understand, and can explain, what it will take to be profitable (how many widgets you need to sell, how many performances you need to make, etc.). Finally, try to avoid reporting losses for more than a couple of years. This could raise a flag on your tax return." Take advantage of the dividend tax credit 09/21/08   Taxes "It's interesting, but the marginal tax rate on eligible dividends is now lower than the rate on capital gains in most provinces at most income levels. In fact, at lower income levels, the marginal tax rate on eligible dividends is often negative. That is, adding more eligible dividend income to your tax return can actually reduce your overall tax bill. Why? Because the dividend tax credit available will offset not only that dividend income, but the tax on other income as well. British Columbia has the deepest negative marginal tax rate in 2008 at negative 15.55 per cent for the lowest income earners. This means, for example, that if you live in B.C., are in the lowest tax bracket, and you add one dollar of eligible dividend income, you'll actually pay 15.55 cents less in tax than without the dividend. What a bargain." Student tax planning can save a bundle 09/07/08   Taxes "So, if you've got a child heading off to postsecondary school this year, congratulations, I expect your child will make smarter decisions. And there are some smart decisions related to your child's tax planning that can help too. Let me share some of those today." Transfers can come with tax surprises 08/09/08   Taxes "Be aware that you'll be subject to the U.S. estate tax as any U.S. citizen if you're considered "domiciled" in the United States. Simply residing in the U.S. doesn't make you "domiciled" there. Domicile is a concept that involves an intention to permanently reside south of the border. And so, it seems that domicile is something to be avoided. Perhaps - but only if careful planning is undertaken before your transfer, because not being domiciled in the United States can lead to tax problems too. Let me explain." Selling your cottage needn't be so taxing 07/25/08   Taxes "Let's assume that James now owns the cottage. He could shelter the cottage from tax by designating it as his PR for the years prior to 1982. For years after 1981, only one exemption is available and the couple would designate the cottage for those years. The result is twofold: There is no tax to pay on the sale of the cottage this year since it has been designated as a PR for every year it was owned. Further, Kate has not yet designated a property as her PR for the years prior to 1982. She could designate the Oakville home for those years. The result? We've now sheltered part of the eventual gain on the Oakville home as well." Canadian Tax Freedom Day: June 14 06/13/08   Taxes "The latest Tax Freedom Day in Canadian history was recorded in 2005, when it fell on June 25. Since 2005, Tax Freedom Day for the average Canadian family has steadily decreased. Tax Freedom Day dropped to June 23 in 2006 and June 18 in 2007. This year, Tax Freedom Day arrives four days earlier than in 2007. While recent Tax Freedom Days show a slight reduction in the tax burden, it is nevertheless a fact that Tax Freedom Day this year is over 40 days later than it was 47 years ago. In 1961, the earliest year for which the calculation has been made, Canadian Tax Freedom Day was May 3. By 1981, it had advanced to May 30, and in 2008 Tax Freedom Day will, as noted, fall on June 14." The drawbacks of your assets being jointly owned 05/17/08   Taxes "The term "joint ownership" is used to loosely describe one of two common legal relationships: Tenants in common, or joint tenancy with right of survivorship (JTWROS). Tenants in common owners each hold separate ownership interests that can generally be sold or transferred without the consent of the other owners. But JTWROS is more common. In the case of JTWROS, the survivorship feature means that when an individual dies, the deceased person's interest is automatically distributed to the remaining joint tenants. Think of this as a "winner takes all" game. The asset will pass to the surviving owners outside of the deceased's estate. The result? Probate fees are avoided." Pay the taxman by midnight or else! 04/30/08   Taxes "Today of course is T-day in Canada: the annual tax filing deadline. If you owe the Canada Revenue Agency income taxes for calendar 2007, the penalty and interest clock starts ticking at midnight: the moment April 30th turns into May 1st. If the CRA owes you there is less urgency but if you have a refund coming, the sooner you file your tax return the sooner you can cash the cheque and put your money to work." Same price, but fewer tax returns 03/09/08   Taxes "QuickTax Standard for 2007 includes two returns for Canadians with more than $25,000 in income, compared with five returns in previous years." [Consider UFile instead] Curve balls raise red flags for CRA 03/09/08   Taxes "When filing your tax return this year, be aware that your past tax filings may have an impact on whether the CRA will accept this year's filing position. Consistency can be a good thing." TFSAs could spawn untaxed pensioners 03/05/08   Taxes "The Tax-Free Savings Accounts (TFSAs) announced in last week's federal budget could become so popular that within 30 years they could supplant RRSPs and create a generation of senior citizens that pay no income tax at all, says actuary Malcolm Hamilton, worldwide partner with Mercer's, the pension consultants." Dividend tax slides below budget radar 02/28/08   Taxes "The status quo will hold in dividend taxation until 2010, when a three-year phased adjustment begins. Myron Knodel, manager of tax and estate planning at Investors Group in Winnipeg, illustrated how this will work with an example involving $100 in dividends paid by a bank. The current federal tax rate on dividends means you'd net $85.46, assuming you were in the top tax bracket. By 2012, your net take on the same $100 would be $80.68, a decline of $4.78, or 5.6 per cent." Deductions failed the smell test 11/11/07   Taxes "What about your tax planning? Does it pass the smell test? There are some court decisions where taxpayers have escaped the long arm of the Canada Revenue Agency by getting away with deducting certain costs, or gaining some other tax benefit, and I just conclude they got lucky. There are other cases where the taxpayer has lost the battle, and it comes as a surprise to no one. Here's a court decision that offers some valuable lessons in claiming tax deductions." A strategy to keep your prized stocks 11/04/07   Taxes "William's advisers suggested that he consider an equity monetization strategy. Now, there are different strategies we could talk about. Today, let me share what is probably the most common." The many benefits of monetizing 11/04/07   Taxes "But the story could help you to: lock-in accrued gains on an investment; defer tax on those accrued capital gains; create liquidity; diversify your portfolio; create a tax deduction for interest costs, and avoid margin calls on money borrowed to invest. These benefits could leave you laughing after all - all the way to the bank." Tax reductions for Canadians 10/30/07   Taxes "The goods and services tax (GST) will be reduced by a further 1 percentage point as of January 1, 2008, fulfilling the Government's commitment to reduce the GST to 5 per cent. The lowest personal income tax rate will be reduced to 15 per cent from 15.5 per cent, effective January 1, 2007. The amount that all Canadians can earn without paying federal income tax will be increased to $9,600 for 2007 and 2008, and to $10,100 for 2009." Fifteen ways to reduce your 2007 taxes 10/22/07   Taxes "Fall is always a good time to take stock of one's tax situation. As several weeks remain before the end of the year, now is the time to review your 2007 transactions and make any necessary adjustments. Tax planning is always an issue, whether you work, are retired, operate a business directly or operate a business through a corporation. Here are fifteen ways, among others, to save on taxes for 2007." The skinny on pension splitting 10/14/07   Taxes "Take the announcement last year about pension income splitting. Canadian taxpayers have had many questions about how this is going to work. The Canada Revenue Agency issued an announcement on July 18 that answered some of the more common questions. Let me share some highlights." $1.4B tax scams nail donors 09/29/07   Taxes "Canada's coffers have been cheated of more than $1.4 billion by scams that provided taxpayers with inflated charitable receipts they used to reduce their income tax. From coast to coast, donors wrote cheques to charities and tax scheme promoters that boasted they were saving the deathly ill, the poor and disabled, overseas and in Canada. Now, at least 106,000 individual Canadians are learning the Canada Revenue Agency considers these schemes a sham, and wants to claw the money back. Some also are being hit with major financial penalties." When to pull trigger on a loss 09/23/07   Taxes "It makes most sense to sell to trigger a capital loss when at least one of the following is true: (1) you don't want to own the investment any more, or (2) you have capital gains in the current or a prior year that you'll be able to apply the losses against. Otherwise, think twice before selling." The naked truth about tax shelters 09/09/07   Taxes "There's no shortage of promoters in Canada today who are happy to provide tax opinions on their strategies, written by reputable legal and accounting firms, and may even provide other evidence supporting the tax deductions or credits being claimed. The problem? Those opinions and that evidence is not worth the paper it's written on if the strategy should have been registered as a tax shelter with Canada Revenue but wasn't. If you're considering a tax strategy that's being marketed by a promoter, it's just as important to ask for a legal opinion on whether the strategy is defined to be a tax shelter (if no TSIN has been applied for) as it is to read the tax opinion on the strategy itself." The perils of joint ownership 08/05/07   Taxes "What you should avoid, however, is giving the last laugh to someone who, against your intentions, inherits some of your assets when you're gone. If you're not careful, joint ownership can cause this problem. Let me share three stories to help explain." Company cars: Perk or penalty? 07/30/07   Taxes "Whether it makes sense to drive a vehicle provided by your employer or to provide your own vehicle for use in your work comes down to a number-crunching exercise. Your best bet is to have an accountant do the math for you, but there are some general guidelines that apply." Income transfers can backfire 07/07/07   Taxes "The only thing that might hurt more than paying double the cost is being double-taxed. Subsection 56(4) of Canadian tax law can cause this problem if you're not careful." It's intent that counts in loss claims 07/01/07   Taxes "My four-year-old son Michael set up a lemonade stand at the end of our driveway and made $2.75 (selling lemonade to my wife Carolyn and me ). Excitedly, he asked: "Dad, can we go to the store to buy some candy?" "Wait a minute," I replied. "You earned $2.75, but the lemonade cost $1.75, and the plastic cups cost $2. By my calculations that means you actually lost $1. And to make matters worse, when you claim that loss on your tax return, Canada Revenue might say you weren't carrying on a commercial activity, and deny the loss." Michael looked at me with a blank stare." Filing 101: Canada Revenue waits for no one 04/29/07   Taxes "In case you were thinking of allowing the deadline to come and go without so much as lifting a finger, I've got a few things to keep in mind. Avoid penalties for filing your return late. Filing your tax return by the April 30 deadline is important if you owe taxes. Failing to file on time will mean a penalty of 5 per cent of the tax balance owing, plus 1 per cent for each month your return is not filed, to a maximum of 12 per cent. And the penalties could double if it's your second time failing to file on time in the past three years." Last-minute tips that can save big bucks 04/21/07   Taxes "The countdown is on. Just a few days left to file your 2006 tax return. Sure, I know, it's a task that's about as pleasant as cleaning out the refrigerator. When I was a bachelor, I'd put off cleaning the fridge until the science experiment at the back of the bottom shelf would develop legs and walk away. Preparing a tax return may not be quite as exciting -- but it's equally important. And in fact, it can be profitable. To increase the likelihood that preparing your tax return is a profitable experience, let me share with you some last-minute tips that could save you some money." Ensure your property is deemed a principal residence 01/20/07   Taxes "Selling a home can be one of the most tax-efficient asset dispositions you'll ever make -- if your place qualifies as a principal residence, that is. But will it qualify?" Beware the minefields of a property 'change in use' 01/20/07   Taxes "Where a property is initially used as a residence, but you later completely or partly convert it to an income-producing property (such as a rental property), a "change in use" takes place. Likewise, where a property was income-producing and you later convert it completely or partly into a residence, the same "change in use" happens. A change in use will generally cause a deemed disposition of the property (or a portion of it) at fair market value under Canadian tax law. If the property has appreciated in value, there may be tax to pay on the capital gain." Keep the taxman at bay 01/20/07   Taxes "If you're concerned about CRA applying income rather than capital treatment to your transactions, there may be a good solution. On Nov. 30, CRA issued a technical interpretation (document 2006-0185041E5; you'll need to visit a tax pro if you hope to obtain a copy -- CRA won't be any help), which clarified that it's possible to segregate your portfolio into two parts: One part that may be treated on income account, and one that may be treated on capital account." Tax changes that may be in store for us 12/17/06   Taxes "Today, let's peek at the potential tax changes coming in the federal budget expected in late February. You see, on Dec. 7, the finance committee released its prebudget report detailing, among other things, recommendations as to what tax changes should be considered. So, let's unwrap these recommendations." Gift to income-splitting pensioners 11/04/06   Taxes "How much tax can this save you? Consider a senior couple. Assume the husband has $60,000 of income, $50,000 of which is eligible pension income that he will split with his wife. She has $10,000 of her own income before the allocation from him. If he allocates one half, or $25,000, of his pension income to her, the couple will save $4,196 in taxes (assuming 2006 Ontario tax rates, and assuming the allocation of income to her also qualifies her for the pension tax credit). This tax savings represents 6 per cent of their total income of $70,000. Not too shabby. This new change could affect retirement planning for some by making it more desirable to create eligible pension income that can be easily split than to earn other types of investment income in retirement." Hit with a loss? Your spouse can ease the pain 10/30/06   Taxes "If you own investments that have lost value, it might make sense to trigger the capital loss so that you can apply the loss against capital gains this year, or in one of the three prior years (losses can be carried back up to three years if you can't use them this year). If you haven't got capital gains now or in the past, you can also carry forward your loss to use in any future year. But, if your spouse has capital gains this year, or in the three prior years, it may make sense to transfer the capital loss to your spouse so that he or she can use it instead. This way, the loss is used up sooner." Charity + tax-free dividends = win-win 10/03/06   Taxes "Thanks to the changes in the last federal budget, a donation of flow-through shares to a registered charity will result in the taxable capital gain on those shares being eliminated. So, you won't face tax on the capital gain, and you'll be entitled to a donation tax credit for the value of the shares when you donate them. In the end, it's possible that your donation will cost you just 8 cents for each $1 donated (if the value of your flow-through shares remains unchanged, and you're in the top marginal tax bracket. Savings will vary by province)." Location is key to tax breaks on risky assets 09/25/06   Taxes "The Amaranth debacle should remind us that there's a best place to hold risky investments -- and that is outside your registered retirement savings plan or registered retirement income fund. The reason is simple. If you hold an investment inside your RRSP or RRIF and it drops in value, you'll get no tax relief from the loss." Self-employment can pay for your child's education 09/10/06   Taxes "Here's the overall result: Mike claims a deduction for the $15,000 in wages paid to Rick, which will save Mike $6,900 in tax (assuming a marginal tax rate of 46 per cent). Rick has $15,000 in his bank account, pays no tax on the amount, and now uses the $15,000 to pay for school. In effect, Mike has claimed a deduction for the amount used to pay for his son's education. And it doesn't really matter what costs Rick uses the $15,000 to cover; the amount is still deductible to Mike regardless." An annuity can brighten your golden years 08/19/06   Taxes "As Canadians get older, two of the biggest challenges we face are memory loss, and how to generate income. I can't help much with the first problem. But let me share an idea that might just result in more income for you in retirement. This idea is a cousin to the idea I shared in my article on July 15 that applied to those with holding companies. This idea is called a "back-to-back prescribed annuity" because it involves buying an annuity and insurance "back-to-back."" Uncle Sam wants you ... to file 08/14/06   Taxes "When it comes to U.S. citizens living in Canada, many have bad memories -- or simply don't want to remember -- about tax obligations south of the border. Since there are so many of you, let me remind you of some of the rules you should be aware of." Split share ownership can be a capital idea 08/05/06   Taxes "Sharing can save you money, and particularly income taxes, if you're willing to share ownership. Let me explain." Stay off the taxman's hit list 08/05/06   Taxes "Last November, an Auditor-General report shed light on how the Canada Revenue Agency (CRA) chooses tax returns for verification, which can be helpful in assessing the likelihood that your return may be selected. Here's the highlights." Your small business has woes? Here's how to protect yourself 08/05/06   Taxes "It's the same feeling many Canadians have experienced when investing in a small private business, only to be disappointed that the business has failed. You get your hopes up, then you realize the dream has fallen apart. From a tax perspective, what next?" Life insurance can be a saviour if you own a holding company 08/05/06   Taxes "The truth is, life insurance can be an effective tool. Today, I want to look at a "corporate insured annuity," which can make sense for those with holding companies." Flow-through shares produce charitable bonanza 07/11/06   Taxes "You'll also be entitled to a donation tax credit for the $10,000 value of the shares, which will save approximately $4,600 in tax. So, you paid $10,000 for the shares, got $4,600 back in tax savings from the deduction, and $4,600 from the donation tax credit, leaving a net out-of-pocket cost of just $800. That is, a $10,000 donation to charity cost you just $800. That's what I call charitable arbitrage." Naming the kids' guardians is no child's play 07/02/06   Taxes "If you're the parent or guardian of minor children, here are some thoughts to keep in mind about naming guardians for your children." When writing your will, make sure your intentions are clear 06/25/06   Taxes "Things can move from mere confusion to costly legal battles if you leave your heirs uncertain about your intentions when you're gone. And few things can cause greater problems than joint ownership." Estate planning for the wise 06/18/06   Taxes "Another challenge of aging is deciding how to deal with your children in your will. Some of your kids may disappoint you, some may have special needs, and some may have no idea how to handle money. Today, I want to talk about dealing with your children in your will." Understand the rights of your spouse upon your death 06/10/06   Taxes "Fact or fiction, it kind of makes you want to have some fun in your own will, doesn't it? Just be careful. Your beneficiaries may have certain rights. Today, let's talk about your spouse." Landscaping may be beheld in the deductibles 05/30/06   Taxes "Tax deductions can be like chocolate. The more the better -- if we can get away with it. Sometimes Canadians misunderstand the rules around certain deductions. Landscaping comes to mind. Sometimes these costs are deductible, sometimes they're not." Donating securities isn't easy 05/21/06   Taxes "Finally, the charity's broker needs to be well-rehearsed in how to hand-hold a donor and his or her broker through the donation process. This process will typically require the donor to provide his or her broker with a letter of direction and information related to the charity's brokerage account and the securities to be donated, in order to make the donation happen." Zero taxes and help a favourite charity 05/14/06   Taxes "This week, I want to share with you one idea that will: (1) allow you to eliminate all the tax on an investment you've decided to sell, (2) make a potentially generous gift to charity, (3) keep much of the sale proceeds for yourself, and (4) prove that I am more of a math geek than I thought." The budget's tax-saving measures 05/07/06   Taxes "The federal budget this week was full of incentives. That is, measures to encourage certain behaviour. Some of these measures provide real opportunities if you know what to do with them. Today, I want to take a look at a few of the measures, and suggest how best to use them to save tax." Before you claim a deduction make sure it's legitimate 04/30/06   Taxes "Now, the Canada Revenue Agency is not in the habit of telling folks what the government is looking for when it decides who should be audited. But it's not difficult to figure out the flags that could lead to the CRA taking a closer look at your tax return. This is a partial list of things that, based on an informal survey of tax professionals and a couple of friends at the CRA, you should be aware of." These tips can help trim your tax bill 04/23/06   Taxes "When it comes to saving tax, there's more than one way to skin a cat. Today, let me share a few last-minute tips that could still save you money as you file your 2005 return." Got a bone to pick with the taxman? 04/16/06   Taxes "Taxpayers aren't immune to making mistakes either. And the Canada Revenue Agency (CRA) makes mistakes on a regular basis as well. The result? Disagreements over how much tax you really owe. Taxpayers are now starting to receive their notices of assessment for filing their 2005 tax returns. If you happen to disagree with your assessment, what are your options to ensure that your opinion has been fully considered?" Are you really self-employed? 04/08/06   Taxes "Each year, thousands of Canadians report self-employment income on their tax returns because of the tax deductions available. The real question is whether these people are really self-employed, or are they more akin to employees who are just trying to gain tax breaks?" Good news for those with shareholder loans 04/02/06   Taxes "Since those decisions last October, there have been four other court decisions on the issue of GAAR. The score? Taxpayers 3, CRA 1. The most recent case provides an interesting planning opportunity for business owners. Let me explain." Aggressive tax plans can fall foul of the law 03/25/06   Taxes "I can recall one situation where a man had been accused by the Canada Revenue Agency of tax evasion. "I know the evidence is strongly against me, but I have $250,000 to fight the case," the man said to his lawyer. The lawyer replied: "As your attorney, I assure you that you'll never go to prison with that amount of money." And he didn't. He went to prison broke. Tax evasion and some legal fees will do that to you." You want a piece of me? Pay 03/19/06   Taxes "Soon your tax preparer, like other businesses, may start selling your financial information to the highest bidder. Why not demand a cut?" Let's have some discipline 03/19/06   Taxes "The fact is, filing a tax return beats life in prison. And it's not just filing a tax return that matters. Filing on time, claiming all the deductions and credits you're entitled to, and implementing tax strategies, will leave you wealthier in the long run. But too few of us take this to heart." Getting your adjusted cost base in order 03/11/06   Taxes "I'd like to suggest another course: Saving tax by knowing your adjusted cost base. Okay, so it doesn't sound enthralling, but a lot of Canadians are losing out because they aren't calculating their adjusted cost base (ACB) correctly. The higher your ACB, the less tax you'll pay on the eventual sale of an asset. Before filing your 2005 tax return, make sure you've properly calculated your ACB on assets sold in 2005." Canadian snowbirds can build a messy tax nest 02/25/06   Taxes "Snowbirds understand the desire to head south too. And many snowbirds spend in excess of four months each year in the United States, which can cause tax filing issues. Let me give you an overview of what to consider if you're one of these folks." You're not going to live forever 02/19/06   Taxes "Naming a beneficiary for your Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) seems simple enough, doesn't it? Well, not so fast. Here are some tips and traps to consider when it comes to naming beneficiaries." How to manage your retirement 02/12/06   Taxes "When drawing on your investments for income in retirement, should you withdraw from your registered retirement savings plan or your non-registered investments first?" Put gold in her purse for Valentine's Day 02/05/06   Taxes "That's it. I decided that if I'm going to buy gold, I'm going to make it tax deductible. Forget the ring. I'm getting Carolyn gold bullion bars for Valentine's Day. Tax deductible? You bet -- as long as she allows me to buy it inside her registered retirement savings plan and doesn't try to wear them." Pay attention to your RRSPs 01/28/06   Taxes "if you're one of the thousands of Canadians who is separated, divorced, or thinking about it, take the opportunity to think about who you've named as beneficiary of your registered retirement savings plan. After all, it's RRSP season and your plan may be top of mind. And be mindful of the Gaudio court decision. Let me explain." The antiquity of tax law 01/22/06   Taxes "Apparently, Ottawa doesn't trust the judgment of doctors in this country very much. You see, Canadian tax law refuses to allow a medical expense tax credit in a growing number of situations, even in cases where a doctor has prescribed a medication or substance. This area of our tax law is in need an overhaul -- and quick." New dividend rules could change your strategy 01/19/06   Taxes "The dividend tax credit has been increased under the new proposals so much that the credit will not only offset the tax owing on the dividend received, but will go further and will reduce other income you have as well. For example, a taxpayer in Ontario earning $60,000 annually will pay $13,703 on that income (2005 tax rates). Add $5,000 of eligible dividends to his income, and his total tax bill drops to $13,653. Did you catch that? The marginal tax rate on those dividends is actually a negative number. Now, once your income hits a certain level ($61,940 in Ontario at 2005 tax rates), your eligible dividends will increase your taxes -- albeit at a lower rate than other income." If it sounds too good to be true . . . 01/19/06   Taxes "Withdrawing money from an RRSP is not the big problem -- although there are definite drawbacks to dipping into your retirement savings early. The problem is that too many Canadians have tried to get money out of their RRSPs without paying any tax at all. And many of these people have fallen prey to elaborate RRSP schemes being promoted by unscrupulous individuals who are trying to make a fast buck." Act like a saint but think like an investor 12/18/05   Taxes "TD Economics released a paper in October that provides a novel way to think about charity. The idea? Think about your giving as you do your investing. And why not? It can mean more meaningful and effective giving. Here are some highlights from that paper." Avoid paying someone else's taxes 12/04/05   Taxes "Sorry to tell you, but pleading ignorance is just as ineffective with the tax collector and the courts. One particular situation comes to mind -- and it's easy to get caught in this trap." Income trusts still the better tax deal 11/27/05   Taxes "But theory is never perfect. In this case, there will still be a tax advantage to income trusts. Consider an an Ontario resident, in the highest marginal tax bracket in 2006." End the tax year right 11/19/05   Taxes "We're quickly coming to the end of 2005. And people can get pretty creative with their spending to create last-minute deductions. (Hey, sometimes deductions seem so logical you'd swear they must be legal.)" Test yourself 11/06/05   Taxes "So you think you're smart when it comes to tax issues? How about taking the Mackenzie Financial Great Canadian Tax Test? This week, the mutual fund company released the results of a test given to 1,565 Canadians. Over all, Canadians get a "C" grade." Tax Evasion 10/23/05   Taxes "My grandfather always had words of wisdom for me. He used to say: "Tim, if at first you don't succeed, skydiving is not for you." I think it's interesting that skydiving is a lot like tax evasion. If you do it once and you're successful, you'll want to do it again. And each time you succeed, and reap the personal benefits, you'll try it over and over. But let me tell you, when things go wrong, they can go very wrong." RRSP overcontributions can boost your nest egg 10/09/05   Taxes "When it comes to the last year for making contributions to your registered retirement savings plan, a little creativity can help you boost the final value of your portfolio. Here is one approach to take." Think before giving a child the title to your home 10/02/05   Taxes "There are four key lessons to learn from this story: Parents should always talk to their kids about their estate planning. Mr. D and the others had no idea that they were on the title as owners of the property. They may have been able to do some planning to minimize the ultimate tax hit. Always get proper tax advice when doing estate planning. The lawyers involved in transferring the title to the children did not appear to understand all the tax implications. Think twice before putting a child on the title on your home. In most cases, all you'll save are probate fees, but the potential tax (and other) problems you create will far outweigh these fees." Changing income trust rules could crack nest eggs 09/25/05   Taxes "Let's put this whole concern in perspective. In 2004, $300-million in tax revenue was "lost," according to the Department of Finance. Actually, not true. This claim ignores the fact that many of those dollars will be collected in the future. Income trusts typically result in a tax deferral rather than an elimination of tax. But let's not argue over such trivial details. It's also important to realize that $300-million represents just 15/100ths of 1 per cent of Canada's $195.8-billion in revenue in 2004-05. That's the equivalent of a $50,000-a-year income earner giving up $75. Heck, the income trust market has plenty of room to grow before deferred tax revenue should be a concern. A word to Mr. Goodale: Take a Valium." Family trust can be an educational building block 09/18/05   Taxes "If you're a successful business owner, you can use the profits of your business to help fund the cost of your child's primary or post-secondary education. There's more than one way to skin this cat, but the idea of a family trust can make sense." Tax treaty could help prevent a nasty bite 09/04/05   Taxes "I once heard that the definition of a tax pro is someone who tells you about problems you didn't know you had, then fixes them in a way you don't understand. This has never been truer than in the area of U.S. estate taxes. Most Canadians aren't aware that they could be subject to U.S. estate tax." Five ways to be prepared for U.S. estate tax laws 08/27/05   Taxes "Today, let's talk about planning ideas for U.S. citizens and permanent residents. Next week, I'll finish off this topic with planning ideas for Canadians with U.S. situs property." Three reasons you could end up paying U.S. estate taxes 08/21/05   Taxes "You see, there are three categories of people who will be subject to the U.S. estate tax -- and you could be counted here: (1) U.S. citizens, (2) permanent residents of the United States, and (3) those who own "U.S. situs property."" The top 10 items the taxman will query on your return 08/07/05   Taxes "Today, I want to share with you the top 10 items on tax returns that were most often questioned by the Canada Revenue Agency (CRA) last year. These come from an informal poll of tax specialists at my alma mater, accounting firm Deloitte, and appears in the firm's newsletter "Tax Breaks."" It's crucial that executors understand all their obligations 08/07/05   Taxes "The fact is, being in someone else's will doesn't always mean you're going to get an inheritance. You might, for example, be named the executor of the will and not a beneficiary, in which case you won't exactly be cashing in. In fact, the executor's job comes with a number of responsibilities." Dying without a will can cost 08/07/05   Taxes "When it comes to your estate, failing to prepare a will may save you legal fees in the short term, but could cost your family later. Dying without a valid will is called "dying intestate," and it's rife with problems." The estate tax - does it really matter? 08/06/05   Taxes "How many families are able to maintain efficient and successful portfolio management for generations at a time? And how likely is it that the third and fourth generations of unearned wealth will be happy with distribution rates of a couple percent? Toss in a decade or two of lax or unlucky portfolio management and a few generations of spendthrift heirs, and familial wealth shrinks faster than the prawn plate at a Cajun wedding." Consider the easy way out 07/17/05   Taxes "When it comes to dealing with your cottage in your estate planning, sometimes the best approach is taking the easy way out." Demolishing shaky tax shelters 07/11/05   Taxes "As the feds continue to scuttle dubious and outrageous schemes, new players are reshaping a chastened financial-advice industry" Use put options to defer your tax payments 07/10/05   Taxes "The dilemma? You're concerned about a stock dropping in value, and want to sell it right away, but you don't want to trigger a significant tax bill today by making the sale." Make sure your sale of home isn't AINT 07/03/05   Taxes "Some tax questions are equally tough to answer. Such as: If you buy a home, fix it up and sell it for a profit, how will that profit be taxed? As a capital gain, or business income?" CRA gives your home a break 06/26/05   Taxes "Just because you start using part of your home as an office for your business does not mean you'll have to pay tax on that part of your home when you sell it later. You can continue to call the entire property your principal residence as long as you meet the three conditions outlined by the CRA above." Be careful how you donate through your will 06/19/05   Taxes "But "generous" is a good way to describe many Canadians, as an increasing number of us are leaving gifts to charity in our wills. But if you're not careful, the tax relief you're counting on from your gift to charity may not materialize as hoped. Let me explain." Getting stiffed on a loan? 06/12/05   Taxes "The question is this: When you lend money and the loan goes sour, is there tax relief available? The answer depends on the type of loan. Let me explain." Market-timing your RRIF withdrawals 06/06/05   Taxes "You might be cringing at the thought of market-timing RRIF withdrawals. But this involves less risk than regular market timing because you're not changing investments. You're simply choosing when to pay tax on the withdrawals." Set your financial house(s) in order before getting married 05/29/05   Taxes "It's the season for weddings, and so I want to share some financial advice for those getting married this year -- particularly those who already have some income and assets." Royalty trusts offer tax benefits 05/22/05   Taxes "Now, if you're looking for a real hot tip, consider a royalty trust. There are more than just a couple of tax reasons to look at them." Beware options in private companies 05/15/05   Taxes "First, always get tax advice before exercising stock options. Second, stock options in a private company aren't always a good idea if your PUC is very low, unless you can sell those shares to someone other than the company later. Private companies may want to consider setting up a "market-maker" trust to buy shares in these situations." Notional pension plans a tax option 05/08/05   Taxes "This week I want to discuss a creative idea called a notional defined contribution plan" Some points to consider after filing your return 05/01/05   Taxes "On a scale of one to 10, the fun derived from preparing your tax return rates about a one -- on par with a root canal. But the process shouldn't end when you drop your tax return into the mailbox or hit the "submit" key to file electronically. There are a number of things to keep in mind after you've filed your tax return that can help you to save tax and minimize future problems with the tax collector. Here are seven ideas." Self-employment a great shelter 04/24/05   Taxes "Self-employment is one of the last great tax shelters, but 2004 has passed so it's too late for self-employment for 2004. Or is it?" Crossed the foreign content line? Here's help 04/16/05   Taxes "The growing vulnerability of the minority Liberal government poses a potentially expensive problem for people who jumped on a budget measure allowing unrestricted foreign investing in registered retirement savings plans." Changes that help, changes that hurt 04/16/05   Taxes "Tax expert Tim Cestnick lists the key tax changes that took place for 2004. Some changes will help you when filing your 2004 tax return, but some will hurt. One thing's for sure: These are changes you shouldn't ignore." Free money on tap for green card holders 04/10/05   Taxes "It's estimated that there are hundreds of thousands of Canadians who are also U.S. citizens or green card holders. If you're in this boat, you probably don't file a U.S. tax return annually, although you should. Now there's an even greater incentive to file. You see, the U.S. government introduced a tax credit in 2001 that could mean cash in your pocket if you qualify, and file a U.S. tax return." 1040 Plunder 04/05/05   Taxes "In a week I will be a reluctant recipient of plundered property. The modern day Robin Hood purloined the cash last year on my behalf and without my knowledge. Technology comes into play too. Using a piece of sophisticated software, my computer and a phone line, $646 will be wired directly to my bank account. The software? Turbotax. The confiscator? The Internal Revenue Service." Watch out for U.S. tax Form 8891 04/03/05   Taxes "Form 8891 is new, and my guess is that many Canadians living in the United States, and U.S. citizens, are going to give it a try this year. There are many who had better file Form 8891 to avoid problems with the IRS. Let me explain." Think twice before deducting 03/27/05   Taxes "When filing your tax return, the temptation will be to claim every possible deduction in order to minimize your taxes for 2004. Yet, it can make sense to defer claiming certain deductions until a future year in some cases." Could you be hit by the 'jock tax'? 03/27/05   Taxes "Athletes and entertainers pay millions every year to the states they visit. Now some states are tracking down CEOs and others who earn money on the road." Getting the most out of your tax return 03/20/05   Taxes "Okay, no need to beat around the bush. Let's jump right into six clever tax filing tips that will save you money, potential time in prison, and the need to lick a bad tasting stamp this tax season. Here we go." What should investors be doing? 03/13/05   Taxes "Now that the foreign content restriction is gone, what should investors be doing?" Dirty dozen tax scams 03/01/05   Taxes "Don't get scammed by someone who thinks you can dupe the tax man." RRSPs show clear advantages 02/13/05   Taxes "Yet, the RRSP should form the cornerstone of any retirement savings plan if you're the average Canadian. Today, let's compare RRSPs to open accounts (non-registered savings) on six fronts." Handle your RSPs properly when leaving Canada 02/06/05   Taxes "If you're contemplating taking up permanent residence in the United States, there are some things you should know about how to handle your registered retirement savings plan or registered retirement income fund." RRSP mistakes can be costly 01/16/05   Taxes "This time of year, thousands of Canadians will make some big mistakes of their own -- with their registered retirement savings plans. Let me explain." Strategies for tsunami donations 01/09/05   Taxes "In fact, thousands of individual Canadians have made a difference by donating more than $50-million to the tsunami relief effort. Tax savings are not the real reason most people have donated. But if you're looking to help, there are some things to keep in mind this week." Make a New Year's resolution on taxes 01/02/05   Taxes "Make it your New Year's resolution to implement one profitable tax strategy in 2005. To make this easy, let me suggest a few options to consider" Charitable donation deadline looming 12/26/04   Taxes "Clients wanting to make a charitable donation are running out of time, if they want to claim it on their 2004 tax filing. Perhaps a gentle reminder is in order, pointing out that New Year's Day will be too late." Scrooge and your CRA taxman have much in common 12/26/04   Taxes "If you're looking for some holiday cheer this year, don't ask Canada Revenue Agency (CRA) to provide it. Scrooge might as well have been a tax collector. In Dickens' story, Scrooge acted a lot like CRA today." Man, it's cold -- a great time to discuss the cottage 12/19/04   Taxes "As I contemplated the gifts of the wise men this week, it occurred to me that wise men and women today will take the time this holiday to look after the family cottage. After all, it's not often that the entire family is in the same place at the same time. So, use your holiday gathering to talk about the cottage. Here are some tips to help that discussion." Tax schemes can come back to bite you 12/12/04   Taxes "Now, many people will think they're safe in buying these tax shelters because: (1) the shelter has a CRA identification number, and (2) they actually receive a refund in April. But neither is an endorsement of the tax shelter. The identification number will allow the CRA to track the users of the tax shelter later, and the CRA has three years from the date on your notice of assessment to reassess you." Give with a passion and get the best tax relief 12/05/04   Taxes "It's the time of year when many of us consider giving to charity. This year, I'd like to discuss giving with a passion, and how to gain the most tax relief from giving." Make the most out of capital losses 11/28/04   Taxes "If you're like many investors and have some losers in your portfolio, do your best to make lemonade out of those lemons with the following tips on dealing with capital losses." A how-to guide on capital gains 11/22/04   Taxes "Sometimes investors have to take the bad with the good. The good? Sometimes you make money. The bad? Sometimes you don't. My next two articles will talk about my top dozen year-end strategies for dealing with capital gains and losses. Today, let's start with tips on capital gains." Canadian residents face tax on U.S. rental income 10/16/04   Taxes "We would like to purchase a condo in Florida to spend our winters down south. In the summer months, we would like to rent out this condo. How will income from this condo be treated from a Canadian and U.S. tax perspective?" Grant strategy can provide immediate education cash 10/14/04   Taxes "I then shared with Gerry a clever strategy using a registered education savings plan (RESP) that can provide a tidy sum of cash, almost immediately, to help pay for Jared's education costs." Tax competitiveness 09/22/04   Taxes "Today, as Canadians look to governments to fund health care, education and infrastructure, it is too easy to lose sight of the important role that taxation can have on competitiveness and growth prospects for a country. Federal and provincial governments now collect $475 billion annually in revenue almost $16,000 for each adult and child by far the biggest hit on a typical family's budget. However, as I hope to make clear, I do not mean that only the level of taxes matters to competitiveness. What is also critical is the structure of taxation the degree to which we rely on inefficient taxes that inhibit economic growth, create unfairness, and cost Canadians dearly by forcing them to comply with onerous rules and regulations." Fund your kid's schooling 09/05/04   Taxes "I want to talk to those of you who are business owners today. A loan from your corporation to your child can really help to pay for that education." Negotiating a new job? Think outside the tax box 08/24/04   Taxes "Be creative in asking for non-taxable benefits that can amount to tax-free compensation" Employee loans creative benefit 08/08/04   Taxes "If your employer is willing to lend you money, you could be better off than borrowing from the bank." In search of greener grass in the U.S. 06/27/04   Taxes "But this raises the question: Will you always be better off living and working in the United States than in Canada? It's an important question, because more Canadians than you can shake a hockey stick at have considered taking job offers in the United States. The "brain drain" continues. The answer as to whether you'll be better off financially really depends on where you're moving from in Canada, and where your destination is in the United States. You've got to consider both tax rates, and the cost of living when making the comparison." CRA interest rate cut means opportunity 06/19/04   Taxes "You can bet the rate won't stay this low for long. You see, this falling rate presents a great opportunity for thousands of Canadians to save tax on certain loans. I want to discuss spousal loans today." So your cottage is worth a fortune? 06/18/04   Taxes "Cottagers, the taxman is stalking you. Beware if you own a cottage that has soared in value over the past few years." Joint ownership can lead to problems 06/06/04   Taxes "Joint tenancy with right of survivorship is different. The survivorship feature means that when an individual joint tenant dies, the deceased person's interest is automatically distributed to the remaining joint tenants. Think of this as a "winner takes all" game. The asset will pass to the surviving owners outside of the probate process. The result? Probate fees are avoided." When death and taxes are charitably intertwined 05/29/04   Taxes "At the time of my death, I want to leave a gift that benefits Carolyn, but benefits a specific charity as well. How? I can give to charity in my will, providing me with a donation credit in my year of death, which will save me tax. At the same time, I can provide Carolyn with the income, during her lifetime, from those same investments that I'm leaving to charity." Stock options can generate a nasty surprise 05/15/04   Taxes "Today, many former JDS Uniphase employees are feeling the same way. You would, too, if the taxman handed you a tax bill of about $276,000 on income you feel that you never had. There's a tax lesson to be learned here." You have the right to question taxman's assessment 05/02/04   Taxes "After filing your tax return, you can expect to receive a notice of assessment from the taxman within eight to 12 weeks. If you disagree with Canada Revenue's assessment of your tax return, don't let it go." Can't miss tips for late season filers 04/17/04   Taxes "Tax season is in full swing, and thousands of Canadians will be filing their returns in the next two weeks. Many have filed already, but procrastinators abound at tax time. Let's face it, the tax preparation task is about as exciting as shopping for snow tires -- so what's the hurry? The good news? Last minute doesn't have to mean lost money. There may still be opportunities to save tax dollars as you file your 2003 tax return. Consider the following list of can't-miss tax-saving measures." Unemployed in '03? Here are some tax tips 04/10/04   Taxes "Today, I want to share some tax tips with those who may have been unemployed at some point in 2003." Strangest taxes 04/04/04   Taxes "You might pay taxes on illegal drugs, Pepsi, playing cards and being a star. And that's not all." Tax time can put cash in your account 04/03/04   Taxes "Maybe you've heard this advice before: Don't get excited about a tax refund at this time of year. Why not? A tax refund simply means that you've made a loan of your own money to Canada Revenue throughout the year, at no interest. I can think of better things to do with that money -- and I'm sure you can, too." Interest deductions lost under proposed law 03/28/04   Taxes "Our government has said that it intends to allow the deductibility of interest costs related to borrowed money invested in common shares and the like (Finance explicitly said this in the Oct. 31 press release, and CCRA said the same in IT-533, paragraph 31), but has worded the proposed law to deny or restrict interest deductions. In other words, our government is saying "we're going to reserve the right to deny interest deductions, but don't worry, we won't enforce the new law."" Do you cheat on your taxes? 03/26/04   Taxes "Most taxpayers say they don't. But more admit to doing so than in previous years." Exit strategies 03/15/04   Taxes "Whoever invented wills had a sick sense of humour. Only a sadist would combine the three things people dread most -- death, taxes and lawyers -- under one roof." This year's tax software offers unprecedented choice 03/13/04   Taxes "There's something new in tax software this year -- choice. For the 2003 tax year, Canadians suddenly have an unprecedented number of software options for completing their tax returns." Keep your beneficiaries in mind after a divorce 03/06/04   Taxes "The law surrounding the designation of beneficiaries on RRSPs, RRIFs, and life insurance contracts is complex, and can vary from one province to the next. Still, your strategy should be the same. After a divorce, be sure to the change the beneficiary named on your registered plans with your financial institution itself. And if you've named a beneficiary of those plans in your will, be sure your lawyer includes in a new will (subsequent to your divorce) a clear revocation of all previously made RRSP beneficiary designations." Retirement savings planning should be a year-round sport 02/28/04   Taxes "If you're like many Canadians, you may have forgotten to make your registered retirement savings plan contribution this year. Actually, you have until Monday to make that contribution, but many will neglect this task. Today, I want to focus on the balance of 2004, and some RRSP contribution ideas you should consider throughout the year." Is that really your tax refund? 02/24/04   Taxes "If someone owed you $1,200, would you pay someone else $100 or more to get your hands on that money if all that stood in the way was at most a two-week wait?" Fears of split hold back spousal RRSPs 02/18/04   Taxes "Despite the benefits of spousal RRSPs, many couples are reluctant to take advantage of them, say financial advisers -- and the prospect of marriage breakdown is one of the main reasons." State's new technology finds tax cheats 02/17/04   Taxes "State officials dismiss the notion they are playing Big Brother, but the potential is rather Orwellian. In theory, said Revenue Department Commissioner Alan LeBovidge, the state may eventually be able to track down so much information about a resident's finances that the state, rather than the individual, could complete the individual's tax return." Estate planning pitfalls 02/15/04   Taxes "Badly thought-out estate plans can result in financial grief for beneficiaries and a boon for the taxman" Old sale set tax precedent for Black 02/07/04   Taxes "When the owners of an Ontario grocery store won a Tax Court ruling six years ago, the case got little public attention. But its impact was felt in companies across the country because it suddenly created an opportunity for business people to pocket millions of dollars tax free." Tax bill has increased 1550 percent since 1961 02/04/04   Taxes "The total tax bill of the average Canadian family has increased by 1,550 percent since 1961, according to a new book, Tax Facts 13, released today by The Fraser Institute. That translated into an additional $25,965 in taxes for the average Canadian family." A taxing battle 01/30/04   Taxes "Companies owe it to their shareholders to avoid paying unnecessary taxes. The trouble is that one person's abuse is another's smart planning. And the tension between those two views is likely to increase." The big payday 01/14/04   Taxes "Wall Street thinks tech will win big from Washington's tax breaks. But there are bigger winners." Deferring tax payment puts money in your pocket 01/07/04   Taxes "Procrastination can work in the realm of taxation, too. You see, delaying the requirement to pay tax can actually save you tax. This is true now more than ever." Tax Act amendments could eliminate interest deduction 12/21/03   Taxes "Golombek is concerned that if the new legislation is passed, it will be virtually impossible for investors who borrow money to purchase dividend-paying investments to pass the cumulative profit test. For example, Golombek gives the example of an investor who buys a stock yielding a 2% dividend today with borrowed money at a 4% interest rate. Assuming the price of the stock increases each year by 7%, he says, it would take approximately 20 years of holding the investment to make a cumulative profit since this profit does include the ultimate capital gain upon disposition. Most investors make regular changes to their portfolio and do not want to hold on to particular investments for so many years. Therefore, he says, any losses investors attempt to write off as a result of interest deductibility could be disallowed by the CCRA." Snowbirds should understand tax rules 12/21/03   Taxes "You should be aware that you may have filing requirements in the United States even if you have no tax to pay south of the border. Certainly if you're a U.S. citizen you're required to file a tax return in the United States each year. But even those who are residents of Canada and non-citizens of the United States (known as non-resident aliens) may have filing requirements in the United States depending on the number of days spent there each year." Giving is still sound tax policy 12/14/03   Taxes "The recent death of gift-in-kind tax shelters doesn't mean the end of charitable giving in Canada. It's just no longer possible for donors to make a profit on the deal." 12 tax tips to munch on 12/07/03   Taxes "Why do we call money dough? Everyone knows that dough tends to stick to your fingers, while money tends to slip through them. Good tax tips, on the other hand, can be a lot like doughnuts. If you try one, it could make life a lot sweeter. TIM CESTNICK serves up a dozen tasty year-end tax-planning ideas that could keep investors' wallets a little fatter and a little happier in 2004." Risks in 'buy low, donate high' 12/05/03   Taxes "Taxpayers prepared to gamble should brace for an audit. The history of tax shelters in Canada is always the same: loopholes are discovered by lawyers and accountants, and the early exploiters are their wealthy clients. By the time small investors get wind of the massive tax savings and government coffers are threatened, the department of Finance closes the loophole." Tax cuts may prove a mirage for AMT payers 12/03/03   Taxes "The tax cuts of 2003 may be a boon to the economy and provide welcome padding to some taxpayers' wallets, but for others those cuts will prove to be a mirage. That's because lower tax rates will push more people into paying the Alternative Minimum Tax, rendering some of those much-heralded breaks moot." IRS revamps RRSP reporting 11/30/03   Taxes "The U.S. Internal Revenue Service has spared about 750,000 people in Canada and the United States from a tax-filing headache involving their Canadian registered retirement plans." A year-end registered plan checklist 11/30/03   Taxes "You don't have to make your 2003 contribution until March 1, 2004, but why wait? Avoid the rush in the new year, contribute today and get your money working." CCRA tax shelter donation arrangements 11/25/03   Taxes "As tax filing season approaches, you may see a growing number of advertisements for tax shelter donation arrangements. While donating various items to a charity (such as art, computers, and prescription drugs) is a legitimate way of making a charitable donation, you should be aware of the risks associated with certain donation arrangements." Ottawa eyes charitable tax shelter 11/25/03   Taxes "10,000 donors audited or reassessed in crackdown. As the year-end tax shelter season goes into overdrive, Ottawa's tax collectors are about to issue a stern warning to investors considering arrangements based on charitable donations or "gifting."" Break the poverty mentality for a good cause 11/23/03   Taxes "When it comes to charitable giving, many of us tend to fall short. Some of the numbers published by the Canada Customs and Revenue Agency may surprise you. Of those who reported between $50,000 and $70,000 of income on their tax returns in 2000, 49.7 per cent claimed charitable donations, and they gave an average of 0.67 per cent of income to charity. Between $70,000 and $100,000, 59.5 per cent claimed donations, and gave an average of 0.76 per cent of income. Finally, 69.3 per cent of those earning more than $100,000 claimed donations in 2000, and gave an average of 1.4 per cent of income to charity." Job-creation schemes don't work 11/03/03   Taxes "Free-market economists like myself attack government tax-and-spend policies as being damaging to prosperity, accusing the government of "sucking money" or "leeching resources" out of the economy. We claim that taxes damage not only the welfare of the person from whom they are taken, but the whole country." Substantial savings result when tax planning's a family affair 10/31/03   Taxes "If your family is like mine, they'll drive you crazy from time to time. But cut them some slack. Without their help, you could be paying a lot more tax. That's right, when a family works together to reduce each member's tax burden, the result can be significant dollars saved." Choose beneficiary carefully to save tax 10/22/03   Taxes "Naming your estate as beneficiary of your RRSP can make sense where you have capital losses and expect to have insufficient income in your year of death to use up those losses." The forgotten payroll tax 10/16/03   Taxes "According to Boston University economist Laurence J. Kotlitoff, 18-year old workers who earn average incomes over their lifetimes will "contribute" $723,591 in taxes (in present value dollars). They will receive about $140,000 in benefits! What private sector retirement program has an egregious record such as that? And even when it does, one can always withdraw from it or transfer to another program. Try withdrawing from Social Security and see what happens!" The era that wasn't 09/25/03   Taxes "In truth, government tax collection and spending rarely missed a growth beat over the last 10 years. In real constant dollars, undistorted by inflation, all levels of government -- Ottawa, the provinces and cities and towns -- spent $15,082 per person in 2002. For every family of four, that adds up to $60,328. Total government revenues for the same family, if its members were living in, say, 1967, would have been $22,720. The growth path in government revenues, plotted in the graph, offers no evidence of tax reduction. Whatever blips occurred can be traced to general economic trends." That Alabama tax vote 09/16/03   Taxes "Last Week, voters in Alabama resoundingly rejected Gov. Bob Riley's tax plan by a margin of more than 2 to 1. The plan would have resulted in the largest tax increase in state history." Drawing down an RESP is no simple task 09/14/03   Taxes "If you thought it was struggle to make regular contributions to a registered education savings plan, just wait until you're ready to take the money out. You won't believe the process. If you had any ideas about calling your RESP administrator and asking for a cheque, just forget it." Insurance trusts can accomplish plenty 09/06/03   Taxes "If I could add some financial advice to the list, I'd suggest buying life insurance -- and consider a trust for that life insurance to boot. You see, there are several situations where an insurance trust can make sense. Let me explain." Tax-saving tips make cost of education easier to bear 08/30/03   Taxes "Chances are pretty good that your kids will also need an education if they hope to succeed in the future. And if your kids are going to get an education, you might as well take advantage of as many tax breaks as possible along the way. Here are a few to consider." Equity strategy can save on taxes 08/23/03   Taxes "Picture this. You're the proud owner of a stock that has appreciated in value and you've got too much tied up in this one security. That's right, you've got too many eggs in one basket. The problem? If you sell all or a portion of your holdings in the stock in order to diversify, you're going to trigger a tax liability large enough to wipe out the national debt, give or take. Not to worry. An equity monetization strategy can help." Proper landscaping design could save you tax 08/10/03   Taxes "There are certain restrictions that could jeopardize your ability to claim the principal residence exemption in some situations. One of those restrictions is the half-hectare rule. You see, our tax law restricts the amount of land that qualifies as part of your principal residence to half a hectare (about 1.25 acres). The good news? There's an exception to this rule where you can demonstrate that the land in excess of half a hectare is necessary for the use and enjoyment of the property as a residence." Deadline for U.S. beneficiaries of RRSPs 07/23/03   Taxes ""However, as the Internal Revenue Service has not yet made a ruling on this issue and the deadline for filing the requisite materials is August 15, the association reminds members and their clients to contact their tax advisors regarding the requirement that forms reporting these transactions be filed, and the procedure for filing such forms," it counsels." Transferring a family cottage to the kids can save tax 07/20/03   Taxes "Let's talk about your cottage. There are a number of ways to minimize the income tax hit on a cottage, but I'd like to focus on one specific strategy: Providing your kids with ownership." U.S. targets big names in fighting abuse of tax shelters 07/07/03   Taxes "The U.S. government is pressing a broad assault on the flourishing tax-shelter business with an array of high-profile summonses and civil suits aimed at stopping cheats who are getting away without paying many billions of dollars in taxes." Here's 77,000 reasons to pay GST 06/24/03   Taxes "One of Mr. Ingram's clients was hit two months ago with a notice from Canada Customs and Revenue Agency, saying he owes $77,000 in unpaid GST going back 12 years to 1991 including interest and hefty penalties." Consider an Alberta trust even if you don't live there 06/22/03   Taxes "The key to taking advantage of Alberta tax rates, short of moving to Alberta, is to establish a trust that is resident in Alberta. You can then transfer certain income-producing assets to this trust. Since the trust will be resident in Alberta, income earned in the trust will be taxed at Alberta tax rates." 'Non-competition' payments may be tax-free 06/19/03   Taxes "The moral of the story? You may want to build a non-competition payment into a deal if you're thinking of selling shares soon. The Manrell decision may be appealed to the Supreme Court of Canada, so this tax-free treatment may not last forever. By the way, the same tax-free treatment will not extend to employees who receive a non-competition payment on leaving an employer. Those payments will be considered employment income." Make the most of your income tax refund this year 05/05/03   Taxes "It's often been said that, next to being shot at and missed, there's nothing quite as satisfying as a tax refund. And we Canadians love our tax refunds. The average refund to date for the 2002 tax year is $1,102.69, according to the Canada Customs and Revenue Agency" The myths of tax preparation and planning 04/26/03   Taxes "Aggressive tax preparation is one way to save tax. But proper tax planning is a better idea. Let me dispel a few myths about tax preparation and planning." Calculating your adjusted cost base 04/19/03   Taxes "When you sell a capital property, your capital gain or loss for income tax purposes is calculated as your proceeds of disposition less your adjusted cost base (ACB) and any outlays or expenses relating to the disposition. In the case of shares acquired on the open market, your ACB is normally the cost of the shares plus any brokerage fees relating to the acquisition. However, there are other instances where the calculation is not so simple." Use cash in your company smartly 03/22/03   Taxes "I spoke about the benefits of earning active business income in a corporation, and leaving some of those earnings in the company to defer tax. Today I want to talk about what to do with those dollars you've retained in your firm." Overtaxed? Don't move to the U.S. 03/11/03   Taxes "But a new study by economist Andrew Jackson of the Canadian Labour Congress suggests that Canadian and U.S. taxes converged substantially in the 1990s and that Canadian workers -- both average wage earners and higher-paid employees -- are already on a par with their American counterparts." Supreme court sets six-year limit on tax collection 03/09/03   Taxes "The Supreme Court of Canada has set a six-year limitation period on the Canada Customs and Revenue Agency for collecting back-taxes." Business owners should applaud the budget 03/03/03   Taxes "How the did the 2003 federal budget make it even easier to defer tax? Simple. The budget proposes to increase the dollars in a company that will qualify for the low rate of tax." New player enters tax software market 02/20/03   Taxes "New computer software for completing your tax return has hit the market just as Ottawa's competition watchdog looks at whether the dominant player in the business has too much power." Intuit: Only in Canada, Eh! 02/16/03   Taxes "Intuit Canada does not collect any personal information about its customers without their prior consent. Contrary to several media reports, Intuit Canada does not use SafeCast/Macrovision/C-Dilla or any "Spyware" technology in any of its QuickTax or ImpttRapide products." - Only U.S. customers have to suffer from C-Dilla... TurboTax: Sector 33 Naughtiness 02/16/03   Taxes "In Part 1, we laid out some of the reasons why we suspected problems with Intuit's implementation of digital rights management in Turbotax, and explored some of the issues that surfaced during installation. Now let's look closely at what happens when you actually try to use the product." Higher price is biggest change in tax software 02/03/03   Taxes "It's tougher than ever to choose between the two dominant software programs for completing your income tax return, QuickTax and TaxWiz. QuickTax is the perennial top-seller and the clear winner in usability, but it's always been the most expensive. Guess what? For the 2002 tax year, prices are going up." To RRSP or not: six issues to weigh 01/31/03   Taxes "I can't think of a more debated issue today than whether or not to use an RRSP in saving for retirement. Perhaps the "which came first, the chicken or the egg" issue ranks high on the list, but that debate will never be resolved. As for your retirement savings, I believe the answer is clearer." TurboTax customers upset by DRM 01/22/03   Taxes "Product activation has now made its way into one of the most popular software programs ever created, TurboTax. And, as an extra bonus, the latest release of TurboTax comes with Macrovisions's obnoxious C-Dilla malware. C-Dilla prevents you from copying the CD by disabling your CD-RW drive. That means it's monitoring your CD writing activities all the time. As if you needed more processes running on your machine. Early reports from some users indicate that C-Dilla has caused interference with other software and that it is inordinately difficult to get rid of, perhaps requiring a low-level hard disk format. And to make things even dicier, Intuit apparently did not overtly inform purchasers of the new TurboTax that C-Dilla was included and would be installed on their systems." Do the little things right to save tax 01/13/03   Taxes "What are those simple things you should be doing to pay less tax? I couldn't possibly mention them all today. In fact, I've been writing about many of those ideas in this space over the past six years, and I'll continue to write about others in days to come. I will say this, however: Regardless of the specific tax strategy, it's going to fall under one of the five pillars of tax planning (these come from my book, The Tax Freedom Zone)" Tax cuts for the rich are what's necessary 01/13/03   Taxes "Let's remember, taxes are a moral issue. If you believe that tax cuts should go to the people who actually pay the taxes, why then, you happen to be for tax cuts for the so-called wealthy. The president is talking about income taxes and a minority of working Americans now shoulder nearly all of the federal income tax burden." Ok, now the end is nigh 12/18/02   Taxes "Now is the time to take action on taxes. Most people, since we have until the end of February to do RRSPs and we don't actually pay taxes til April, forget the primary chance we have save taxes happens now, before the calendar ends. Here are some quick points to remember and consider acting on before you go out for a New Year's party." Defer income till new year to shave tax bill 12/16/02   Taxes "Not unlike those postal workers in Virginia, most Canadians would prefer to receive their income as quickly as humanly possible. But what if I were to tell you that delaying the receipt of certain income until the new year can actually make sense -- for two reasons. First, effective tax rates are expected to be lower in 2003, and second, the time value of money can create a lower tax burden itself. Let me explain." Tis the season for tax tips 11/30/02   Taxes "Having trouble prioritizing your to-do list? I've got a simple solution: Procrastinate. Eventually, one of the tasks on your list will become a dire emergency -- like the implementation of year-end tax strategies. Consider these ideas to save tax for 2002" Charitable gifting 11/27/02   Taxes "As current Canadian governments continue to place a greater priority on fiscal responsibility, universities, charities, and other non-profit causes are made to suffer. Yet, our social safety net is one of the very reasons that Canada is considered one of the best places in the world to live. How do we balance social responsibility with fiscal responsibility? I emphasize that we all have responsibilities to our social well being and collective culture." Probate revenue plunges 11/20/02   Taxes "Ontario's public coffers suffered a dramatic one-third drop in probate tax revenue this year, which, estate planning experts say, is probably the result of clients' growing use of tax planners." Unlock locked-in dollars for more flexibility 11/13/02   Taxes "There's another familiar, yet true, story in which the good guy loses. It might even be your story. It's about a person who has saved for retirement for years only to find that he's not able to withdraw all that he wants from his registered plan. It's a locked-in plan. But his story has a good ending after all. He's discovered a way to unlock some of those locked-in dollars. Let me explain." Goodbye REOP, hello "pursuit of profit" 11/01/02   Taxes "Given the CCRA's periodic propensity to ignore the applicability of court decisions, Canadian tax advisors have been waiting eagerly to find out whether the Stewart v. The Queen decision, released by the Supreme Court of Canada in May, means the dreaded "reasonable expectation of profit" test is dead." Handle deceased's home properly 10/29/02   Taxes "The bottom line? If your heirs expect to sell your home after your death and hope to claim a capital loss in the process to recover tax you paid at the time of your death, be sure that no beneficiary (or someone related to a beneficiary) ordinarily inhabits the place after you're gone." Making the most of capital losses 10/22/02   Taxes "As investors, the dark cloud of the market has been hanging over us for some time. Can you see the silver lining? Is there some way we can make lemonade out of the lemons the market has handed us this year? You bet. Just deal with your capital losses properly." Be prepared to pay tax on your perks 09/28/02   Taxes "Employees are taxable on the value of benefits and perks that they derive from employment. This simply means that, with few exceptions, employees are taxable not only on their salary, but also on in-kind personal perks -- free housing, low-cost loans, personal vacations, school fees, cosmetic surgery, and clothing -- that are directly attributable to their employment." Presumed guilt puts taxpayers in bind 08/19/02   Taxes "Do Canadians enjoy taxation more than other nationalities? Probably not, but we acquiesce to oppressive procedures in tax law, most notably the presumption of guilt." Gains from past losses 03/15/02   Taxes "The bear that mauled stock market investors in 2001 can now help them get back some taxes they shelled out in prior years. Indeed, the bear and the tax man have teamed up to make a limited-time offer that lets your clients recoup capital gains tax paid as far back as 1998, when market values and tax rates were much higher." Highlights of budget 2001 12/10/01   Taxes Please ignore the onerous tax rates. When is tax evasion unethical? 11/13/01   Taxes "A few years ago the Roman Catholic Church issued a revised catechism that categorizes tax evasion as a sin. Part I of this article explores the arguments that could be used to support the view that tax evasion is a sin, or is unethical. Part II presents arguments to support the position that there is nothing sinful or ethically wrong with tax evasion. The article concludes that the arguments offered to support the view that tax evasion is sinful or unethical do not hold up under analysis, and suggests that it is the tax collectors who might be guilty of sin, since they participate in the taking of property without the owner's consent."	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