Author Topic: Can"EH"dian Tax - You have questions, I have answers  (Read 105375 times)

Heckler

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #450 on: January 21, 2016, 08:41:10 PM »
CPA,

My 40 y.o. wife had a BC LIRA account with ~$5k in it, transferred from a previous employers pension. 

I've worked with our banks brokerage to unlock the LIRA and move the funds to her RSP account, using the small account value provision to allow accessing the funds before standard LIRA locked in funds.  This allows her to add funds or sell for allocation balancing. 

The bank simply asked for a letter asking for direction to unlock the LIRA and transfer the securities in kind, plus a Form 4 for my permission to unlock her LIRA. 

Are there any tax or legal implications my bank may not have advised us?   (Besides obvious income taxes after we eventually take funds out of her RSP) 

Thanks!
« Last Edit: January 21, 2016, 09:00:11 PM by Heckler »

Heckler

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #451 on: January 21, 2016, 08:49:36 PM »
From part 4.  http://www.fic.gov.bc.ca/pdf/Pensions/BCLIRAAddendum.pdf

Lump-sum payment of small account balance
9 (l)
On application by the owner of this locked-in retirement account, the locked-in retirement account issuer will pay to the owner the lump-sum amount referred to in section 69 (2) of the Act and section 107 of the Regulation if, on the date of the application,
(a) the balance of the locked-in retirement account does not exceed 20% of the Year's Maximum Pensionable Earnings (YMPE) under the Canada Pension Plan for the calendar year in which the application is made, or
(b) the owner is at least 65 years of age and the balance of this locked-in retirement account does not exceed 40% of the YMPE for the calendar year in which the application is made.

http://www.fic.gov.bc.ca/index.aspx?p=pension_plans/forms

For more if anyone's interested in unlocking their LIRA
« Last Edit: January 21, 2016, 08:53:01 PM by Heckler »

daverobev

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #452 on: February 01, 2016, 12:36:29 PM »
Just want to make sure I've got this whole mess right(ish) now:

I had to pay cap gains tax to the UK for what was Canada FY 2014 - sold a rental property.

I have updated/added lines 431 and 433 (which gets put into 405). With all the other stuff in my returns, it works out that I had to pay the UK about $6000 in CAD; this works out as only giving me back about $4000 from Canada.

What I then missed was putting the difference in as an expense - so $6k - $4k = $2k expense on line 232.

Am I missing anything? I thought under the DTA I'd get nearly everything back...
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Le Barbu

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #453 on: February 01, 2016, 02:23:48 PM »
I own some ZCN shares (canadian stocks index ETF) in a taxable account. It pays dividend at the end of the year (ex-div. date  Dec. 24th, record-date Dec. 29th) but the pay-date was January 7th 2016. Are these dividends will be taxable for 2015 or 2016?

Samething for interest paid for investment purpose. Does the december's interest are deductibles for 2015 if I paid for on January 5th 2016?

It's the first year I do this, so next year I will just continue with the same method.
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Posthumane

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #454 on: February 06, 2016, 01:16:39 PM »
I have a question regarding business income and expenses. My wife started a small business in our house, to the tune of a few hundred a month in revenue. We had to buy some equipment to get the business started, most of which were purchased in December. She had a couple of clients in Dec but it didn't really start picking up until January, so as a result her expenses in the last year far exceeded her revenue. Can she somehow carry those expenses forward to this year to offset her revenue?

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #455 on: February 06, 2016, 04:30:01 PM »
I own some ZCN shares (canadian stocks index ETF) in a taxable account. It pays dividend at the end of the year (ex-div. date  Dec. 24th, record-date Dec. 29th) but the pay-date was January 7th 2016. Are these dividends will be taxable for 2015 or 2016?

Samething for interest paid for investment purpose. Does the december's interest are deductibles for 2015 if I paid for on January 5th 2016?

It's the first year I do this, so next year I will just continue with the same method.

Should just be the income listed on your T5 form that will be sent by the brokerage. Its been a while since I've got a T5 because of my house purchase a few years back, but I believe it counts for the year in which you actually receive the deposit in your account (pay-date).
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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #456 on: February 06, 2016, 06:45:10 PM »
I own some ZCN shares (canadian stocks index ETF) in a taxable account. It pays dividend at the end of the year (ex-div. date  Dec. 24th, record-date Dec. 29th) but the pay-date was January 7th 2016. Are these dividends will be taxable for 2015 or 2016?

Samething for interest paid for investment purpose. Does the december's interest are deductibles for 2015 if I paid for on January 5th 2016?

It's the first year I do this, so next year I will just continue with the same method.

Should just be the income listed on your T5 form that will be sent by the brokerage. Its been a while since I've got a T5 because of my house purchase a few years back, but I believe it counts for the year in which you actually receive the deposit in your account (pay-date).

Thank you Tuxedo, what about the interests then?
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CPA CB

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #457 on: February 11, 2016, 07:18:18 AM »
CPA,

My 40 y.o. wife had a BC LIRA account with ~$5k in it, transferred from a previous employers pension. 

I've worked with our banks brokerage to unlock the LIRA and move the funds to her RSP account, using the small account value provision to allow accessing the funds before standard LIRA locked in funds.  This allows her to add funds or sell for allocation balancing. 

The bank simply asked for a letter asking for direction to unlock the LIRA and transfer the securities in kind, plus a Form 4 for my permission to unlock her LIRA. 

Are there any tax or legal implications my bank may not have advised us?   (Besides obvious income taxes after we eventually take funds out of her RSP) 

Thanks!

Hi Heckler,

I think you're covered here as you'll fall under the provisions. Ultimately it's one tax protected account rolling over to the next, so it shouldn't have any impact this year.

Cheers,

CPA CB

CPA CB

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #458 on: February 11, 2016, 07:24:30 AM »
Just want to make sure I've got this whole mess right(ish) now:

I had to pay cap gains tax to the UK for what was Canada FY 2014 - sold a rental property.

I have updated/added lines 431 and 433 (which gets put into 405). With all the other stuff in my returns, it works out that I had to pay the UK about $6000 in CAD; this works out as only giving me back about $4000 from Canada.

What I then missed was putting the difference in as an expense - so $6k - $4k = $2k expense on line 232.

Am I missing anything? I thought under the DTA I'd get nearly everything back...

Hey Dave,

The tricky part with international tax and treaties is that the government here uses an algorithm to 'grind down' the amount of tax credits given.

Essentially, it takes into account the amount of foreign income vs. canada source income, and uses this as a mechanism to derive your foreign income tax credit. The idea (in theory) is that if you pay 6k in the UK, and owe 7k in Canada, the tax credit will work out to cover your taxes payable to around the $1k area... It's rarely perfect in practice, as your foreign vs. canadian source income affects the calculation so heavily...


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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #459 on: February 11, 2016, 07:27:44 AM »
I have a question regarding business income and expenses. My wife started a small business in our house, to the tune of a few hundred a month in revenue. We had to buy some equipment to get the business started, most of which were purchased in December. She had a couple of clients in Dec but it didn't really start picking up until January, so as a result her expenses in the last year far exceeded her revenue. Can she somehow carry those expenses forward to this year to offset her revenue?

What kind of equipment? I assume this is a sole proprietorship?

What I would recommend is 'capitalizing' the equipment (i.e. it is an asset of the business) and depreciating it over the life of the equipment (which is prescribed in the Income Tax Act - Look at Capital Cost Allowance Rates). This will help to defer the expense to 2016 and beyond (depending on the equipment class).

Hope this helps!

CPA CB

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #460 on: February 11, 2016, 07:32:08 AM »
I own some ZCN shares (canadian stocks index ETF) in a taxable account. It pays dividend at the end of the year (ex-div. date  Dec. 24th, record-date Dec. 29th) but the pay-date was January 7th 2016. Are these dividends will be taxable for 2015 or 2016?

Samething for interest paid for investment purpose. Does the december's interest are deductibles for 2015 if I paid for on January 5th 2016?

It's the first year I do this, so next year I will just continue with the same method.

Should just be the income listed on your T5 form that will be sent by the brokerage. Its been a while since I've got a T5 because of my house purchase a few years back, but I believe it counts for the year in which you actually receive the deposit in your account (pay-date).

Thank you Tuxedo, what about the interests then?

Hi LB,

So interest paid on income invested all the way up to December 31st is deductible for tax purposes in your 2015 fiscal year. It's in your Schedule 4 on your tax return.

As far as the ETF - this should be reported either on a T3 or T5, so you will see the amounts total for the year. The way these etfs distribute capital differs based on the investment (ROC, Capital Gain Dist., Dividend, Interest/Investment Income) so it is very specific to the fund in question.

Cheers,

CPA CB

scrubbyfish

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #461 on: February 11, 2016, 08:58:23 AM »
My 11 year old has received his first tax slip from CRA, "taxable" income of $3000.

At what age is a person required to file a tax return?

If not required at 11, is there an advantage to an 11 year old filing?

Posthumane

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #462 on: February 11, 2016, 10:07:13 AM »
I have a question regarding business income and expenses. My wife started a small business in our house, to the tune of a few hundred a month in revenue. We had to buy some equipment to get the business started, most of which were purchased in December. She had a couple of clients in Dec but it didn't really start picking up until January, so as a result her expenses in the last year far exceeded her revenue. Can she somehow carry those expenses forward to this year to offset her revenue?

What kind of equipment? I assume this is a sole proprietorship?

What I would recommend is 'capitalizing' the equipment (i.e. it is an asset of the business) and depreciating it over the life of the equipment (which is prescribed in the Income Tax Act - Look at Capital Cost Allowance Rates). This will help to defer the expense to 2016 and beyond (depending on the equipment class).

Hope this helps!
Thanks, this does help. The business is indeed a sole proprietorship. It's a hair styling business and some of the equipment could be considered capital, such as her station and chair, hair sink, standing dryer, etc. I don't think modifications to the house can be as these are more like maintenance expenses (had to modify some water supply and drain lines to accommodate the sink).

daverobev

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #463 on: February 12, 2016, 03:56:54 AM »
Just want to make sure I've got this whole mess right(ish) now:

I had to pay cap gains tax to the UK for what was Canada FY 2014 - sold a rental property.

I have updated/added lines 431 and 433 (which gets put into 405). With all the other stuff in my returns, it works out that I had to pay the UK about $6000 in CAD; this works out as only giving me back about $4000 from Canada.

What I then missed was putting the difference in as an expense - so $6k - $4k = $2k expense on line 232.

Am I missing anything? I thought under the DTA I'd get nearly everything back...

Hey Dave,

The tricky part with international tax and treaties is that the government here uses an algorithm to 'grind down' the amount of tax credits given.

Essentially, it takes into account the amount of foreign income vs. canada source income, and uses this as a mechanism to derive your foreign income tax credit. The idea (in theory) is that if you pay 6k in the UK, and owe 7k in Canada, the tax credit will work out to cover your taxes payable to around the $1k area... It's rarely perfect in practice, as your foreign vs. canadian source income affects the calculation so heavily...

Thanks - just want to confirm I'm entering the right stuff on the right lines, though - 431/433 and the un-refunded/credited amount on 232?
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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #464 on: February 13, 2016, 02:04:25 PM »
I have not been able to find any concrete information on whether the controversial 'income splitting' or Family Tax Credit will be allowed to be claimed for 2015.  Anyone know for certain if it is on or off the table?  I know that it was one of our young, hot PM's election promises, just not certain if it is off the books for 2015 or if it will survive one more tax year and be caput in 2016 tax year.  Thanks.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #465 on: February 14, 2016, 07:33:10 AM »
I have not been able to find any concrete information on whether the controversial 'income splitting' or Family Tax Credit will be allowed to be claimed for 2015.  Anyone know for certain if it is on or off the table?  I know that it was one of our young, hot PM's election promises, just not certain if it is off the books for 2015 or if it will survive one more tax year and be caput in 2016 tax year.  Thanks.

FTC is good for 2015, will be gone for 2016.
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powersuitrecall

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #466 on: February 16, 2016, 10:16:11 AM »
Hi again CPA CB (or other tax savvy people),

I have decided to close my home business for the 2015 tax year.  It was a photography business for which I purchased gear for.  I therefore have claimed CCA over the life of the business.  I sold some equipment in 2015, but decided to keep some for personal use going forward. 

I would like to know what my CCA obligations are for closing this business.  Rough numbers follow:

UCC Start of Year                                  = $6000
2015 CCA                                           = $1000
2015 Disposition (Sale to others)                  = $2000
2015 Disposition (Fair Market Value of stuff kept) = $2500


Q - This will have the effect of claiming a $500 loss for the business year, correct?

Q - Is this ok?

Q - Do I have an obligation to "zero" out the amounts (ie - add $500 more to dispositions)?

Thanks!

CPA CB

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #467 on: February 16, 2016, 10:44:08 AM »
I have not been able to find any concrete information on whether the controversial 'income splitting' or Family Tax Credit will be allowed to be claimed for 2015.  Anyone know for certain if it is on or off the table?  I know that it was one of our young, hot PM's election promises, just not certain if it is off the books for 2015 or if it will survive one more tax year and be caput in 2016 tax year.  Thanks.

FTC is good for 2015, will be gone for 2016.

That's correct

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #468 on: February 19, 2016, 01:06:19 PM »
I have a basic question about capital gains. I know that cap gains is based on your marginal tax rate for the year the gain occurred. Does the marginal rate include only your employment income, or is it employment income plus the cap gain?

For example, if the gain is several hundred thousand dollars, will it bump you into  the 47.7% bracket?

daverobev

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #469 on: February 19, 2016, 03:40:51 PM »
I have a basic question about capital gains. I know that cap gains is based on your marginal tax rate for the year the gain occurred. Does the marginal rate include only your employment income, or is it employment income plus the cap gain?

For example, if the gain is several hundred thousand dollars, will it bump you into  the 47.7% bracket?

It's a progressive system. You go progressively from one bracket to the next. Yes that much gain will put a portion into the top bracket. But you'll only pay half the tax on cap gains (but it's counted fully in terms of bracket progression, if that makes sense - it gets halved after other calculations).
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scrubbyfish

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #470 on: February 19, 2016, 03:42:21 PM »
Re-posting from just over a week ago, in case anyone knows:

My 11 year old has received his first tax slip from CRA, "taxable" income of $3000.

At what age is a person required to file a tax return?

If not required at 11, is there an advantage (soon or in the distant future) to an 11 year old filing?

CPA CB

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #471 on: February 19, 2016, 04:47:11 PM »
Hi scrubbyfish,

There is no age requirement of when to file...but sometimes it is beneficial to file depending on the circumstances.

As per CRA:

Do you have to file a return?
You must file a return for 2015 if any of the following situations apply:

You have to pay tax for 2015.
We sent you a request to file a return.
You and your spouse or common-law partner elected to split pension income for 2015. See lines 115, 116, 129, and 210.
You received working income tax benefit (WITB) advance payments in 2015.
You disposed of capital property in 2015 (for example, if you sold real estate or shares) or you realized a taxable capital gain (for example, if a mutual fund or trust attributed income to you, or you are reporting a capital gains reserve you claimed on your 2014 return).
You have to repay any of your old age security or employment insurance benefits. See line 235.
You have not repaid all amounts withdrawn from your registered retirement savings plan (RRSP) under the Home Buyers’ Plan or the Lifelong Learning Plan. For more information, go to Home Buyers' Plan (HBP) or see Guide RC4112, Lifelong Learning Plan (LLP).
You have to contribute to the Canada Pension Plan (CPP). This can apply if for 2015 the total of your net self-employment income and pensionable employment income is more than $3,500. See line 222.
You are paying employment insurance premiums on self-employment and other eligible earnings. See lines 317 and 430.
Even if none of these requirements apply, you can file a return if any of the following situations apply:

You want to claim a refund.
You want to claim the WITB for 2015.
You want the GST/HST credit (including any related provincial credits). For example, you may be eligible if you turn 19 before April 2017.
You or your spouse or common-law partner want to begin or continue receiving Canada child tax benefit payments, including related provincial or territorial benefit payments.

You or your spouse or common law partner want to claim the family tax cut. See line 423.

You have incurred a non-capital loss (see line 236) in 2015 that you want to be able to apply in other years.
You want to carry forward or transfer the unused part of your tuition, education, and textbook amounts. See line 323.
You want to report income for which you could contribute to an RRSP and/or a pooled registered pension plan (PRPP) to keep your RRSP/PRPP deduction limit for future years current.
You want to carry forward the unused investment tax credit on expenditures you incurred during the current year See line 412.
You receive the guaranteed income supplement or allowance benefits under the old age security program. You can usually renew your benefit by filing your return by April 30. If you choose not to file a return, you will have to complete a renewal form. This form is available from Service Canada.

CPA CB

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #472 on: February 19, 2016, 04:53:49 PM »
Hi again CPA CB (or other tax savvy people),

I have decided to close my home business for the 2015 tax year.  It was a photography business for which I purchased gear for.  I therefore have claimed CCA over the life of the business.  I sold some equipment in 2015, but decided to keep some for personal use going forward. 

I would like to know what my CCA obligations are for closing this business.  Rough numbers follow:

UCC Start of Year                                  = $6000
2015 CCA                                           = $1000
2015 Disposition (Sale to others)                  = $2000
2015 Disposition (Fair Market Value of stuff kept) = $2500


Q - This will have the effect of claiming a $500 loss for the business year, correct?

Q - Is this ok?

Q - Do I have an obligation to "zero" out the amounts (ie - add $500 more to dispositions)?

Thanks!

Hi there,

Yes - you can claim the loss - but in this case it is what is known as a "Terminal Loss", rather than just a disposition.

You can only claim a Terminal Loss when all assets in that class are disposed of. Given that you're closing the business, this will be the case. In theory you're deemed to have disposed all of the assets upon closing the business (and distributing the proceeds).

Cheers,

CPA CB


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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #473 on: February 20, 2016, 02:34:20 PM »
Hi again CPA CB (or other tax savvy people),

I have decided to close my home business for the 2015 tax year.  It was a photography business for which I purchased gear for.  I therefore have claimed CCA over the life of the business.  I sold some equipment in 2015, but decided to keep some for personal use going forward. 

I would like to know what my CCA obligations are for closing this business.  Rough numbers follow:

UCC Start of Year                                  = $6000
2015 CCA                                           = $1000
2015 Disposition (Sale to others)                  = $2000
2015 Disposition (Fair Market Value of stuff kept) = $2500


Q - This will have the effect of claiming a $500 loss for the business year, correct?

Q - Is this ok?

Q - Do I have an obligation to "zero" out the amounts (ie - add $500 more to dispositions)?

Thanks!

Hi there,

Yes - you can claim the loss - but in this case it is what is known as a "Terminal Loss", rather than just a disposition.

You can only claim a Terminal Loss when all assets in that class are disposed of. Given that you're closing the business, this will be the case. In theory you're deemed to have disposed all of the assets upon closing the business (and distributing the proceeds).

Cheers,

CPA CB

Awesome CPA CB - I did confirm all this with a retired CA (my father).

Thanks for starting this thread so long ago.  I'll probably be back :)

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #474 on: February 21, 2016, 05:03:33 PM »
Re-posting from just over a week ago, in case anyone knows:

My 11 year old has received his first tax slip from CRA, "taxable" income of $3000.

At what age is a person required to file a tax return?

If not required at 11, is there an advantage (soon or in the distant future) to an 11 year old filing?
RRSP contribution room can accumulate for the child. I first filed at 15, according to the CRA records (I checked my CRA account, it has my history since 1991). I recommend using Simpletax (free software) and filing electronically.

I also recommend getting a CRA MyAccount to track it. SimpleTax (and others) and the CRA should be linking in the future to autofill the tax return, they have already started.

One last hurrah for the CRA. Last year the CRA used their power to fill in my RRSP contribution for $300 I forgot to claim, that's right the CRA found me an extra deduction (I found it after I filed, was going to just sit on it till this year rather than re-file). Yay Canada.
http://www.cra-arc.gc.ca/esrvc-srvce/tx/psssrvcs/menu-eng.html
 
The small amounts don't require tax payments, there's no downside to filing that I know of.

scrubbyfish

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #475 on: February 21, 2016, 05:19:41 PM »
Thanks, Prairie Stash! :)

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #476 on: February 22, 2016, 09:12:52 AM »
Hi again CPA CB (or other tax savvy people),

I have decided to close my home business for the 2015 tax year.  It was a photography business for which I purchased gear for.  I therefore have claimed CCA over the life of the business.  I sold some equipment in 2015, but decided to keep some for personal use going forward. 

I would like to know what my CCA obligations are for closing this business.  Rough numbers follow:

UCC Start of Year                                  = $6000
2015 CCA                                           = $1000
2015 Disposition (Sale to others)                  = $2000
2015 Disposition (Fair Market Value of stuff kept) = $2500


Q - This will have the effect of claiming a $500 loss for the business year, correct?

Q - Is this ok?

Q - Do I have an obligation to "zero" out the amounts (ie - add $500 more to dispositions)?

Thanks!

Hi there,

Yes - you can claim the loss - but in this case it is what is known as a "Terminal Loss", rather than just a disposition.

You can only claim a Terminal Loss when all assets in that class are disposed of. Given that you're closing the business, this will be the case. In theory you're deemed to have disposed all of the assets upon closing the business (and distributing the proceeds).

Cheers,

CPA CB

Awesome CPA CB - I did confirm all this with a retired CA (my father).

Thanks for starting this thread so long ago.  I'll probably be back :)

My pleasure! Glad to help!

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #477 on: February 22, 2016, 09:26:23 AM »
I own some ZCN shares (canadian stocks index ETF) in a taxable account. It pays dividend at the end of the year (ex-div. date  Dec. 24th, record-date Dec. 29th) but the pay-date was January 7th 2016. Are these dividends will be taxable for 2015 or 2016?

Samething for interest paid for investment purpose. Does the december's interest are deductibles for 2015 if I paid for on January 5th 2016?

It's the first year I do this, so next year I will just continue with the same method.

Should just be the income listed on your T5 form that will be sent by the brokerage. Its been a while since I've got a T5 because of my house purchase a few years back, but I believe it counts for the year in which you actually receive the deposit in your account (pay-date).

Thank you Tuxedo, what about the interests then?

Hi LB,

So interest paid on income invested all the way up to December 31st is deductible for tax purposes in your 2015 fiscal year. It's in your Schedule 4 on your tax return.

As far as the ETF - this should be reported either on a T3 or T5, so you will see the amounts total for the year. The way these etfs distribute capital differs based on the investment (ROC, Capital Gain Dist., Dividend, Interest/Investment Income) so it is very specific to the fund in question.

Cheers,

CPA CB

" interest paid on income invested all the way up to December 31st" so, if the december's interests (1st-31st) have been "paid" on january 5th, they dont belong for 2015 (reported to next year)?

Also, the T5 slip report some "Foreign non-business income" (18.06$)  and foreign non-business income tax paid (-0.97$)

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #478 on: February 22, 2016, 10:03:23 AM »
Last spring, I had to pay 1,000$ for resigning a buying offer (agreement and fees)

Long story short, asbestos was found at many places in the building and we didn't want to deal with this when DIY renovations. It's dangerous for health and cost a lot of $$ to remove by specialized firm.

Is there a way I can recover something through my 2015 taxes? My point is our goal was to buy this for a rental project. I kept every documents just in case...
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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #479 on: February 22, 2016, 11:29:01 AM »
Re-posting from just over a week ago, in case anyone knows:

My 11 year old has received his first tax slip from CRA, "taxable" income of $3000.

At what age is a person required to file a tax return?

If not required at 11, is there an advantage (soon or in the distant future) to an 11 year old filing?

I just finished reading a tax tips book in which it was recommended for minors to file tax returns just so they would get the contribution room for RRSP.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #480 on: February 24, 2016, 01:26:16 PM »
I have a T5008 statement from my brokerage but it doesn't have any of the box numbers the tax software is asking for. It doesn't have any boxes for that matter, just a summary of what I traded, when and for how much.

The brokerage said they'd be sending out another document mid-March but I take this information with a grain of salt considering how clueless they've been in the past.

Am I missing a document or do I need to somehow infer the boxes numbers from that T5008 statement?
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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #481 on: February 25, 2016, 08:49:01 AM »
I live in BC.

If I am going to hold VCN, VUN, VEE, VDU and VAB in my portfolio is there are dividend tax benefit to holding only VCN in my non-registered account vs. US or international ETF dividends?

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #482 on: February 25, 2016, 09:06:06 AM »
I live in BC.

If I am going to hold VCN, VUN, VEE, VDU and VAB in my portfolio is there are dividend tax benefit to holding only VCN in my non-registered account vs. US or international ETF dividends?

Yes there is. For tax purposes, once you're investing in cash (taxable) accounts, it's most efficient to put your Canadian exposure there. With VCN most of your distributions will be in the form of Canadian-eligible dividends which are taxed at a much lower rate. Particularly once you've retired and have less income at the regular tax rates.

http://www.taxtips.ca/taxrates/bc.htm
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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #483 on: February 25, 2016, 01:49:14 PM »
Yes there is. For tax purposes, once you're investing in cash (taxable) accounts, it's most efficient to put your Canadian exposure there. With VCN most of your distributions will be in the form of Canadian-eligible dividends which are taxed at a much lower rate. Particularly once you've retired and have less income at the regular tax rates.

http://www.taxtips.ca/taxrates/bc.htm

Thank you. :)

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #484 on: February 27, 2016, 06:50:02 PM »
Hello,

I have a question about the Liberal's new Child Tax Benefit. It is based on the "adjusted
family net income" and I'm wondering how that is calculated?  If for example a family makes 100K, but puts 10K into an RRSP and pays 20K in tax, would the benefit be based on 100K or the 70K?

Best,

Carla

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #485 on: February 28, 2016, 08:07:26 PM »
Hello,

I have a question about the Liberal's new Child Tax Benefit. It is based on the "adjusted
family net income" and I'm wondering how that is calculated?  If for example a family makes 100K, but puts 10K into an RRSP and pays 20K in tax, would the benefit be based on 100K or the 70K?

Best,

Carla
I think it will be line 236 of your tax return - net income combined with your spouse/partner if you have one.

My family net income is Total - RRSP -$8000 Daycare expenses. $8000 in the 2015 maximum amount you can claim, claimed by lower earner in dual households, if you paid more than that it doesn't matter, if you paid less than use that amount.

Using your example it would be $100,000-$10,000= $90,000.

Please note it hasn't passed yet, March 22, 2016 is the date to watch. The pledge was to start payments in July.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #486 on: March 02, 2016, 12:19:21 PM »
Can anyone give me an ELI5 explaination on (or link me one) taxes for taxable accounts?  Everything I am reading is way over my head.

We will soon run out of RRSP/TFSA space.  Thus, we will invest in VCN in a taxable account at Questrade.  So far I have figured out that we should not DRIP it because it complicates our ACB (I'm still not clear on what an ACB is).  For regular contributions, does it make any difference to the simplicity of our accounting to do a yearly contribution?  Quarterly?  Monthly?

When dividends are distributed we will reinvest them.  But we still must pay tax on them for that tax year, right (same as you'd pay interest on a taxable HISA)?  I've never gotten or seen a T5 slip, so is all of the info we need for declaring our dividends on that slip? 

What if we eventually sell- what exactly should we be keeping track of ourselves?  Or do we just need the T5 slip?  If we can't figure out how to do the taxes on this ourselves, what do I need to supply an accountant with? 

For the record, I've read this CCP article and the white page associated with it and I have NO CLUE what it is saying.  http://canadiancouchpotato.com/2013/04/04/calculating-your-adjusted-cost-base-with-etfs/

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #487 on: March 02, 2016, 01:01:32 PM »
Can anyone give me an ELI5 explaination on (or link me one) taxes for taxable accounts?  Everything I am reading is way over my head.

We will soon run out of RRSP/TFSA space.  Thus, we will invest in VCN in a taxable account at Questrade.  So far I have figured out that we should not DRIP it because it complicates our ACB (I'm still not clear on what an ACB is).  For regular contributions, does it make any difference to the simplicity of our accounting to do a yearly contribution?  Quarterly?  Monthly?

When dividends are distributed we will reinvest them.  But we still must pay tax on them for that tax year, right (same as you'd pay interest on a taxable HISA)?  I've never gotten or seen a T5 slip, so is all of the info we need for declaring our dividends on that slip? 

What if we eventually sell- what exactly should we be keeping track of ourselves?  Or do we just need the T5 slip?  If we can't figure out how to do the taxes on this ourselves, what do I need to supply an accountant with? 

For the record, I've read this CCP article and the white page associated with it and I have NO CLUE what it is saying.  http://canadiancouchpotato.com/2013/04/04/calculating-your-adjusted-cost-base-with-etfs/

AFAIK, unless you DRIP *directly* - ie through Computershare or CST - you do not need to keep an ACB record yourself. Your broker will do this all for you.

ACB is adjusted cost basis. If you buy 100 shares of VCN for $5, and 100 more for $10, you have 200 shares which cost you $7.50 each - NOT 100 you can sell for $12 and only pay cap gains on the $2 profit per share. Shares are 'fungible' meaning, like a coin or note, it doesn't matter which share you have - a share is a share. Basically the govt doesn't want you selling only the shares with minimal gains (or most losses!) - they make you average it out.

An ACB sheet is actually not that painful. I have to do it because I DO own shares directly. You just have to log every reinvested dividend and purchase you make. Some of the DRIPs I do have discounts when you reinvest the divis.

For VCN, because it contains Canadian companies, the tax you will have to pay will be little. You are paying tax on the divis, though, yes. You get a weird gross up and credit on your taxes but it's fine. If Canadian divis were your only income, you could receive roughly $40k a year before having to pay a significant amount of tax (though things like the Ontario health premium thing still apply as normal).

For a simple ETF buy you should get all the info you need on a slip. The slip is pretty clear. I believe you'll also get a T5008, statement of activity with the broker. THAT is where you get the buy/sell stuff from - your T5 only deals with distributions (divis).

It's not falling off a log easy, but it's not hard either. Perhaps just do a couple of buys in your first year - but make sure you get over $50 in divis else they are not obliged to do a T5. I have DRIPs I started late in a year that I didn't get slips for (of course, you can work out the numbers, but it's MUCH more of a pain).
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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #488 on: March 02, 2016, 03:16:37 PM »
I have a capital gains question.

My father owns a piece of property that he purchased for $12,000 and is now worth $1,500,000. It is a sentimental family property and he wishes to leave it to my brothers and I when he passes. I was learning about capital gains and estate planning and realized there may be a large tax bill that occurs when that happens, unless it is declared as his primary residence.

He says it is his primary residence, however he does not live there. He live a mile away with his girlfriend, and has for many years. He is still legally married to my mother and his girlfriend is also still legally married, so they can not be declared as common law (or rather adult interdependent relationship, in Alberta). It is, to my knowledge, the only piece of property he owns with a house on it (the rest is farmland).

My question, to avoid a quarter million dollar capital gains tax bill in the future, is, how does he legally insure that his property is listed as his primary residence, even though he doesn't live there. His girlfriend's house is HER primary residence, but because they can't be listed as common law, it's not also his primary residence. Correct?

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #489 on: March 02, 2016, 06:32:14 PM »
Hello,

I have a question about the Liberal's new Child Tax Benefit. It is based on the "adjusted
family net income" and I'm wondering how that is calculated?  If for example a family makes 100K, but puts 10K into an RRSP and pays 20K in tax, would the benefit be based on 100K or the 70K?

Best,

Carla
I think it will be line 236 of your tax return - net income combined with your spouse/partner if you have one.

My family net income is Total - RRSP -$8000 Daycare expenses. $8000 in the 2015 maximum amount you can claim, claimed by lower earner in dual households, if you paid more than that it doesn't matter, if you paid less than use that amount.

Using your example it would be $100,000-$10,000= $90,000.

Please note it hasn't passed yet, March 22, 2016 is the date to watch. The pledge was to start payments in July.

Thank you!

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #490 on: March 02, 2016, 06:47:36 PM »
Hi there! Great thread here! I have an exciting LIRA question...

 I just found out that if i terminated today from my company and decided to have my pension commuted the values breakdown as follows:

-$280,000 goes to a tax sheltered spot (i assume whats left of rrsp room and the rest an LIRA )
-$111,000 in cash (taxable).

So my question is how do I make use of the locked in money (LIRA)? I plan on working until at least age 38 (32 now) so these numbers should be significantly higher. Would I be able to use my LIRA money at such an early age? My personal investments in RRSPs are already maxed and will continue to be. My retirement plan would be to combine the commuted value of the pension with my personal investments as my source of income after I quit.

Everything I read doesn't seem to touch on using the locked up money pre age 55. I did read that there may be a loop hole to unlock the funds at age 47 which is the early retirement age of my plan, but .i would want it even earlier.

Any thoughts??

Max


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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #491 on: March 03, 2016, 12:15:03 AM »
Hi there! Great thread here! I have an exciting LIRA question...

 I just found out that if i terminated today from my company and decided to have my pension commuted the values breakdown as follows:

-$280,000 goes to a tax sheltered spot (i assume whats left of rrsp room and the rest an LIRA )
-$111,000 in cash (taxable).

So my question is how do I make use of the locked in money (LIRA)? I plan on working until at least age 38 (32 now) so these numbers should be significantly higher. Would I be able to use my LIRA money at such an early age? My personal investments in RRSPs are already maxed and will continue to be. My retirement plan would be to combine the commuted value of the pension with my personal investments as my source of income after I quit.

Everything I read doesn't seem to touch on using the locked up money pre age 55. I did read that there may be a loop hole to unlock the funds at age 47 which is the early retirement age of my plan, but .i would want it even earlier.

Any thoughts??

Max

I went through the same a while ago. The $280,000 would normally all be required to go into the LIRA account. The $111,000 can be put to any remaining personal RRSP room and the balance must be taxed and paid in cash. You can apply to unlock LIRA accounts, but it certainly does not appear to be a straight forward, easy process. It generally covers hardship, special circumstances, or small amounts. I would simply plan to draw down your RRSP first and then apply to unlock the LIRA once the RRSP runs low and you can provide a better case for unlocking that account. The rules do differ a bit based on each province or the federal rules.
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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #492 on: March 03, 2016, 05:39:27 AM »


I went through the same a while ago. The $280,000 would normally all be required to go into the LIRA account. The $111,000 can be put to any remaining personal RRSP room and the balance must be taxed and paid in cash. You can apply to unlock LIRA accounts, but it certainly does not appear to be a straight forward, easy process. It generally covers hardship, special circumstances, or small amounts. I would simply plan to draw down your RRSP first and then apply to unlock the LIRA once the RRSP runs low and you can provide a better case for unlocking that account. The rules do differ a bit based on each province or the federal rules.

Thanks for the reply!  I did not realize that it was the cash portion that can be allocated to remaining RRSP room, good to know. I kind of figured I would have to plan to just draw down my accessible moneys until I trully needed the locked up money, at which point it may be easier to retrieve. I live in Ontario which I believe has sightly less forgiving regs compared to Alberta as far as locked in accounts go.

Max

lostamonkey

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #493 on: March 03, 2016, 06:09:47 AM »
Thanks, Prairie Stash! :)

I am fairly sure that if your child reports his income, you will lose $3,000 worth of eligible dependant tax credits which is worth $750 in Alberta.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #494 on: March 03, 2016, 10:05:47 PM »
Thanks, lostamonkey! I have an accountant do my (slightly complex) taxes, so I will double-check with him about where to declare my kid's income. There was also a news mention of declaring a kid's UCCB on the kid income line or something. Too confused already, and my brain left me about a week ago so I'll just take it all to the accountant when the final slips come in. I'm grateful to each person's input on this one!

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #495 on: March 06, 2016, 08:00:30 AM »
Max, go to the source for your LIRA question.  It's different in each province.

Here's the general area you want to start digging around. 

https://www.fsco.gov.on.ca/en/pensions/lockedin/Pages/nonhardshipunlocking.aspx


I just unlocked my wife's BC Lira and moved the ETF to her RSP so we could add funds to it.  Mind you, that was $5k moved under the small amounts provision.  It was as simple as asking my account provider to take care of it, and we signed one GovBC form.   However, you might be stuck with it locked in, being such a high value.
« Last Edit: March 06, 2016, 08:05:17 AM by Heckler »

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #496 on: March 06, 2016, 09:10:25 PM »
Hi CPA,

First of all, thank you so much for what you are doing here. Now for "boring" (really interesting) tax questions!

Me:       Full time employed.                   100K income    RRSP: 116 000 (Maxed), Have no TFSAs (45K in room).
Spouse: Full time government employee.  70K income    RRSP:   28 000 (15K Contribution Room), Have no TFSAs (45K in room).
Other income: 3 year old, newly incorporated side business for 2016, boomed and earned 100K in 2015, and hoping to maintain that level going forward. Currently have 20K in corporate account.

Notes: Spouse will have a good pension and intends to work until 50-55. 400K owed on mortgage, 1 year old child.
No other debt. Both of us are under 30.

The goal: (Yes this is not near a lean as the true mustachian). Mortgage paid and me FIRE in 12 years with 1.5 million being the target. Not relying on any future business income. Estimated required savings will be 5000 per month to hit this goal, plus making $3300 in mortgage payments.

The question: The business allows us to maintain a nice lifestyle, but still save substantially. Money from the business has been used to pay off all debt but the mortgage and put into our RRSPs. Should we pull money from the company (declare dividends) to max out the TFSAs, or just hold investments in the company, and if so, what kind of investments are better from a tax perspective. I decided against a permanent life insurance policy owned by the company for a few reasons (perhaps you can support/refute that decision). Corporate class funds?

Will not pretend that this is not a great problem to have, but none the less, one that I could use an unbiased opinion on!

Thanks in advance.
« Last Edit: March 06, 2016, 09:17:41 PM by cowboy »
Hoping to hang it up in 2029....

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #497 on: March 07, 2016, 09:38:46 AM »
Hi CPA,

First of all, thank you so much for what you are doing here. Now for "boring" (really interesting) tax questions!

Me:       Full time employed.                   100K income    RRSP: 116 000 (Maxed), Have no TFSAs (45K in room).
Spouse: Full time government employee.  70K income    RRSP:   28 000 (15K Contribution Room), Have no TFSAs (45K in room).
Other income: 3 year old, newly incorporated side business for 2016, boomed and earned 100K in 2015, and hoping to maintain that level going forward. Currently have 20K in corporate account.

Notes: Spouse will have a good pension and intends to work until 50-55. 400K owed on mortgage, 1 year old child.
No other debt. Both of us are under 30.

The goal: (Yes this is not near a lean as the true mustachian). Mortgage paid and me FIRE in 12 years with 1.5 million being the target. Not relying on any future business income. Estimated required savings will be 5000 per month to hit this goal, plus making $3300 in mortgage payments.

The question: The business allows us to maintain a nice lifestyle, but still save substantially. Money from the business has been used to pay off all debt but the mortgage and put into our RRSPs. Should we pull money from the company (declare dividends) to max out the TFSAs, or just hold investments in the company, and if so, what kind of investments are better from a tax perspective. I decided against a permanent life insurance policy owned by the company for a few reasons (perhaps you can support/refute that decision). Corporate class funds?

Will not pretend that this is not a great problem to have, but none the less, one that I could use an unbiased opinion on!

Thanks in advance.

I would max out RRSPs every single year due to your pretty high salaries and invest all of this into US and International stocks (ex. 65%VTI and 35%VXUS)

Then, top out both TFSA (if you have 0$ now, then room is  46.5k$) and the best investment for TFSA are canadian stocks and/or bonds

A neat, simple and efficient asset allocation I would do in your situation? your RRSP (116k$) ALL into VTI, your spouse RRSP (43k$) ALL into VXUS. Both TFSA into  VCN (or if you are fearful, one of your TFSA into VCN and the other one into VSB.

This would be very tax efficient, simple, low cost, low maintenance and the final result would be 100% stock (37% canadian, 46% US and 17% International) or 82%stock (19% canadian, 46% US and 17% International) and 18% canadian bonds.

Did you think about RESP? You can put another 2.5k$/year and grab the grant (20%). The best place to invest this is canadian stock and/or bonds.

Dividends are pretty tax efficient so you could pull few thousands every year (unless your company may need it)

To reach FI, you  do not have to be mortgage free. You can reduce your mortgage to a level you are comfortable with (let say 200k$ for example) but investing, even in a taxable account, is a better way to be FI early. In meantime, always get the lowest mortgage rate you can (variable or fixed 1 year) and let roll.

About that insurance thing, I will let someone else help you...
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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #498 on: March 07, 2016, 06:26:06 PM »
Thanks for the reply Barbu.

We are not concerned about what funds per se. Perhaps I was not clear enough.

A) Holding investments within the company (having only been taxed at approximately 15%), having for money to invest now, and cashing out later, paying taxes when the money has to be taken out of the company, still through a declared dividend. Not quite as beneficial as an RRSP in the terms of tax deferral, but I'm uncertain how the gains in the company would be treated tax-wise.

B) Taking the money out of the company with dividends now, and investing with less "after-tax" money. Less money invested now, but primarily tax free when it comes time to use it.

To answer your other question, yes RESP is currently maxed for the little one, and would prefer to be mortgage free. Those numbers I used let me hit my savings number and be mortgage free at the same time.
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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #499 on: March 07, 2016, 07:24:21 PM »
Thanks for the reply Barbu.

We are not concerned about what funds per se. Perhaps I was not clear enough.

A) Holding investments within the company (having only been taxed at approximately 15%), having for money to invest now, and cashing out later, paying taxes when the money has to be taken out of the company, still through a declared dividend. Not quite as beneficial as an RRSP in the terms of tax deferral, but I'm uncertain how the gains in the company would be treated tax-wise.

B) Taking the money out of the company with dividends now, and investing with less "after-tax" money. Less money invested now, but primarily tax free when it comes time to use it.

To answer your other question, yes RESP is currently maxed for the little one, and would prefer to be mortgage free. Those numbers I used let me hit my savings number and be mortgage free at the same time.

If you decide to leave the money in your company until you sell it, you could benefit of capital gain exemption wich is a lot better than dividends but reduce your personal cashflow meanwhile.
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