Busmess Use exemption before rules are changed Will Ottawa take away or reduce the capital gains exemption in its next budget? Rather than waiting to find out, you might want to review your investments now and possibly use the exemption while you may. “An individual taxpayer claim- ing the full $500,000 lifetime capi- lal gains exemption on a gain on the sale of qualified small business corporation shares or a qualified farm property currently saves as much as $189,000 in tax,” said . David Thompson, of Thorsteins- sons, tax lawyers. But even the basic $100,000 exemption, which you may use for capital gains on any kind of prop- erly — typically real estate, stocks and bonds — can save you consid- erable tax. You should never make an inv- estment decision only for tax rea- sons. Still, if you were thinking about selling an investment any- way, then tax reasons — like the prospect of losing the capital gains exemption — should prompt you to move now. You don’t have to sell an asset to produce the capital gain so you may claim the exemption. _ Giving “property,” typically securities or real estate, to another family member triggers a disposi- tion at the fair market value. You declare the capital gain and claim the exemption. The fair market value is, in effect, the “purchase” price for the recipient so any future capital gain will be less: it will be calcu- lated from that higher, “adjusted cost base’” — instead of from the lower, original purchase price. Note that if you give property to a spouse, you have to make a TheReview Wednesday, January 22,1992 — A14 special election to have the prop- erty change hands at the fair market value. Otherwise, there is not disposi- tion to trigger the capital gain in your hands. And the property then keeps its original “adjusted. cost base” (what you paid for it). If you owned a holiday home as well as your regular home before 1981, you and your spouse should each be able to designate one of the places as a principal residence. Then any capital gain would be calculated starting only from 1981. Be sure to get expert advice before you make any such moves. “The complex rules surround- ing the capital gains exemption, especially as it applies to qualified small business corporation shares, provide both tax planning opportu- nities and pitfalls,” said lawyer Thompson. “If you are planning to sell an unincorporated business, for example, you should consider incorporating the business and then immediately selling the shares of the new company. You would then qualify for the $500,000 capital gains exemp- tion.” Thompson also noted that share- Record-breaking year More homes, condos and town- houses were sold last year in Greater Victoria than in any previ- ous year. And homes were sold at steeply rising prices. The Victoria Real Estate Board reports that 1991 was a record- breaking year for Multiple Listing Service sales. The board says there were 9,241 sales last year, breaking the previ- ous record of 8,935 set in 1989, and easily surpassing 1990’s total of 6,749 sales. Last month, there were 550 MLS transactions for a total of $95.1 million, compared with 361 sales in December, 1990 and 695 in November, 1991. The median price of a single family home rose in December to $187,000 from $180,000 in November. The price in December, 1990 stood at $156,000. There were 21 sales in Central Saanich last month valued at $4.1 million, for a median price of $192,500. In North Saanich there were 15 sales worth $3.9 million, for a $256,000 median. For Sidney, the board reports five sales for $750,000, for a $148,500 median. ( MUEFET G LOUISN 9389 Beacon Avenue Sidney, B.C. -0017 le 656-001 [AUTTU G ANNUAL JATIUART CONTINUES!! 20 - 50“. off CLOSED Sunday, Jan. 26 for Inventory ‘\\ LOUDA SALT MUFFET & LOUISA CZ INENGS=) 2385 Beacon Avenue Sidney, B.C. 656-0022 SANSCHA = Sidney and North Saanich Community Hall Association lea ee ANNUAL GENERAL MEETING @ split amon j j ily member Suinich maulliples and Election of Board of Directors the $500,000 exemption.” Onl , individuals (not companies) me, f. LUESDAY, JAN. 28th, 7:30 p.m. claim the exemption. SANSCHA ANNEX — INFO. 656-4523 “If you have a company. incor- porated before Nov. 21, 1985, you may be able to enjoy a windfall advantage,’ Thompson said. R b & C “Tf there are any high par value Moore ) O erts O. or no par value preferred shares i AGG issued before Nov. 22, 1985, you CHARTERED ACCOUNTANTS may be able to redeem those j iti j shares for cash or debt. That would Accounting & Auditing Services be offset by the exemption.” Business & Computer Consulting ee: You might also be able to “crys- tallize” your entitlement to the capital gains exemption through a non-arm’s length transfer — that is, a share transaction within the company. That allows you to realize the increase in the tax base of your company’s hares now so you can use your capital gains exemption while it still exists. As this process also increases the adjusted cost base of the shares, it reduces any future (possibly taxable) capital gain on death or when the shares are sold. The business must meet certain conditions. And it must be an active business. Shares of a com- pany that deals only in passive Phone: 656-5547 Fax: 656-2382 #200-2377 Bevan Ave. Sidney V8L 4M9 STRAIGHT TALK ABOUT : YOUR MONEY. = fii: wan |Feb | Ver ug [Seni LET T ILL BULIE rt TE ErT (Rates Subject to Change without Notice) RON GURNEY FINANCIAL SERVICES LTD. inyasimanis lie siceka, bondls andl FINANCIAL CONSULTANTS - LIFE UNDERWRITERS > even revenue property would not _|_SUITE 108 — 9848 2nd St, SIDNEY (In Marina Court) 656-9393 qualify. You need to look at all the tax aspects, including the CNIL (cumulative net investment loss) and AMT (alternative minimum tax) rules. Let’s say you plan to take some profits in the stock market. But you have been losing money on your revenue property since 1988 and have had little or no other investment income. That could build up a CNIL balance which would restrict or even deny your use of the capital gains exemption to offset the stock profits. Also, the non-taxable part of any capital gain is added for AMT purposes, so ask Revenue Canada for the AMT calculation form to AIRPORT/AIRCRAFT BUSINESS Excellent building for Air Cargo, Customs SOE! or other related uses. Direct taxi way access. Lots of parking. For information regarding lease or purchase, please contact: see if you might have to pay — or MIKE DAVIS might be able to avoid — the tax. 655-4451 HEALTHY You are invited to participate The CRD Task Group on Atmospheric Change would like to hear your Suggestions on how to: — improve local air quality — reduce fossil fuel consumption and improve the health of our atmosphere. SAANICH PENINSULA AND GULF ISLANDS: LIVE SHAW CABLE 11 TV FORUM: Healthy aimosptieré 2000 Time: Thursday, 7-8 p.m. Phone your ideas in to Shaw Cable 11 at 655-1700. OPEN HOUSE Time: Friday 9:30 a.m. - 6 p.m.; Saturday 9:30 a:m. - 5 p.m. Place: Panorama Leisure Centre, 1885 Forest Park Drive PUBLIC MEETING Time: Tuesday, 7:00 - 9:30 p.m. (priority at beginning of meeting to Gulf Islanders) Place: Sidney Public Library, Nell Horth Room, 10091 Resthaven Drive, Sidney Preregister: Call 360-3114 to schedule speaking time; priority to scheduled speakers. Presentations may be limited to 5-10 minutes each. Your recommendations to the Task Group may involve: — land-use planning — wasie management — transportation planning — emissions regulation — energy and building regulation — forests and green spaces — municipal and regional operations — business — information and education — ... and other categories January 23: € January 24 - 25: February 4: The CRD ‘Healthy Atmosphere 2000’ Discussion Paper is available to stimulate community discussion of these concerns. It may be picked up at local libraries, municipal council offices or i ne CRD, or can be mailed upon request. For further information, or to schedule a presentation time at the February 4 public meeting, call 360-3114.