&. Business TheReview Federal budget could affect personal finances Now the initial rush of informa- . tion about the latest federal budget has slowed, let’s take a closer look at how some of the proposals could affect your personal ’ finances. Home Buyer’s Plan You may borrow up to $20,000 from your registered retirement savings plans by March 1, 1993, to buy a home. You pay no interest on this loan. If you repay the money (over 15 years starting Dec. 31, 1994), there are no tax conse- quences. If you don’t make a scheduled repayment, you will pay tax on that amount. So a couple could take up to ~@ $40,000 from their RRSPs. And if several individuals pooled resources to buy a home, each could presumably withdraw up to $20,000. Many financial institutions will allow you to cash an RRSP GIC pmor to maturity to benefit from the Home Buyer’s Plan. TIP: Calculate the cost of with- drawing RRSP funds (the long- term loss of tax-free compounding plus the tax bill if the money is not repaid). Compare this effect on your retirement income with the likely benefits — personal as well as financial — of buying the home. TIP: Calculate the costs of buy- ing and running a home, including the RRSP repayment or the tax ‘© cost if you don’t make the repay- ment. Make sure you can afford the home, especially if you count on two incomes now but will have only one income in the future. TIP: Consider alternative financing. At least one financial institution offers a “partnership” arrangement between taking out a mortgage and using your RRSP — without actually withdrawing your money. Might a family member or Outside investor provide funds for a home so again you can leave your RRSP untouched? Capital Gains The $100,000/$500,00 exemp- tion survived — but not intact. The profit you make on invest- ment property bought after Febru- <@21y this year will no longer qualify for exemption. And the longer you hold property already owned on z= (el ARE YOU (The Golden Age) lf so, you are invited to a ~elome Wagon. PLUS FIFTY | SHOWCASE * Displays * * Planning Guidance * * Gifts * * Valuable Prizes * ‘Admittance is Free, but by invitation only! March 26/92 6:30 to 10:00 p.m. THEO’S BANQUET HALL Fifth St., Sidney. Phone Dorry Feb. 29, the less of the exemption you will be able to claim. This new tule also applies to, for example, a Mutual fund which invests in property. The calculation involves pro- Tating, rather than a valuation day; LLet’s say you have owned land or revenue property for two years. If you sell now, almost all the capital gain will qualify for exemption. But if you sell a year from now, then only two-thirds of your profit will qualify. Sell in two years and only one-half the profit will qual- ify. (Not that your principal resi- dence, property used in a business and a qualified farm escape the new tule.)- TIP: Selling or transferring the property soon can trigger the capi- tal gain, enabling you to claim as much as possible of the exemption before it erodes further The RRSP The 1993 contribution will remain at 1992’s limit of $12,500, instead of rising to $13,500. Then the $1,000-a-year increase resumes. The increase in limits on registered pension plans will also be delayed. Children Starting next year, single parents and one-earner couples with incomes up to $60,000 will receive more child benefits while two-eamer families with incomes above $50,000 will receive less. The child tax benefit starts at $85 a month — non-taxable. The RRIE Starting next year, all registered retirement income funds can run for life — instead of your (Or your spouse’s) age 90. A higher minimum payout formula applies from age 71 through 77 on RRIFs by year-end if keeping more money growing tax-free in your RRIF would be beneficial. The disabled If you are one of the 230,000 Canadians receiving CPP (or QPP) disability pensions, you may make a regular RRSP contribution for the 1992 tax year based on the CPP disability pension — now considered “earned income” — you received in 1991. Also in 1992, if you attend a post-secondary education institu- tion on a part-time basis, you will be able to claim the education credit. And more expenses will be eligible for the medical expense credit. Mike Grenby is a Vancouver- based columnist and independent financial adviser who works with individuals; he will answer your questions as space allows — write to him c/o The Review, 9726-First Wednesday, March 18,1992 — A27 30 TO 5 on ALL GOLD and SILVER JEWELLERY, WATCHES AND CLOCKS! Not including estate jewellery or special orders. Facer jewelers 2403 BEACON AVENUE SIDNEY - 655-1515 TIPS CAPITAL GAINS — THE LAST GREAT TAX SHELTER (written by Richard Flader and Terry Greene, partners of Flader & Greene, Chartered Accountants in Sidney, B.C.) In the early 1980's tax shelters such as MURBS, Canadian feature films, oil and gas syndicates virtually littered the Canadian financial landscape. The 1990 atmosphere of government fiscal restraint has necessitat- ed the end of most of these projects, combined with their own lack of economic viability. One of the few survivors from that era is the capital gains exemption which was introduced in 1985. At that time the intention was to allow a $500,000 exemption, phased in over a five year period. Fiscal reality soon set in with the result that the exemption is effectively capped at $100,000 except for qualified small business corporation shares and qualified farm property. The capital gains deduction applies to all capital property owned by an individual provided that the individual was resident in Canada throughout the year. The determination of what constitutes a capital gain is a | matter which has received a great deal of attention by the # court system in this country. Essentially a capital gain results from sale of a capital property rather than items = held for speculation or in the nature of trade. Most | Canadians will receive a capital gain from the sale of | shares, bonds, rental properties or other land sales. Once | the gain is determined (bearing in mind that only 3/4 of the ff = gain is taxed) you then plunge forward into the calculation of the applicable deduction. To determine the allowable | deduction can involve some serious mathematics since F » you must first determine your unused lifetime general | § exemption. Previous capital gains, capital losses and » allowable business investments all affect this figure. After | that hurdle, the balance in your “cumulative net investment |a= | loss” account must be calculated since this also may fia | reduce the deduction. Individuals who have borrowed | heavily to finance investments often run afoul of this pitfall. Those who have successfully run the gauntlet of tests can now smile broadly since they may be able to fully deduct a gain which would otherwise be taxable. It seems that the government felt too many were making it through | to the other side since they have announced measures in their recent budget to restrict the deduction for real estate transactions. Essentially real estate purchased after Febru- ary 1992 will not qualify for the exemption unless itis used in an active business. Real estate purchased before March fj = 1992 will qualify on a proportionate basis depending on f |. the number of months held before March 1992 compared [= fo the total number of months the property was owned. Bl | Utilization of the capital gains exemption obviously & | requires a lot of work in the planning stage as well as in & |= final determination but the reward of tax free gains has got rE = to be worth the effort these days. E St., Sidney, B.C. V8L 3C7. Who’s taking Advantage of your Pay Cheque, you, or the Taxman? § At Investors, I'll help you save tax dollars and start saving toward a more comfortable financial future. Call: DIANE DOBBIN 656-7113 (Res.) Investors Group URGENT Call Your Professional Advertising Representative Today! CORRIE MOROZOFF 656-1151 ™m™ReEVICW STRAIGHT TALK ABOUT YOUR MONEY. anvuiann EEE E EE EEE Et i (Rates Subject to Change without Notice) | RON GURNEY FINANCIAL SERVICES LTD. FINANCIAL CONSULTANTS = LIFE UNDERWRITERS H_ SUITE 10A — 9843 2nd St., SIDNEY (In Marina Court) 656-9393 | aut Tax Planning & Preparation Electronic Filing with Revenue Canada 9768 THIRD STREET, SIDNEY 656-3991