For Immediate
Release
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| Adrian Mastracci, president of KCM Wealth
Management says, "Anticipate your financial affairs for
the year ahead and prepare your game plan to accommodate them."
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Vancouver, BC (April 15, 2002): Don't be in a hurry to lock
away your 2001 income tax return into the archives just yet! It
assists the spring tune-up of your 2002 tax stuff.
Adrian Mastracci, president & fee-only investment counsel
at Vancouver based KCM Wealth Management comments, "My
advice is to plan early. Get a handle on your 2002 expectations
while last year's results are fresh in your mind."
"Take the opportunity to look ahead of the curve for yourself.
Anticipate your financial affairs for the year ahead and prepare
your game plan to accommodate them," explains Mastracci, "I
follow this approach with my clients."
"Dust off your crystal ball and get organized for 2002,"
says Mastracci, "You'll appreciate the rewards at tax time
next year."
Mastracci outlines his summary of activities that may apply in
2002:
1. Individuals
- Refresh your retirement goals and the size of investment portfolio
required to sustain your retirement income for your lifetime.
- Estimate your expected income sources, all deductions and tax
credits for 2002.
- Prepare your taxable income projection for 2002 along with
some "what if" scenarios that you may face.
- Identify your tax shelter requirements early in 2002. The better
ones are usually available earlier than later.
- Determine whether you are subject to income tax instalments.
- Review your capital gain and loss strategy. Consider the losses
you may be carrying forward from 2001 and refresh your memory
on the $100,000 exemption figures from 1994 that were claimed
on selected investments.
- If you own mutual funds, or are contemplating a purchase, they
make the taxable capital gain and loss distributions usually in
December.
- If the fundamentals have changed, it may be appropriate to
sell securities that have losses to offset the 2002 gains or those
of the prior three years.
- Review your stock options strategy, and your portfolio dependency
on the employer fortunes.
- Start your 2002 RRSP contribution either to your account or
to your spouse.
- If purchasing your first residence, you and your spouse may
withdraw up to $20,000 each from your respective RRSP under the
Home Buyer's Plan.
- Repay the annual amount to your RRSP due from the Home Buyer's
Plan withdrawals.
- If you turn age 69 in 2002, review the alternatives available
on converting your RRSP to a RRIF. The conversion must be finalized
by December 31.
- All RRSP contributions must be made before you convert to a
RRIF, unless you can make a spousal deposit to a younger spouse.
- The 2002 contributions to a Registered Education Saving Plan
must be made by December 31. Of course, the earlier the better.
- The 2002 charitable donations, political contributions, childcare
expenses, alimony, maintenance, medical expenses, professional
dues, moving expenses, safety deposit box fees, accounting fees
and investment counsel fees must be paid by December 31.
- Revisit your taxable benefits from your employer, such as the
automobile standby charge.
- Pay special attention to your strategy on non-deductible loan
interest, such as the house mortgage. Accelerating the repayment
of non-deductible loans improves your nest egg.
- Your income portfolio may benefit from a ladder of investments
instead of holding cash in short term instruments.
- Consider loaning your spouse capital at the prescribed rate,
if your spouse is in a lower tax bracket than yours. The prescribed
rate from April 1 to June 30, 2002 is a rock-bottom 2%.
2. Business Owners & Professionals
- Take advantage of the reduced corporate tax rate on the first
$200,000 of active business income.
- Review your personal remuneration, and that of family members.
A salary and bonus combination totalling $75,000 creates the maximum
$13,500 RRSP room for 2003.
- Examine your remuneration mix, such as salary and dividends,
that is appropriate for your business.
- Ensure that a current shareholder loan will not be included
in your income as you approach the second fiscal year end since
it was issued.
- Assess the prospect of obtaining a loan from your company at
the prescribed rate of 2% before June 30, 2002. Professional counsel
can help unravel the complex rules.
- Analyze whether crystallization of your business or operating
farm qualifies for the $500,000 capital gain exemption. Full use
means tax savings of $112,500 at the 45% tax rate.
- Review the deferral rules on capital gains if you sell your
business and buy another qualifying one.
- Prepare your vision for the business succession. This may be
one of the best investments you'll make.
- Assess whether incorporation of your business is beneficial
for your situation.
- Employers may now provide gifts to employees up to $500 per
year. The gift is not taxable to the employee and the cost is
deductible to the employer.
3. Venturing to the USA
- Canadians who spend time living in the USA may be required
to file a US tax return. It's important to determine whether you
meet the "substantial presence" test.
- Canadians who own property in the USA should review the new
estate tax rules that apply. Renting your property may also subject
you to withholding taxes.
- Canadians who carry on business in the USA may be required
to file a US tax return.
- US citizens living in Canada should seek advice on the tax
filings that the IRS requires. You run the risk of losing exemptions
to which you're entitled if you don't file.
"The centerpiece of financial success for my clients is the
game plan that outlines the policies and strategies they will follow
to reach their unique personal goals," concludes Mastracci,
"Tuning up the tax stuff is an important part of it."
"Spring ahead time is here," summarizes Mastracci, "Plan
early. Start an in-depth assessment of your 2002 finances and you
may just retain more of your nest egg. Perhaps, an even greater
level of financial security."
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