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| Adrian Mastracci, president
of KCM Wealth Management, says "Be anticipatory
about your situation as it unfolds for 2003.
This ensures you take advantage of all the
provisions that apply." |
For Immediate Release
Vancouver, BC (March 10,
2003): Adrian Mastracci,
president & investment
counsel at Vancouver based fee-only KCM
Wealth Management comments on filing the 2002 income
tax return. More importantly, what you can
do to prepare for the 2003 tax year.
Income tax time is upon us once again. All
too soon, of course!
First, a little trivial pursuit. When was
Canada’s tax return only one page? Up
to 1949. How things have changed!
For Canadian citizens, the due date for regular
returns is April 30, 2003. Those who earned
2002 income in the US, had properly or a business
in the US, or spent considerable time there
may also have to file a US tax return. Spending
considerable time in the US means having to
determine whether the “substantial presence” test
is met for 2002.
For US citizens, the due date for regular
returns is April 15, 2003. Similarly, a US
citizen who earned 2002 income in Canada
may also be required to file a Canadian income
tax return. US citizens living in Canada
on a full-time basis have a requirement to
file a US tax return.
Anyone who has cross border activities is
governed not only by the respective tax authorities,
but also by the Canada-US Treaty. In some cases,
income tax paid in one jurisdiction is not
fully recognized by the other.
Be sure to assemble all the reporting slips
and receipts. It is your responsibility to
report all income, whether or not you received
the slip for it.
Our software is now set up to file the 2002
Canadian income tax returns. We can also review
the drafts for those that prepare their own
returns. We do not prepare US tax returns;
however, we can suggest firms who do.
We have prepared a checklist for the filing
of the 2002 Canadian returns. If we do not
prepare your return, kindly send us a copy
along with the notice of assessment.
The best part about filing the 2002 return
is to dust off your crystal ball for the 2003
tax year. You will appreciate the benefits
at income tax time next year.
Take the opportunity to look ahead of the
curve. Anticipate your financial happenings
for 2003. Organize your game plan to accommodate
them.
Some major planning activities for 2003 are:
- Revisit your investor profile, level
of risk taken and asset mix decisions.
- Refresh those retirement goals and the size
of investment portfolio required to sustain
retirement income during your lifetime.
- Estimate your expected income sources, deductions
and tax credits for 2003.
-
Prepare your 2003 taxable income projection
along with the possible “what if” scenarios.
- Review your capital gain and loss strategy
and consider the 2002 losses carried forward.
- Contemplate the appropriateness of selling
securities whose fundamentals have changed.
- Consider a prescribed rate loan to a spouse
who is in a lower tax bracket.
- Initiate the 2003 contributions to registered
accounts.
- A “best investment” is
to prepare your vision for the business succession.
- Take advantage of the reduced corporate tax
rates on active business income.
- Examine your remuneration mix, and that of
family members. Start with salary and dividend
combinations 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.
-
Analyze whether crystallization of your business,
or operating farm, qualifies for the $500,000
capital gain exemption. Full use means tax
savings of $109,250 at BC’s top rate.
- Review the deferral rules on capital gains
if you sell a business and purchase another.
- Assess whether incorporation of the business
is beneficial.
Be anticipatory about your situation as it
unfolds for 2003. This ensures you take advantage
of all the provisions that apply.
Note: If anyone has access to a 1949, or earlier
return, I would appreciate receiving one.
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