Adrian Mastracci, investment counsel at KCM Wealth Management, says “There is a lot at stake in this exercise. You will appreciate the benefits at income tax time next year."

Vancouver, BC (March 29, 2004): Income tax time is upon us once again. All too soon, of course.

Adrian Mastracci , investment counsel at Vancouver’s “fee-only” KCM Wealth Management comments, “Some of you may recall that the tax return was a scant one page up to 1949. How things have changed. Just a little!”

“The best part about sorting out the paperwork for the 2003 tax return is to dust off your crystal ball and estimate your 2004 tax year,” notes Mastracci, “Use your 2003 results as a starting point.”

“There is a lot at stake in this exercise,” points out Mastracci, “You will appreciate the benefits at income tax time next year.”

“I suggest taking the opportunity to look ahead of your financial curve,” adds Mastracci, “Anticipate your taxable events for 2004 and their ramifications. Then organize your game plan to accommodate them.”

The major planning activities for 2004 may unfold like this:

Employment related

Estimate your employment income, deductions and tax credits for 2004. Forecast your 2004 tax deferral requirements. The better ones are snapped up early.

Assess your stock options strategy and your stock portfolio dependency on the employer fortunes. Inquire about a prescribed rate loan from the employer.

Ask about the status of your employer pension plan. Particularly its financial health to deliver the promised retirement benefits.

Prepare your 2004 taxable income projection, along with some “what if” scenarios.

Investment stuff

Refresh your retirement goals and the size of nestegg to sustain your retirement income aspirations. Revisit your investor profile, level of risk taken and asset mix decisions.

Review your 2004 capital gain and loss strategy. Factor in the capital losses you may be carrying forward from previous years.

Contemplate the appropriateness of selling securities whose fundamentals may have changed. Ensure that your mix of investment income (interest, dividends and capital gain) is appropriate.

Consider donating securities to a charity. The resulting capital gain attracts an inclusion rate of 25% instead of 50%.

Get an early jump on the 2004 RRSP deposit and reduce taxes withheld at source. Review the alternatives on converting the RRSP to a RRIF if you turn age 69 in 2004.

Think about making the RESP deposit for the children or grandchildren. It will provide them a leg up on their educational pursuits.

Income splitting and tax matters

Appreciate the taxation of different types of income. The tax table provided below helps.

Make a prescribed rate loan to your spouse who is in a lower tax bracket if it is beneficial. The interest rate is 3% for documentation in place by June 30, 2004 .

Mull over the need for strategies using trusts and estate freezes. Consider which spouse ought to accumulate and invest the family saving capacity.

Border crossings

If you spend time in 2004 living in the USA , or earn income there, you may require US filings. If you own property in the USA , review the estate tax rules that may apply.

Canadians who have family trusts with a beneficiary residing in the US should review the cross-border tax implications. US citizens living in Canada should seek advice on the required IRS filings, along with the gifting rules that may apply.

2004 top tax rates for individuals

Your 2004 tax rate depends on your total income. The top tax bracket moved from taxable income of $104,600 in 2003 to $113,800 in 2004.

The 2004 top tax rates below allow you to compare how the rest of the country fares on investment and salary incomes. Please note that changes may occur as Provincial budgets are unveiled.

“The goal of this planning exercise is to ballpark the 2004 tax consequences for your situation,” concludes Mastracci, “It minimizes surprises for the next tax filing.”

"Tweaking the tax events and making the appropriate game plan adjustments are two important steps," says Mastracci, "You may just retain more of your nestegg. Perhaps, an even greater financial security for yourself."

"Be anticipatory about your situation as it unfolds for 2004 and beyond,” summarizes Mastracci, “This ensures you take advantage of the provisions that apply."

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.