Adrian Mastracci, president of KCM Wealth Management, says “Anticipate your financial happenings for 2005 and tweak your game plan to accommodate them."

For Immediate Release

Vancouver, BC (March 30, 2005): It’s that noteworthy time of the year again. The opportunity to polish the crystal ball for the investment and tax plans that may apply.

Someone once said, “There will always be death and taxes. However, death doesn't get worse every year.”

Adrian Mastracci, investment counsel at Vancouver’s “fee-only” KCM Wealth Management comments, “The 2004 tax return materials hold some valuable keys to consider for this exercise. They assist in getting a jump on your 2005 investing and tax planning stuff.”

“My advice is to start the planning exercise early,” notes Mastracci, “Get a handle on your 2005 expectations while the 2004 results are fresh in your mind. Taxes can be tamed, investments can be planned.”

“Anticipate your financial happenings for 2005 and tweak your game plan to accommodate them,” continues Mastracci, “I talk to my clients about this every spring.”

Here is a summary of activities to assist your 2005 planning:

1. Individuals

• Estimate your expected income sources, all deductions and tax credits for 2005. Project your taxable income for 2005 along with some “what if” scenarios. Table 1 & 2 below will help the number crunching.
• Determine whether you are subject to income tax installments. Seek out your tax deferral requirements early in 2005. The better ones are usually available earlier.
• Refresh your retirement goals and the size of investment portfolio required to sustain them. Review your investment portfolio and your dependency on the employer fortunes.
• Assess the prospect of loaning funds to your spouse, or obtaining a loan from your employer, at the prescribed rate of 3% before June 30. Professional counsel can help unravel the rules.
• Review your capital gain and loss strategy. Consider the losses you may be carrying forward from 2004 and revisit your adjusted cost base entries from the $100,000 exemption of 1994.
• Start your 2005 RRSP contribution to your account or the spousal plan. If an RESP contribution has a priority in your plan, it must be made by December 31.
• If you turn age 69 in 2005, review the alternatives available on converting your RRSP to a RRIF. The conversion must be finalized by December 31.

2. Business Owners & Professionals

• Revisit your vision for the business succession. This may be one of the best investments you will ever make.
• Review your personal compensation and that of other family members. A blend of salary and bonus totaling $100,000 in 2005 creates the maximum $18,000 RRSP room for 2006.
• Examine your remuneration mix appropriate for your business. A combination of salary and dividends may make sense.
• 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. As an example, full use means tax savings of $109,250 at BC rates.
• Take advantage of the reduced corporate tax rate on small business active income. Review the capital gains deferral rules if you sell your business and buy another qualifying one.

3. Cross Border Connections

• Canadians who spend time living in the USA may be required to file a US tax return. It is important to determine whether you meet the “substantial presence” test.
• Canadians who own property in the USA should review the 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 are entitled if you do not file.

“The centerpiece for financial success is the up to date investment game plan that outlines the policies and strategies. The ones to follow to reach those unique personal goals,” explains Mastracci, “Jump starting the investing and tax stuff early in the year is an important part of keeping it fresh.”

“Start a detailed assessment of your 2005 finances,” concludes Mastracci, “Plan early and you may just retain more of your precious nestegg. Perhaps, an even greater financial security for yourself.”

Table 1. Income Tax Rates for British Columbia

Table 2. Canada’s 2005 Top Tax Rates for Individuals

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.