By
Gigi Suhanic
You Ask, We Answer
Financial Post
May 25, 2002
Question: If an American relative
gives me a gift of approximately US$20,000, are
there any tax implications? Is it considered income?
It would not be used for investment in a business
or used to earn income in any way. It would probably
be used for maybe a vehicle, payment on the mortgage,
or other personal bills.
Answer: Adrian Mastracci,
investment counsel with Vancouver based KCM Wealth Management,
says while generally there are no tax implications for the recipient
on such a gift, the American relative may have to pay tax. The U.S.
gift-tax exclusion law allows a donor to give away as much as $11,000,
tax-free. However, Mr. Mastracci cautions if any part of the gift
is invested, "you'll be subject to income tax on the income
generated from the investment," including interest, dividend
and/or capital gain.
Question: I have a question
about accumulating investment losses from previous years which I
have yet to claim as I have no capital gains. How do I forward the
losses so that I can use them in the future when I have some capital
gains to write them off against?
Answer: First of all, says
Don Nilson, it is important that you report losses in the year they
are incurred, even though you receive no tax break that year. He
says that you should look back over the previous three years to
see if you can benefit from carrying the loss to any of those years.
This will put refund money in your pocket right away. If you must
carry it forward, you need to keep track of it somewhere in your
tax records, including the year it occurred, so you get the right
"inclusion rate." When you have a capital gain, then apply
the carryforward loss at line 253, bearing in mind adjustments for
inclusion rates. The Canada Customs and Revenue Agency keeps track
themselves, so they will recognize your claim. In recent years,
CCRA's Notice of Assessment will make reference to your capital
loss carryforwards recorded on their system. If you have lost track,
CCRA can send you a statement of your loss status.
Adrian Mastracci, fee-only investment counsel
at
KCM Wealth Management, says, “If any part of the gift is invested,
you'll be subject to income tax on the income generated from the
investment, including interest, dividend and/or capital gain.”
Question: I am a widowed senior
(68) and three years ago I borrowed $20,000 to purchase a home.
I made the first payment (re: the loan) to my RRSP in the amount
of $1,333 and I suspect I should have done the same this year. I
forgot to do this transaction by the end of February and now the
bank won't let me. Should I send a cheque to the government along
with my completed tax forms? What happens now?
Answer: Jamie Golombek says
that presumably, when you borrowed $20,000 from your RRSP, you participated
in the federal government's Home Buyers' Plan which allows a first-time
homebuyer to borrow up to $20,000 from his or her RRSP to buy a
home. Under this plan, you need to repay one-fifteenth of the amount
you borrowed each year. Unfortunately, if you forget to make a repayment,
you can't simply send that money to the government with your return.
Rather, you are forced to include the amount not repaid in your
income tax return for the particular year of nonpayment.
Question: My daughter is in
medical school. As part of her studies she was required to purchase
some medical equipment totalling around $800. Is there any provision
for claiming these expenses?
Answer: Mr. Mastracci,
of KCM Wealth Management, says the Canada Customs and Revenue
Agency has issued a comprehensive interpretation bulletin and a
pamphlet on tuition fees. Eligible tuition fees include mandatory
computer service fees. However, you cannot claim items you will
keep, such as a computer or microscope. The equipment fees that
you describe may fit this category. If the expenditure is classified
as an “ancillary fee,” which means subordinate, it may
be deductible up to $250.
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