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By: Adrian Mastracci
North Shore News
Business Section, “Loose Change”
Sunday, April 6, 2003
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. A checklist has been prepared
for the 2002 Canadian return.
The best part about filing the 2002 return
is dusting 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 planning activities to contemplate for
2003 are:
Individuals
- Revisit your investor profile, level
of risk taken and asset mix decisions.
- Refresh those retirement goals and
the size of investment portfolio to sustain
retirement income.
- 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.
Business Owners & Professionals
- 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 you or anyone you know has access
to a 1949, or earlier return, I would appreciate
receiving one. Many thanks.
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