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By: Adrian Mastracci
North Shore News
Business Section, “Loose Change”
Sunday, December 7, 2003
It won't be long until we'll be dancing to the tax talk tune once again.
A few moments to refresh your expectations for the 2003 taxable events is time well spent. Retrieve last year's return and use the numbers as guides for this year's results.
By now, you have a pretty good idea of the events likely to unfold for the whole year. The preferred habit is to start this exercise in April, followed by a tweaking now.
Know what's ahead. A lot may have happened since the start of the year.
Here is the summary of tasks that may apply in 2003:
Investment Strategy
- Review your capital gain/loss strategy and examine selling the losers.
- Consider capital losses carried forward and the $100,000 capital gain exemption filed in 1994.
- Take into account the mutual fund capital gain/loss distributions typically made in December.
- Ensure that the mix of assets in equities, bonds and cash is appropriate.
- Securities donated to a charity attract a capital gain inclusion rate of 25% instead of 50%.
Retirement & Registered Accounts
- Refresh your retirement goals and the size of investment portfolio required to sustain them.
- Deposit the 2003 RRSP contributions to your account and/or the spousal plan.
- Convert the RRSP, likely to a RRIF, by December 31 if you turn age 69 in 2003.
- Consider a family RESP where applicable and deposit the 2003 contribution by December 31.
Employer Matters
- Assess your stock options strategy, plus your portfolio dependency on the employer fortunes.
- Inquire about a prescribed rate loan from the employer.
- Revisit your taxable benefits, such as the automobile standby charge.
Income & Deductions
- Estimate all your expected income sources, deductions and tax credits for 2003.
- Finalize your 2003 tax deferral requirements as the better ones are snapped up early.
- Pay the expenses deductible in 2003 by December 31.
- Rework your 2003 taxable income projections, along with some “what if” scenarios.
Income Splitting & Estates
- Consider a prescribed rate loan to the spouse in a lower tax bracket.
- Examine which spouse ought to concentrate on accumulating saving capacity.
- Ponder the need for strategies using trusts and estate freezes.
Crossing the Border
- Canadians who spend time living in the USA, or earn income there, may require US filings.
- Canadians who own property in the USA should review the estate tax rules that may apply.
- Review the cross-border tax implications if a family trust's beneficiary resides in the US.
- US citizens living in Canada should seek advice on the required IRS filings.
Anticipate your financial affairs for 2003 and finalize your game plan to accommodate them. The goal is to ballpark the tax consequences for your situation and minimize surprises.
Tweaking the tax tidbits and making the appropriate adjustments are two important steps. You may just retain more of your nestegg.
Perhaps, an even greater financial security for yourself.
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