32 - Wednesday, February 6, 1991 ~ North Shore News

There are

MONEY MATTERS

still ways

to save income tax

WHEN YOU complete your tax return for 1990 and see
how much tax you have to pay, you will almost certainly
wonder what you could do to reduce that tax bill.

“Tax shelters can appear very
appealing."’ said a Certified Gen-
eral Accountant who specializes in
tax planning for both individuals
and small businesses.

“Yet you must look behind the
promotional literature and prom-
ises of big tax savings to see if the
tax shelter makes sense as a long-
term investment as well."

The sophisticated — and risky
— tax shelters offer tax breaks to
attract investors, who otherwise
wouldn't be prepared te take the
risk.

Although Ottawa has cracked
down on many of the tax shelter
approaches, promoters will always
find a way to make an investment
sound attractive.

Realize, first of all, that most
of these tax shelters base their
figures on somebody who is in the
top tax bracket. If your taxable
income this year will fall between
about $28,000 and $56,000 the
projected tax savings will be a fit-
tle less dramatic.

And if your taxable income is
below $28,000, you should proba-
bly ignore the tax shelter com-
pletely.

“The trouble with many tax
shelters.’’ said the CGA, ‘‘is that
while you might get a big refund
immediately, any losses you might
suffer won’t surface until years
from now, That's why it’s so im-

portant to assess any underlying
investnent, Whether or not it has
tax shelter features, and to ask
questions.’* For example:

+» What will my out-of-pocket
expenses be each year? That's
particularly crucial if you borrow
to make the investment. For ex-
ample, if you deduct the $1,000
interest you paid on your loan,
you wiil ger a tax refund of
perhaps $400. But the loan has
still cost you $660.

- How much more money
might 1] have to invest in future?
Such a ‘cash call’? can come as
an unpleasant surprise. The in-
vestors are called on (o put up
more cash to complete the project,
for example. If they don’t, they
could lose much or all of their in-
vestment.

+ What is your long-term bot-
tom line likely to be? And how
realistic are the projections? Is the
investment overpriced because of
the tax breaks?

Let’s say you get $10,000 in tax
write-offs, saving you $4,0C0 in
tax. But your out-of-pocket in-
vestment totals $15,000 over the
years and you eventualiy get back
only $10,000.

You will still be out $1,000 {the
$5.000 loss reduced by the $4,000
tax saving). In that case, you

See Learn page 33

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Photo submitted

TAX SHELTERS may look appealing, but not all make sense as a long-term investment.

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_ featuring

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Vancouver, B.C. V6E 4E6
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