GE business

TAX TIPS

Split income to reduce taxes

By THE INSTITUTE OF
CHARTERED

ACCOUNTANTS OF
BRITISH COLUMBIA

transferring some of your

income from the plan will be
taxed in the spouse’s hands
as the funds are withdrawn.
If the periodic payments are
received by your spouse
after reaching age 65, they

income. However, if you

also have an RRSP of your
own, the total contribution
to both plans must not ex-
ceed the annual allowable
limit. If you are over 71, you
can still contribute to your

entitled to the $1,000 in-
vestment income and capital
gains deduction, and both of
you would be able to make
use Of the pension income
deduction if you have

B7 - Sunday, February 27, 1983 - North Shore News

Question:

Answer.

penalties.

Tax Tips

Late Filing Penalties

North Vancouver, B.C. V7M 2K3, 987-8101

What are the penatties for filing a late income tax return?

i comes to 5 percent of the unpaid amount, PLUS one percent for
each month to a limit of 12 months that the amount ts outstanding.
However, if you don't file a return at ail, in the hope of evading taxes
the penalty added is another 50 percent of the amount of the tax
you're trying to avoid paying. A false return can result in severe

~~ One of the most effective will qualify for the $1,000 spouse’s RRSP if your qualifying income. For a free C.G.A. Tax Tips brochure call or visit:
ways to reduce your per- pension deduction. spouse is under 71. If you are considering PERRAULT, SMYTH & COMPANY
sonal tax is by a method You may deduct your There are strong ad- income splitting, be sure to Certified General Accountants
called income-splitting. contributions to your vantages to splitting your pay attention to both the 1975 Lonsdale Avenue
Simply stated, it means spouse’s RRSP from your income in this way. Both you form and the substance of

and your spouse would be
taxable income to another . .

member of your family,
usually your spouse, who is
in a lower tax bracket. The
money can then be invested
and the earnings from the
investment will be taxed ata
lower rate.

Income splitung works
best when one spouse ts in a
significantly higher tax
bracket and the family has
surplus funds to invest.

There is one important
point to remember. The
Income Tax Act contains
what are called “attribution
rules”. These rules prevent
you from simply giving your
spouse the money. If you do,
the income from it will be
considered part of your
earnings and you will still
pay tax on it. Evenif you buy
an investment and sell it to
your spouse, the income
from the investment will be
taxed in your hands.

You are allowed to lend
your spouse the money. The
loan must be properly
documented and is usually a
non-interest bearing demand
note. Your spouse can then
use the money to purchase
investments and income
from the investments will be
taxed tn your spouse’s hands.

You can't deduct the
amount of the loan from
your own income. You will
be making the loan from
your after-tax money. The
purpose of income-splitting
is to reduce the tax on in-

the VanCi )
egistered Retirement
savings

Plan.

come earned in interest,
dividends etc. by having it
taxed at oa lower rate in

someone else’s hands.
One of the simplest ways
splitting family income
with a spouse is to contribute
to a spousal Registered
Retirement Savings Plan If
the spousal RRSP is retained
for at least three years, the

Classified
986-6222 —

of

No start up charpes.
No close out fees
No COMM stOns
No service charges
No penalties

No deductions

In other words, no strings.
Phe VanCity Fixed Term Plan.

If you want to maximize your invest
ment this plan atlows you to lock in

your RRSP fund for terns from | year
to S years Locked in funds earn

Buaranteed rates of interest, com
pounded annually, for (he entire term
(Funds cannot be withdrawn before
completion of the tenn chosen) Phe
minimum contribution iw S900) And
as with all Van€ ity RRSES and other
tax deferral plans, he boxed) fern
Plans yours with io strips

Phe VanCity Vanable Kate Plan
Whatilpives you ws one of Che best
mite rest rates ay achable Cale ubated or
yout daily balance and compounded

scp abnually So every penny works
hard

future, while allowinp you to defer a
portion of your 1982 imcome lax
All deposits are puaranteed

And-— you could buy one with
our money.

ANNOUNCEMENT
REAL ESTATE

If you're short of Gash.) but would std
hkhe fo Cake advantage of a Vari€ ity
RRSP ask us abouta loan, and you
could start canning minmiedtately Koop
moma: also that you can Crarisfer
esting plans toa Vand ity KRRSE

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yoren

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. | \ \ Where money works |
| Vancouver City Savings \. for people: |
Credit Union VARCITS

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