DOLLARS AND SENSE

WHILE WE often’ talk
about ‘death and taxes as
two key things we can’ all
count on, when death does
actually occur taxes are
usually one of- the last

things to be considered, _. --~

Yet the way the-income te tax sit-
uation -is-handled could mean a
difference of thousands of dollars
—- saved or lost — to the sur-

vivors. (You might like to keep a

copy of this column with your

own will and with the copy of

wills that name you as executor.)
‘Special: rules apply on the

_ death of a taxpayer that permit

income to be: split among a
number: of tax returns and, in
some instances, to be allocated to

ply on death of taxpayer

44 The way the income tax situation
is handled could mean a difference

of thousands of dollars .

taxpayer dies between Jan. 1 and
May | and hasn't filed a personal
tax return for the previous year,
the deadline for that return is ex-
tended to six months after the
date of death.

(2) Separate return for rights or
things.

“Rights or things’? are unpaid
amounts that would have been in-
cluded in income when realized or
disposed of had the taxpayer not
died.

For example, says Fahy, the

SW

cent interest payment date and not
reported in previous tax periods,
dividends declared before date of
death and unpaid at date of death
(this offers people with their own
companies a planning opportuni-
ty) and supplies on hand, inven-
tory and accounts receivable of a
taxpayer who reports on the cash
method.
(3) Separaie return for
from partnerships or. proprietor. «
ships. -

When- a” ‘partner or sole pro-

following types of income qualify” prietor dies after the fiscal period

as Tights or thin, hings—if-tti¢y were
owing to-the"déceased at the date
_of~death, and relate to a pay
period completed prior to the date
of death:
© Salary, wages or commissions
© Vacation pay
e Unemployment
benefits ;
Canada/Quebec Pension . Plan
and Old Age Security benefits.
Other examples of rights and
things include uncashed matured
bond coupons, any other bond in-
terest accrued before the most re-

insurance

beneficiaries for tax purposes or |

to be deferred,”? says Brandon
Fahy, director of the estate plan-

ning and administration group for.

Coopers & Lybrand, chartered ac-
countants.

The legal representative of the
deceased (normally the executor)
may file as many as four separate
tax returns for the year of death.
That allows up to four sets of
personal exemptions to be claim-
ed, easily saving ‘hundreds and
possibly thousands of tax dollars.
(1) Final date of death i income tax
Fetuzn.

‘This return. covers all income’
“(other than that. which may be

reported on.one of the following
elective tax returns) from Jan. i

of the year of death vanttil the date

of death.

‘This includes capital’ gains ac-
,crued to date of death,’ minus ac-
‘crued capital losses.

Deadline for filing this return is

‘the later of April 30 of the year

six months
If the

following. death or
after the date of death.

For more information, please call
The North Shore’s only full

Service Investment firm

RBC
DOMINION
SECURITIES

925-3131
201-250 15th Street, West Vancouver

Gear John,

My husband and | enjoyed our cruise
through the Panama Canal. You will be
pleased to know we sailed with Tilleys from
Connecticut, Tilleys from Toronto and
Tilleys from ‘Vancouver. Our Tilley hats,
shirts and shorts served us admirably
- throughout the voyage.

. Marilyn Hamilton Dobson
‘and Peter Dobson
Abbotsford

At Gatun Locks in
the Panama £ anal

Thal

Titey Endurables yy Inc.; wa ond John Tilley. independent retailers.

North Vancouver

1194 Marine near Pemberton
' 987-6424

Open 10 - 5:30

Monday thru

Vancouver
1537 Broadway near Granville
732-4287 ©

Saturday

of his partnership or proprietor-

income ~

ship, any income for the period
from the end of the fiscal period
to the date of death may be
reported on a separate tax return,
(4) Separate ceturn for trust in-
come ,

When the beneficiary of a
testamentary trust (set up by a
will) dies, income earned between
the end of the trust's fiscal year
and the date of death may be
reported on a separate return.

Other special tax rules following
a taxpayer's death allow (among
other things) a carry-back of
charitable donations exceeding
20.7% of net income in the year

of death, and a choice of valua-

tion when investments like revenue
proerty and stocks are transferred
to a Spouse, | : °

When such. an investment is
transferred to a spouse or spouse
trusts “the taxpayer is deemed to
‘have disposed of the investment at
the original adjusted cost base,
with soine exceptions,’’ Fahy said.

“But if the taxpayer hasn’t fully
used the $100,000 capital gains

Some things never change.

exemption, the legal representative
may elect to transfer the invest-
ment at fair market value to use
up the capital gains caemption,”*

The latter approach triggers the
capital gain in the name of the
deceased taxpayer. Otherwise, the
spouse or spouse trust would
eventually ave to report the en-
tire gain,

For further reference, ask
the local tax office for the Guide
for Preparing Tl Returns for
Deceased Persons. Read through
it to help with your tax planning,
then. put the guide” ‘With your will
to remind Your executor to get a’

. current version so he or she can
keep your final income tax bill as
low as possible,

Mike Grenby is a North Shore-
based columnist and independent
financial adviser who works with
individuals; he will answer your
questions as space allows — write
to him c/o The North Shore
News, 1139 Lonsdale, North Van-.
couver, V7M 2H4,

Just like we did last year and the three years before, we're offering an RRSP rate higher than
the 5 major financial institutions in Canada.* Find a higher posted rate, and we'll beat it.
It’s that simple. Consistently higher rates, consistently better service.

Bank of British Columbia
Division of Hongkong Bank of Canada “43
Now, what can we do for you?

1457 Lonsdale Ave., N. Vancouver
980-245]

1578 Marine Drive, W. Vancouver

922-3311 '

*Rates higher than those posted by Royal Bank, CIBC, Bank of Mentreal, Scojiabank, and T.D. Bank on fixed-term red amthte RRSPs,