TAX SAVINGS Splitting income is getting harder to do BY GAAR, it’s getting tough to split income and save tax these days. GAAR stands for General An- ti-Avoidance Rule, one of the new rules introduced by tax reform. And as if it wasn't tough enough before GAAR to split income, you really have to structure your af- faiss carefully now. A group of local certified general accountants studied the various ways people can shift in- come to those in lower tax brackets. “The main problem is attribu- tion,” said one of the CGAs. “That means if a man gives money to his wife, for example, because she doesn’t work outside the house, any interest, dividends and capital gains she earns on that money is attributed back to him for tax purposes. So he still has to pay the tax.’” However, when the wife reinvests that income, the subse- quent income eared on. that money will belong to her for tax purposes. The CGAs outlined some other income-spiitting approaches you might consider. But carefully review your Own financial situation to check if these ideas would be beneficial. If large sums of money are involved, you might want to consult with a tax expert first. eYou may lend moncy to a spouse (or any other indiv:dual) to produce imcome from a business. This income would not ordinarily be attributed back to you. © If you have used up your capi- tal gains exemption, you could lend money to a child (possibly through # trust) or adult other than your spouse and the capital gains they realize would belong to them — tax-free if they could still apply their capital gains exemp- tioa. elf you give the money to a child under 18, the income (but not capital gains) will be attributed back to you. Sut you could give money to a 15-year-old who would invest it in at least a three-year compounding deposit, The interest wouldn't have to be declared until the child was 18 — the magic age when attribution would no longer apply. ¢Put family allowance pay- menis into an account or other in- vestments in the child’s name. Then the income this money generates will belong tc them for tax purposes. As 2 matter of poli- FIRST AID" Tip FROSTBITE Frostbite makes tha skin white, waxy and numb; freezing causes harcen- ing. © Waem trostbitten erea gradu- ally with body heat, de not rub ¢ Do not thaw frozen hands and feet uniess, medical aid is far away and there is no chance of refroezing. They are better thawed in hospital e If there are blisters, apply sterile dressings and bandage tightly to prevent break- ing @ Get to medical aid. wae Se. John Ambulance cy, Revenue Canada exempts fami- ly allowances from the under-18 attribution rule. © A registered education savings pian shelters investment growth from tax. This income is eventually taxed in the student's hands. However, check on costs and restrictions — you could end up losing all the investment income in some circumstances. elf an RRSP is appropriate, consider contributing to a spousal plan if your spouse is likely to be in a lower tax bracket than you when the funds are withdrawn. You still get the deduction now but your spouse will pay back less tax then than you would have, provid- ed the three year rule is observed, @ When both of you are 60 or older, split your Canada Pension 14% our posted rate!* March 1, 1989. Ofter subject to withdrawal at any time @ White Rock: 1550 Johnston Rd., W. 41st Ave. @ Chinatown: 129 E.Pender St., SONUS When you make your 1988/89 RRSP contribu- tion to a 1-5 year TERM-RRSP at First City Trust, you'll earn an automatic 1/4% BONUS above See your First City Trust branch staff or au- thorized ageni for details. Offer valid through Take advantage of our exclusive First City Trust RRSP Retirement Forecast - a computer projection of your personal RRSP savings. It's yours for the asking when you make your contribution. * Eansting deposits or transtery are nol ehygible for this bunus. FinsiCiiy Trust Exclusively for personal investment savings iS Member: Canada Deposd Insurance Corperatin 538-2888 = Kerrisdale: 2246 261-3390 @ West Vancouver: 1575 Marine Dr., 926-8877 @ Downtown Vancouver: 777 Hornby St., 688-9421 662-8877 Plan pension with a lower-tax- bracket spouse whose CPP is less than yours. © A spouse with no or low in- come could sell a non-income pro- ducing asset (inherited property, for example) to a high-income spouse. This would shift invest- ment capital — and proceeds — to the spouse in the lower tax bracket. This article was prepared by the Certified General Accountants Association of British Columbia, the Province’: ’s largest professional accounting body. For further information the association can-be reached at 1555 West 8th Avenue, Vancouver, B.C., V6J IT5, or by phoning 732-1211. Rate subject to change. THE CANADIAN HOME INCOME PLAN’ Using your home to increase your Retirement Income Provides a lifetime guaranteed Tax-Free* income for Senior Canadian homeowners while they stay in their own homes. For more information cai: JOHN RIBALKAN or CAM McEWEN ova Financial Services Gnc. 985-9511 0 Income for your RRSP. That's what Industrial Income Fund, and Mackenzie Mortgage and Income Fund, are out to build. But there's more. Because, when they believe the timing is right, the managers at Mackenzie Financial Corporation can invest a portion of these portfolios in high quality equities — in an anempt to build capital gains, too. Is it au approach that works? We're happy to let the numbers speak for theniselves. But for more information on Income Pius, speak with your independent dealer or stockbroker or return the coupon below. So that you can use the P/zes to make more of your RRSP. 12.2%] 14.9% 11.5% rae GREAT PACIFIC MANAGEMENT CO. LTD. Doug Gartland Jim Perkins 669-1143 299-6577 Here's the proof. Industrial Income Fund Mackenzie Mortgage & Income Fund C1 ralike to make more of nay RRSP, Please send me more information about Income es from The Industrial Group of Funds. NAME: ADDRESS POSTAL cry: PROVINCE: COUR: PHONE (Resulenicey {Business GREAT PACIFIC MANAGEMENT CO. LTD. Mait to. 300, 1190 Hornby St., Vancouver, BC. V6Z 2K5 All figures to December 1, 1988 are average annual compound returns based on the net income invested and ine ‘hading reinvestment of dividends. Last perforiaace is not necessarily indicative of fidure results, Any offers made only by prospectus ichic ‘A contains complete details ofall charges. Please read i before making a purchase aud retain it for fiture re eferene . Looking (Be e: F both ways. 4 ; ‘To manage sour RESP. For growth sid micume. 47 - Wednesday, January 11, 1989 — North Shore News