* 20 ~ North Shore News - Sunday, December 10. 2000

—— BUSINESS een .

of capital

Understanding the taxing rul

BREAK out the calcula- -

“tors, because with the

year drawing to a close,

| it’s time co start think-
ing about your tax
: return.
| Today, 1 want to talk to
you about one of the must

“confusing elements of this.”
year’s return — capital gains.

Capital gains are any gains _

you make on your basic invest-
ment. Ler’s say you buy 1,000
shares of a stock at $1 a share.
At the end of the year, the
stock is Worth $1.50 share.
Your $1] 1000 i investment is

you can
bank on it

now worth $1,300, a capital

- gain of S500.

In the past, calculating cap-
ital gains was simple. You

~ made $500, the government

taxed you on 75 per cent of

; that $500, or $375..

is tater delivered with a costly

P| ten scams of 2000:
Bogus’ business” Opportuni-

vantage of would-be
by pushin over”
hyped or. ‘worthless smal

goods when ‘completed:
Sods wi ri

+. sénio:

“schemes “—
- Internet:

invoice attached. In the unso-

» ficited invoice scam, companies
get invoiced for goods and scr-
"vices that were never ordered. -
2H’ Foreign ‘lotteries: In: this:
“scam telemarketers sell foreign |

lottery tickets in “pools” with a

hefty j price tag attached. A typ-
ical scenario begins with a caller’

Suggesting ? the target — often a

track: to riches, these schemes

promise of quick and easy prof-
fact, ¢

for little of no effert.

Ost people. who participate in
pyramid schemes lose, because,
sooner or later no new parti

pants’ can be recruited to. keep,

the’ sche:

sounds too good to be. true, i
sbably the

“has won or could be.
. the winner of 2 lottery or jack-..
“pot, and. to collect’ ‘the win- °

nings, they must send in money |
“fo cover * “taxes” or other bogus S

3 Pyramid chemes: These

¢ yen those: on the:

: areas old‘ as. the”
hills: Usually promoted as a fast -

Florida’

But in February, the capital

* gains inclusion rate was

reduced to sixty six and two-
thirds per cent (we'll round it
to 66.66 per cent here). This
is good news for investors —
instead of paying taxes on
$375, you only need to pay
taxes on $333.33.

It gets better. In October,
the inclusion rate was reduced
to 50 per cent. Instead of pay-
ing taxes on $333.33, you’!
only need to pay on $250.

Here’s the Pprobler.
Instead of paying a flat rate of
50 per cent in 2001, you'll still
_ heed to make your real

. timeshare scam, vacation’ cer-
* tificates for hiolidays i in Florida:
“are the “prize”. given out in
- contests “or . promotions. But.
what is supposed to be a free

tip can end up costing hun-".

‘dreds of dollars —.in U.S.::.
_to pay more than you agreed
to...To. make initial contact, -
fraudulent: telemarketers. call...

funds. To top it off, the offer is

conditional’ upon “attending a
“timeshare sales presentation. ~~
&8 Internet fraud: The Internet ©

may..be ‘ revolutionizing how |
consumers buy and. sell goods
and services, but it has also:

~ become the home of high-tech

fraud artists. Some of the mos!
jpular Internet scams include

Investment ‘scams, online auc-

tions,.bogus business opportu:

_ nities, chain letters and Pyramid

schemes.

Bogus charities The holiday
season is the time of year many
legitimate“ charities ‘are: busy
collecting contributions,” but.
there are. also bogus ‘charities |
out to’ scam potential ‘donors,
‘These charities will often

‘name that is’similar to a legiti

mate ‘charity and use high-pres
sure . tactics to collec

‘that’ are “good: for 2

~ milli

gains inclusions based on
when these announcements
were made. -

So, whatever capital gains
you made before February 28
will be caxed ata 75 per cent
inclusion rate, 66.66 per cent
on capital gains made from
February 28 to October 17
and 50 per cent on gains made
after that, dividing the year
into thr three separate tax periods.

This con
for i instance, you sold some of
your stacks in January, and
made $1,000, then in.
September, sold another

investinent, netting you $500,

of 2000

~ businesses routinely order. and

use on a daily basis; things like.

copier paper, toner and mainte
nance — supplies. The’

behind the scam is to get-you-

or your employee to buy items
you didn’t order, or to get you

‘and claimy they’re your regular
supplier, or that dizy have “s:
cial deals” on. office supplies
limited
time only”... =

RB Nigerian letter schemes: This
starts with a letter, fax or e-mail
from Nigeria marked “urgent”
or. “confidential”...
claims ‘to be- an ‘official of -a
company or government mi

stry. who is trying to transfer
ns of: dollars out ‘of the -
‘country. The letzer-Wwriter pro-
“poses depositing the money: in:
“a trustworthy bank account in
‘exchange, for*30 . per. cent’ or:

more of the ‘transterred funds.

© get’ in on the action, the
‘business or. or :
» provide ite b
~ber;and ‘other: company’ infor-
< - mation and ‘then ..-is“asked- to

ization ° must
account umi-

the issue. If

‘ideas:
or Joss for the year. ..

"The’sender. .

your taxable gains are now
$1,083, (75 per cent X
$1,000) + (66.66 per cent X
$500).

But what if instead of sell-
ing vour stocks for a net gain,
you sold some for a gain dur-
ing one tax period, and some
at a luss at another? There are
four steps you need to take to
calculate this:

& Step 1: Determine the net
gain and net Joss in each of the
three periods. .

@ Step 2: Combine the Peri-sd , ;

One net gain or loss with the
Peried two net gain or less:
This will produce an interim
net gain or loss and an interim

- inclusion rate. :

Step 3: Combine tie Period
Three net gain or loss with the
interim net gain or loss to | ~~
determine the total net

gain /loss over the whole year.
W Step 4: Determine the

. appropriate inclusion rate(s) ..

and calculate the raxable gain
Sound confusing? Don’ t

_Worry. It is. But here’s some

examples that might heip: |
. Example one: ©.

B Step 1: In Period one, 4 you a

record 2 net gain of $600. In’
Period two, you las¢-$500: In
pzriod three, you make’ $400.
@ Step 2: Subtract your net:

| losses from. your net gain
Periods one ind two: The

result is an interim net gain of

+100. The ‘inclusion rate on

this $100 is 75 per cent, as th
net gain in period one was
jarger than the net loss in pel

‘i Step 3: Add the interim net”

gain S100) to Period three

- (5400); the net. gain for the:

ear is S50!

a Step “4: Since t the net
are from different score, cl

start sending sums of money to =:

“cover the. transfer of” funds; or:

ompeting pla
Choose the'¢ one at which

_ BStep 2:
~ one and two recorded a gain, -

culate the taxable inclusion
rate for cach period. (75 per -
cent X S100) + (50 per cent x.
$409} = $275 :

Suill with me? Lee's trv *
another one:

Example two:
MW Step 1: In Period one; you :

- made $1,500. In Period two;:

you made $750. In Period .
three, you fost $800. :
ince both Periods

we must caiculate the interim
inclusion rate by dividing our
interim inclusion amount (75
per cent X $3,590) + (66.66
per cent X $750) = $3,625

the total amount of capital
~” gains; in this case $2,256. We

wind up with an interim tax

"rate of 72.22 per cent...

© i Step 3: Since we have a
« loss in Period three, subtra
- $800 from $2,250, givin

= anet gain of $1, 450

a Step 4: The interim ne
gain (92,250) i is larger than:

a the | Period three net loss
“ ($800), so'we must apply. the
- effective interim inclusion rat

of 72.22 per cent to the.ca

‘tal gains for the year to deter

mine the taxable ca pital

*: $1,450 X 72.22 per cent

of you wh

‘are dreadiiig this year’s tax

return, look at it this v way

ing less cakes.
And he’s 5 nol

arrange to have part “paid Gu

before the end of this year-an

the balance at the

‘Any money
RRSP/RRIE.will

‘your ince
‘death and taxed; But

dependency and othe
which this year’s bud