46 - Sunday, February 23, 1986 - North Shore News Government income splitting {INCOME splitting has just been made a lot tougher by the federal government. No longer can vou Ioan money to your spouse or minor children, and see the income earned by that money taxed in their hands. The new rules on income split- ling contained in Bill C-84 will put that money back in your hands at income tax time. Lisa Smedman ‘Income splitting’ is simply a method of directing money from the family’s high income earner to its low income earners. It works because the lower the income, the lower the tax bracket. Revenue Canada taxes a family as a collection of individuals. Each person is entitled to the $1,000 in- terest and dividends deduction, and to the new ‘‘lifetime exemp- tion” on net capital gains. SHELTER For the 1985 tax year, the lifetime exemption can shelter as much as $20,000 in net capital gains. Income splitting used to be simpler, says Bruce Flexman of Thorne Riddell Chartered Accoun- tants. You loaned your spouse some money, then both of you signed a promissory note, stating that the loan would be paid back upon demand, without interest. Or the loan might have had a definite “term’’ or due date. In most cases, the promissory note was simple enough that you could draw it up yourself. Then the interest, dividends or capital gains the loaned money produced was taxed in your spouse’s or child’s hands. Bill C-84 changed all that. BILL C-84 Now, investment income earned by a loan to a spouse or minor child will be attributed back to you at tax time. Even a ‘back to Victoria’s only seaside hotel Includes 3 days 2 nights ¢] Breakfast & | Dinner for two in the ‘Tudor Room by the Sea’. |] Lunch for two in ‘The Snug’ Lounge. © | High Tea for two served in the Grand Lobby, + $199.00 or Deluxe $318.00 * Double occupancy. Available to April 15, 1986 Optional Charters on 41 foot Custom Yacht ge SR (Additional Cc ost) aaa Oak Bay Beach Wotel 1175 Beach Drive, Victoria, B.C., Canada. V8S 2N2 (604) 598-4556. back’’ loan - one in which you loan money to a friend, who then loans it to your spouse - won't fool Revenue Canada. If you guarantee a bank loan for your spouse or minor child, the money that loan makes can also be taxed in your hands. An exception is made on loans made prior to the May 23, 1985 federal budget, says Flexman. If you made a loan prior to this ends date, your spouse or child has uni the end of 1987 to pay it back. the loan is not repaid, any income it makes after 1987 will be at- tributed back to you. (This rule applies even to term loans that come due after 1987.) “Tf you can’t prove the loan was made before that date, then Reve- nue Canada may not accept it." See Income Are you sure you're getting the biggest tax refund you're entitled to this year? 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