Mes BUSINESS Tax treasure hunt can prove profitable I’D LIKE to call this adventure Treasure Island Revisited (with apologies to Robert Louis Stevenson). With our secret map, we'll out- wit Long John Revenue Canada and find the buried treasure: thou- sands of dollars in tax savings. Elio Luongo, senior tax manager with Thorne Ernst & Whinney, chartered accountants, is our ex- pert mapmaker. And he’s no mean Storyteller, either -— especially when you see the happy (and prof- itable) endings he devises. In today’s episode (watch this space in future editions of the paper for more treasure hunts), Uuonge has Sarah and Richard following five simple steps to un- cover their treasure chest contain- ing a minimum of $12,000 in saved or deferred tax (if their combined incomes are $60,000 this year) or as much as a glittering $43,000 — or more (if they have a really good year and make $132,000). Luongo warns other treasure- seekers to tread carefully, after reviewing their own situations. “Following somebody else’s steps might not lead to the same results,” he said. ‘‘Also, in this example we have focused on saving as much tax as possible for this year — just to il- lustrate how effective tax planning can be. in some cuses, this might . not bs the ideal sirategy: taking a longer term approach could pro- duce better results overall.’’ Sarah earns $32,000 a year at work but doesn't belong to a com- pany pension pian. Richard went - into business for himself last Feb- works this year, he will cam $28,000, $55,006 or $100,000. Sarah and Richard each have -$10,000. savings earning 10 per cenit interest. They jointly own a home with a 25-year, 12-per-cent $100,009 mortgage. They have two children: Michael, 6, and Lesley, 2. (The B.C. provincial tax rate of 51.5 per cent of the basic federai tax is used here. Our calculations do not include the time value of money.) On the map, Luongo hes clearly marked five simple steps for Sarah aad Richard to follow: (i): Defer the year-end for Richard’s new business. * (2) Put the family allowance into the children’s bank account. 3) Use savings to pay down the mortgage. (4) Make ‘the maximum RRSP contributions early in the year. .@) Maximize personal tax cred- its. “““Say. Richard makes $28,000," said Luongo. family’ income level, those ‘five steps will still save or defer about $12, 000 in tax for the couple this year... AE Richard earns $55,000, pushing | family income to $87,000, "tax savings almost double to about _ $23,000. And if. he hits $100,000, . they'll : save around $43,000 on their total $132,000 income.” Luongo said additional steps — like using the saved tax to pay CORRECTION NOTICE in our Zellers “BIG BIG BIG - SALE EVENT" flyer dated July 5th to 8th, the following items will not be available: lawn dart set, infant & children’s life jackets, sling chair & chaise lounge. We can not issue rain checks on these liems. We apologize for any inconvenience this may have caused our customers. “At the $60,000 — down the mortgage further and having Richard (at his higher- income levels) pay Sarah and possibly the children to work in his business — could improve the couple’s financial position even more. dollars and sense Michael Grenby Luongo documents the five-step approach outlined here with five pages of detailed assumptions and explanations. In future columns, Yl be covering these and other . tax-saving tips. But here ure just a few highlights. - By. choosing a Jan. 31 year-end for his new business (a sele pro- ‘prietorship), Richard will repori -the self-esaployed income he earns between Feb. 1, 1589, and Jaa. 3!, | ATTENTION ‘MOM | & DAD: SEE THE NORTH SHORE’S LARGEST 1990, only when he files his 1990 tax return — in April, 1 To illustrate how each individual situation and option must be con- sidered separately, Luongo said: “If Richard earned $55,000 in those 12 months, he might want to consider paying tax on $27,800 in 1989 and $27,200 in 1990. That way, he’d be in the lowest, 26.5 per cent tax bracket both years and be able to claim two sets of per- sonal credits instead of paying tax on almost half his income at 40.5 per cent and claiming only one set of credits. “On the other hand, if Richard reports no income for 1989, the couple can claim child tax credits and Sarah can also claim the mar- ried amount/credit for Richard as a dependent spouse.’’ If Sarah and Richard use their savings to pay down the mortgage, they might want to set up a line of credit in case of emergencies. Luongo showed how much tax each step could save or defer for the couple at the three different levels of family income: $60,000, $87,006 and $132,000. For example, deferring the business year-end would save $5,547, $16,257 and $36,650, respectively. Depositing the family allowance into the children’s ac- counts since they were born; $317-$485. Using savings to pay down the mortgage: $1,070, $1,210 and $1,260, respectively. If Sarah makes the maximum RRSP con-. tributions: $2,544 ut all levels. Maximizing personal credits: $2, 536 at all levels. 29 — Wednesday, July 5, 1989 - North Shore News DR. NASIM VISRAM is pleased to announce the opening of her practice in general dentistry at DELBROOK DENTAL CENTRE in the Delbrook Plaza #114-3711 Delbreok Ave., North Vancouver Hours 8am-Spm Mon-Friday 9am-12pm Sat. for appointment phone: 988-0570 New Patients Welcome SELECTION OF PATIO & LAWN FURNITURE CHOOSE FROM RESIN, METAL, WOOD & ALUMINUM cast aluminum furniture (never rusts) WEST’ VAN. ‘LAWN. & ATIO: FURNITURE: (922-6033. . 4402. MARINE DRIVE}: WEST VAN. See our full line of § piece sets from Umbrellas from Tables from Chairs from Cushions from SAVE 15% to 30% 199 te *1495 529° to $299 Chaise lounges from ‘69 to °399 $29°5 to °499 49° to °239 S45 to 149 arvsee Custom Orders taken for Umbrellas, Cushions and Lounge Pads. See our Children’s Selection of Patio Fumiture. "FREE DELIVERY ae .. ethtiuowntes