page 42, ‘Mach 16, 1977 - ‘North: Shore News Seeetneaes Meee Seater Peaedeal : ae 2 UPN een Seas aoe ‘From The Institute of Chartered Accountants of British Columbia The incorporation of a business has many advan- tages from the point of view . of legal liability and ease of financing. But the major tax advantage of incerporation is that of tax deferment. Tax savings through income splitting can also tbe achieved. Tax deferment — occurs when income is taxed in a corporation at a rate less. than what it would have been taxed at in the hands of the individuai. In most cases, once the after-tax earnings of “the ‘corporation are paid to the individual shareholder in the form of a dividend, the tax paid by the corporation on the income and the tax paid by the shareholder on the dividend should approximate the tax that would have been paid by the individual had he received the income directly. when the income is taxed in the hands ot the. corporation ‘currentl, and a dividend its not. paid to the individual immediately... ‘NATURE OF INCOME The amount of deferment, woule: by allowing what. otherwise be personal’ i come - flow first. into ‘a corporation, depends upon the nature of the income. Dividend income in a corporation is taxed at 33-% per cent. dividends received by an individual with taxable income in excess of $31,368 (1976 rates) are taxed at rates in excess of 331% per cent.. The tax paid in a corporation is totally refund-. corporation. incorporating — is income splitting. If a hus- © _ Such income .less than $150,000 per. year from. an. active business may be taxed at 20. per Since only corporations receive. the benefit of. the. manufacturing and process- ing credit, there is an actual tax saving realized on any such income which is taxed - at the low rate of tax. The second advantage of band and wife both take part in a business, a salary may be paid from a corporation to cannot usually be paid. from one spouse to another if the business were not incorpor- ated. HUSBAND-WIFE SPLIT If the shareholdings. are properly arranged, dividends from the company can also be split between the husband . and wife, ; F urthermore,. with. income from investments ina Corpor-_ ation, the shares may be held. . by beth husband and wife (with each paying for their shares from their own funds) § . the divi- “| -dends paid by the company 4 shared. by the] - and once again, can be husband and wife. — Without the use of an | _ investment holding corpor-° |. ation, the income earned on ‘f°: ~ re - Lo aetna i “IMMEDIATE = OCCUPANCY | have been transferred from {. one ‘spouse to another, is | ‘investment ; assets, which attributed back to the trans- feror spouse and included in ' his or her income. Attribu- tion may be avoided by the {| . incorporation of investment _ income. - Other tax advantages of incorporating are in the areas of estate and should cent in ‘the. that of: In summary, the individual . incorporate’ his. oN, ‘. There is a popular miscon- _ ception that expenses may be more easily deductible in a. corporation than -by the individual on his personal tax return. The tax. reasons for incorporating should not be that of the deductibility . of expenses but rather the reduction or deferment- of income taxes. om . COME TO VISIT THE SUNNY SQUA- Careless" income if his marginal tax _faulty or careless - rates are in. excess of the | corporate tax rates applic- able to the particular income. smoking _ ling - more worth, $258,000 up from the previous year. | - Fire. Chief Chandler in his annual’ ‘four major residential fires contributed to the increase in. -1976- fire losses. Causes of. |. these ‘fires. ranged froma faulty. clothes dryer, sparks | from a fire: place, . and some. of undetermined origins.” and use of electrical appliances remain the main causes of fires in... West Vancouver last year resulting in damages total-- than. $596,000. y report’ stated » that. _ A breakdown of the figures . indicate that loss to private ‘amounted © to - $506.795: $35,354 to apart-- dwellings ments: fires to commercial premisescaused $5.000 dam- ~ age: and losses 1o. marine -and vehicle fires: resulted in - $27,000 and $19, 417 _ worth respectively: | On: the whole the number. of fire alarms over the last. Jo years (1966-1976 )) have .in- creased some 152 per cent. . the Fire Chief said, but the “number of emergency «calls - were down four per ¢ cent from 1975. . The increase in the 1976 - dollar loss was primarily due to the inflationary real. estate prices, Chief. Chandler: said. As a precaution the dep- artment ‘‘strongly recom- mends the installation of "U.L.C. (Underwriters Labor- atories of Canada) approved smoke detectors’’ and fire extinguishers specially des- igned for fires involving wood, | flammable _ liquid. - such as grease. and electrical © fires. MISH AREA. JUST 40 MINUTES FROM. __.... . LIONS GATE BRIDGE. Our business is - » building and designing homes. We have. some beautiful: homes under construction --in the Highlands and Brackendale area, “and we have Lots upon. which we can ~ . build you. the home: of your” choice. . Here are: ‘some. * samples of hommes “under _Sonetrustion a 2 1100, ‘Sq. ft. Bungalow . ‘3 bedrooms, utility room, wall to. wall, carpeting except in: kitchen: &: bathroom, storage room off carport. . | IMMEDIATE OCCUPANCY 1266 sq.ft. ‘Bungalow -able once dividends are paid. . planning by that corporation to the deferred compensation. A. 3 bedrooms, large storage area, wall to | shareholder. Other invest- corporation may be a vehicle bathrooms. except, in. tchens © and ‘ment income in British for estate planning during —_ Columbia has a basic corpor- ate rate of tax of 51 per cent for 1977. The rate of tax is. higher ‘in the individual's hands if his taxable ‘income exceeds, once again,$31,368. Active business income not exceeding $150,000 per year (or $750,000 accumula- ted since 1972) earned in a corporation is taxed at a rate of 25 per cent. Taxable income in excess of $2,614. (1976) is taxed in the individual's hands at rates in aennnm afl BE mn nat GLARED UE ow fer Vebaee TAX ON DIVIDENDS . Therefore, if the individ- ual’s marginal tax rate is in excess of 51 per cent (where his taxable income is in excess of $31,368) it would be better to pay: tax on dividends and other invest- ment income in a corpora- tion, Furthermore, if income is from an_ active business and it is less than $150,000 per year ($750,000 acumulated since 1972) it ‘would also be better to incorporate the income. The benefit to be gained by the individual by way of tax deferment on active business income is even greater if such income. is’ from - ‘ manufacturing and processing. ‘one’s lifetime. ~In addition, such tech- niques as the use of a deferred profit sharing plan mav reduce corporate taxes in the current. year with the individual paying tax in some subsequent year, DISADVANTAGES There are also disadvan- tages to incorporating a business or, incorporating investment income. If the ‘active business _ income is in excess. of $150,000 per year, or $750,000 accumulated since 1972, the tax paid by the corporation and the individ- ual after the payment of» dividends would exceed the taxes which would have been payable by the individual had he received such income directly. Also, if the individual's marginal tax rate is less than 51 per cent, there would be a pre-payment of tax on investment income if it were to flow through a corporation rather than a deferment of tax. Furthermore, capital taxes ‘in British Columbia (at a rate of 2/10 of one per cent of capital) are only applicable for corporations. ‘and carport added, One of our builders has selected a group of homes to be built in Brackendale. | A basic 2 bedroom cathedral entry will be $39,900. With a brick fireplace, sundeck it will be $42,240. A 1268 sq. ft., 3 bedroom rancher. will be $39,900. An acorn fireplace added will bring the price to $40,500. On Highlands Way North, a 2 bedroom, split level entry with basement, fireplace and carport will be $45,400. A3 bedroom rancher will ba. faa ann, pameewee Maw eee ' These prices include lino, carpeting and fixtures in the colours of your choice. Another builder is constructing a down- stair entry colonial in the Highlands with living room, dining room, kitchen with breakfast area,.3 bedrooms and ensuite plumbing plus full basement for $55,000. $43,6 _ breakfast nook and ‘2 Well under construction, we have a 1395: sq. ft. bungalow with ensuite plumbing ‘anda finished family room for $46,000. A3 bedroom back split with sunken living room and V2 basement for $46,000, A 3 bedroom downstair entry with % basement for $45,500 and a 2 bedroom, side split with dining room plus large basement for $45,500. All these homes have fireplaces, carports, wall to wall carpets (except in kitchen and bathroom) and there is still thanan tA Nan time mee abe mom nll VOTE ewe ad WAIN E ywu Oevrs COGS cariw fixtures. 1° We also have building lots In Brackendale and the Highlands where we can build you the custom home. you require. Our dosign service will be avallablo so you may own the home that you have always wanted.