BUSINESS Death Is certain; taxes, not always so DEATH IS certain. But taxes can sometimes be less certain — and sometimes, with a little planning, less altogether. In fact. the following | story shows bow a witow had a chance to save between $29,600 and $66,000 in tax following her hus- band’s death. Clare and Charles were married for 20) years. When Charles died this year, he left everything to Clare. including the family sum- mer house. Clare, however, dias decided she wants to. tritnsfer the summer place to the children. “How she chooses to apply the sules — and she does have several choices — can make a large dif- ference in income tax results," said Elio Luengo, senior tax manager with Peat Marwick Thorne, chartered accountants. “Effective tax planning takes a long-term view, so it’s important to look at your particular situa- tion over the long term — and possibly seek professional advice — before you take any tax-saving steps.”’ Here*s some more background on Clare and Charles: The family’s main home had always been in Clare’s name (she had inherited it from her parents). Charles had never used any of his capital gains exemption, had never claimed any capital losses and his investment income was always higher than investment ex- penses. Bought in 1975 for $40,000, the summer place was valued in 1981 at $130,000. When Charles died, its fair market value was $250,000. However, Charles hadn't done so well with his stocks. He had paid $95,000 for them but when he died, his portfolio was worth only $60,000. “Charles always told me the stocks would eventually turn around and double in value by 1993,"" Clare said. *‘I don’t quite know why he was so sure that would be the year, but after he died 1 decided [’'d hang on to them just in case.’’ Luongo said that if Clare does no tax planning, Charles’ assets will simply be transferred tax-free to her at his adjusted cost base — that is, valued at what he paid for them plus certain expenses. “Often, that’s what the beneficiary chooses and it can produce a desirable result,’’? he said, “However, sometimes it makes more sense to trigger the tax. You are allowed to make such an elec- tion on 2 property by property basis under the tax act.”’ In other words, tax could be triggered on the increase in the summer place’s value between 1981 and 1990. Before 1981, each spouse could have had a principal residence and not been liable for any tax on its increase in value. Charles* capital gains exemption could be used to eliminate tax on all but $20,000 of the increase in the summer place’s value. And that $20,000 gain could be offset by triggering $20,000 of the losses on his stocks. Clare now gives or sells the summer place to the children at today’s fair market value of $250,000 and pays no tax. When the children dispose of the proper- ty, they will declare only the in- crease in value from today until! the date of disposal. Let's go through that in a little more detail. “Until 1981, each spouse could Michael Grenby DOLLARS AND SENSE designate a separate property as a principal cesidence, provided cer- tain requirements were met.’ Luongo said. “Because Clare owned — their main home, Charles could have owned their summer place as his principal residence from 1975 to 1981. That way, tax would be levied only on any increase from its 1981 value of $130,000 — in- stead of from its purchase price of $40,000."" So when Charies died, Clare could elect to trigger the capital gain of $120,000 between 1981 Mh I t's a big world out there — and the market for British Columbia goods and services is getting bigger every day. and 190, She would) cho that te fake advantage of Charles” unused $100,000 capital gains exeniption, That would feave a capital vain of $20,006, But naw Clare ceuhi alse trigger $20,000 worth of the S35.000 (paper dosses Chrartes had incurred on his stacks -- stocks he had ovivinally bought for $95,000 which were worth apls $60,000 on his death. Vhis $20,000 loss would: offset the remaining $20,000) profit on the summer place, leaving no tay to be patd at Charles’ death, Phis would abo bump up’? the value of the sumuner place, for tan purposes, to the current $280,000 when Clare transferred it to her children, That's the ‘adjusted cost base on which aay future increases in value would be calculated for day purposes when the children eventually sold or perhaps gave the sunune place te their children. If Clare didn’t take advantage of the principal residence provi- sions and the elections to trigger both capital gains and losses at Charles’ death, there could be a total income tax bill of between $39,000 and $66,000, depending on Clare's tax bracket. Mike Grenby is a Vancouver- based columnist and ind2pendent personal financial adviser. BC Trade — to help B.C. companies get their share of international sales. And it's working: the province's exports now total $18 billion a year. That's why the Ministry One out of every seven of International Business and Immigration set up jobs in B.C. exists because of export sales. BRITISH COLUMBIA TRADE lA DEVELOPMENT CORPORATION Chairman: Honourable Elwoou N, Veitch BCTRADE Minister of [Intemational Bust. & Immigration To spot opportunities for B.C. companies, we have trade offices in major cities — Shaen at Simpower’s Coquitlam plant are of Asia, Europe and the U.S.A. And to help you take advantage of those opportunities, we offer international marketing know-how and financial assistance. Wednesday, October 3, 1990 - North Shore News - 15 Jim Simmons Steve Ray, general sales manitger of Plaza Lincoln Mercury Sales Led. is pleased to announce that Jim Simmons has yomned: Plaza as a sales and tease representanve. Jim brings with him nine years of experience and knowledge with Ford on the North Shore. Jim is looking forward to his new appointment at Plaza Lincoln Mercury and welcomes all his former and new clients _. 1695 MARINE DRIVE . NORTH VANCOUVER 986-4291 Simpson Power Products lid. (Simpotters produces generator ystems and marine and industrial engines for we around the world. president Charles Butterfield Ueft) and vice president Peter Meurrens. Asistance from B.C. Trade belped Simpower sell Venezuela generator sets for the Yacuma Quibor Tramel. If your company could grow through export sales, get in touch with BC Trade: Suite 730, 999 Canada Place, Vancouver, B.C. V6E 3E). Telephone 844-1900; Fax 660-2457. “Our exports are now S18 billion a year” says Eluvod N. Veitch, Minister of international Business and Chairman of BC Trade, “That's an increase of 130 percent aver the past decade, We tntend to keep those numbers rising.”