Page 22, March 18, 1979 - Sunday News ‘TAX TALK “Vf you’re.- self-employed you'll spend money trying to - Documents i make a profit and you can claim some income deductions as a result. tax There are two very basic rules to remember: (1) An expense claimed as a deduction must be for the purpose of making’money in the current tax period. If it provides a long-term benefit, it will be considered a capital expenditure and thus the deductibility will be restrict- ed. (2) An expense must be ‘‘reasonable’’. A test of this requirement is that there should be a ‘‘reasonable expectation of profit from the expense”. Let’s take an example: Mr. Bellows is an office worker with a dull and dreary job. He’s attracted by what he thinks is the glamorous and carefree life of a travel agent so he signs up for a short instruction course, travels - around, various alluring vacation spots, rents an office advertises and sits back waiting for customers to turn up. rm . When they don’t show, he realizes the travel business isn’t quite so glamorous as he though and the bucks aren’t that easy to come by. So he goes back to. his mundane old job and claims his losses as a deduction from employment income. To his surprise he finds the tax department has disallow- ed the expenses because: (a) The fee for the course was ‘intended to provide long- term benefit and therefore- was a capital expenditure. It would qualify as deductible tuition fees only if paid to an approved educational institution; ' (b) There wasn’t reasonable expectation of profit from the business because poor Mr. Bellows had embarked on his fling without the experience or knowledge to have much chance of success; and (c) The travel expenses were © personal and weren’t laid out to earn income. Capital expenditures generally are not deductible but there are a few excep- tions, such as the cost of attending conventions. ee important for self-emplo This is deductible provid- ing no more than , two conventions are claimed in one business year. Also, our erstwhile travel agent belonged to a Canadaian association and_ therefore could’ claim only if the convention were held: in Canada. may be deducted from business income over the useful life of the property. Expenditures for_property of an intangible nature (good- will, franchises, for instance) may also be written off, but only to half of the expendi- ture and at a rate -of 10 per cent per annum on_ the business Ea If he belonged to an international organization, however, he could claim for conventions anywhere in the world. And the cost of taking a spouse along is_ not deductible. There are other capital expenditures which are deductible: ® Interest and other costs of borrowing money; © Legal fees to obtain licences, permits, franchises; © Landscaping around busi- ness premises. Capital expenditures for depreciating property, such as buildings and equipment, (Il Mlloosgy ‘ ‘réasonable’ , expenses. reducing balance. Land maintains its value and the cost is not deductible. consider Now, let’s Car expenses and depreci- ation, for instance, should be pro-rated on the basis of business and personal mile- age. Mileage from home to the business premises is personal; mileage from home directly to a work site may be considered business. An important point: if you maintain an office or work- shop in your home for business purposes you can LIONS GATE HOSPITAL HAS RECEIVED a generous donation from the employee's Seaspan. The money will be used for the purchase of three cardiac monitors for the new intensive care department. The Seaspan employees have made previous donations to the Lions Gate hospital for which the hospital and all who have need of such equipment are grateful. In the photo from left to right are: Joyce Campbell, and Vera Thompson accepting the cheque on behalf of the hospital and Jean Verner and Ken Fryer, there representing the employees of Seaspan. (Terry Peters photo) Lotteries may exploit poor Consumer Affairs Minister Warren Allmand says that he will follow up on observations by Toronto Liberal MP Jim Fleming who said that a group of social agencies thinks donations are declin- ing because of lotteries. “if what he says is correct it deserves some. action,”’ said Allmand, noting how ever that he isn’t sure what action could be taken. Fleming said the National Advisory Counct! on Volunt- ary Action, representing many social service agencies, said in a report many months ago that lotteries may be the reason why they are getting less revenuc. People may be spending money on lotteries that they used to give to charity, they said. Fleming said he suspects lotteries are a form of tax on the poor who are lured by a powerful promise of instan- tancous happiness. Fleming's cemarks were applauded by Conservative MP's. Pigase call me - today District Agent Bus. 736-2621 Res. 988-9884 Did you know it takes about $181,000.00 to provide a monthly income of $1,000 for 20 years. Occidental Life has a low premium Adjustable Term Plan that is renewable to age 80 - with an option to have decreasing term to age 100. Thats right - to age 100! We have a term plan that doesn’t stop In 20 years or at age 65 and the monthly premium Is very low. A Term Insurance Plan you can’t outlive! $10,000.00 or $1,000,000.00 I can get you the best rates! Mortgage Insurance, Partnership or Key-Man, Annuities of Registered Retirement Savings Piana I'd tike to be your agent for lite {have over 20 years of business and Life Insurance experience |.’ MARVIN P. HUNTER Term Insurance Specialist Occidental Life A Transamerica Company Ste. 550, 1665 W. Broadway Vancouver, B.C. Today is the first day of the rest of your life - Have a nice day! x claim, providing an allocation of expenses (such as property taxes, mortagage~ interest, insurance, utilities, repairs and maintenance) along with details such. as square footage or the number of rooms occupied for the * business. (4) Interest and depreciation on his car may be allowed only if he is entitled to deduct travelling and other expenses as described above. Finally, for the _ self- employed person there is one cardinal tax rule that must be “obeyed: keep ment detailed records, such as receipts, to support all claims. “ The taxman is much more co-operative when he’s able to see such things as hotel and restaurant receipts, the - number of people entertain- ed, mileage records, the purpose of trips and so forth. So keep yourself well- documented. Prepared by the Institute of Chartered Accountants of B.C. ; ~ ..because every | child has the right to smile 1979 International Year of the Child Unicef Canada © benefits clerk. employee benefits. EMPLOYEE BENEFITS CLERK Westcoast Transmission Company Limited, a major natural gas pipeline company, has an immediate opening in its Industrial Relations Division for an employee The successful applicant will be a Grade 12 graduaté with proficient typing skills, and possess the ability to communicate -effectively both orally and in writing. Responsibilities include the maintenance of records and files pertaining to employee benefit programs. Two to three years office experience dealing with the adminis- tration of employee benefits is desirable. . A competitive salary is offered, with a ful! line of Reply in writing, stating full qualifications, experience and salary expectations, to the Personnel Assistant: WESTCOAST TRANSMISSION COMPANY LIMITED . 1333 WEST GEORGIA STREET VANCOUVER, B.C. VG6E 3K9 ‘*it’s not easy running your own - business’’ Maybe I! can help (f you're business, some financial personnel operating a you may have questions about management, management, working capital, bookkeeping. taxation or other considerations I'm Harry Boynton and I'm with the Federal Business Development Bank The FBODG doesn't just lend money. it provides coun- selling and information about government programs to people who are in business or are considering starting thelr own business The FBDB oftice is open 8 30 - 4 30 Monday to Friday Our services are available to everyone 145 West 15th Street, North Vancouver For Information Call 980-6571 FEDERAL BUSINESS | DEVELOPMENT BANK