BUSINESS leigh the pros and cons RSPs of i MARY LUE Larsen is tempted. “It seems almost too casy,’’ the Norsth Shore News reader said. ‘‘I can have some shares put into an RRSP and get a deduction without having to come up with the money for a contribution. What are the advantages and disadvantages of Going this?”’ (I know, I know, you really are far more interested in XMAS than RRSPs at the moment. But in- vesting just a few thoughts in this tax holiday now could help provide more luxurious festive holidays in the future.) Larsen’s employer has set up a Tegistered retirement savings plan option as part of the employee share purchase plan. “That means we can transfer our shares into the RESP and get a deduction for tax,’’ she said. ‘‘But is that a good idea?’’ If an RRSP is right for you and transferring shares is the only way you will make a contribution, then transfer the shares. But let’s look at the whole picture. Anybody may transfer any eligible investments (like stocks, Canada Savings Bonds, other gov- ernment bonds, mortgages) into an RRSP instead of making a cash contribution. You get a receipt for the value of the investment at the time of transfer. Unless your employer sets up a group RRSP like Larsen’s com- pany has done, theugh, you must have a self-directed plan to do this. Putting investments into an RRSP can trigger accumulated in- terest or a capital gain or loss, which could affect your income and tax. But back to Larsen’s question. Should you put investments rather than cash into an RRSP? dollars and sense Michael Grenby Larsen and her husband are us- ing RRSPs to save for retirement. Larsen said she plans to keep her company shares for many years and added: ‘‘We also have some Canada Savings Bonds.”’ Ideally, you should hold guaran- teed investments inside an RRSP, where the interest (which would otherwise be fully taxable) is sheltered from tax. investing in And you should hold your stocks outside the RRSP, where you can benefit from the capital gains exemption and the dividend tax credit. Dividends and gains are sheltered inside the RRSP, but when the money comes out every dollar is taxed as full income. If you invest all your money in stocks and equity mutual funds, then you are obviously prepared to take a long-term approach. For the extra risk, you expect higher gains than guaranteed investments weuld . produce — which has generally happened in the past. In this case, you should continue to hold these equities, whether in- side or outside your RRSP. Larsen, however, could easily cash some of her CSBs next Feb. 1 and earn more interest by buying, for example, RRSP term deposits for one, three and five years. (If she had a self-directed RRSP, she could put the bonds directly into the plan if she didn’t want the term deposits.) She would then keep her company shares outside her RRSP. Larsen earns less than her hus- band. So putting money into her own RRSP is fine — some share purchase group RRSPs at work dlike Larsen’s) do not allow a spousal contribution. Talking of spousal RRSPs, these continue to be a good way to split income. The higher-income spouse makes the contribution to the lower-income spouse’s plan. Big- earner gets the big deduction and small-earner pays less tax when the money comes out. However, because of the “three-year rule,” try to make your spousal contribution by Dec. 31. Here’s why: Let’s say the professional wife puts money into a spousal plan for her house husband — but they don’t have a house yet. If she con- tributes to his spousal RRSP, he could take out the money on Jan. 1, 1991, for a down payment and it would be his for tax purposes (if he tcok it out sooner, it would be attributed back to her). But if she contributes a day later, on Jan. 1, 1989, he would have to wait until Jan. 1, 1992 -~ a year later — be- fore he could take out the money in his name. Hello! fm Your North Shore Diana Munnik Sales Agent Loomis Agent Featuring the “CAREVELOPE” at $6.99 Delivered to 8,800 points Canada-wide * By Air * No weight restrictions 10%x13%"' Cardboard Envelope Sold in books of 10 Call me for all your courier needs ; Yours truly, 5495 Regent Street Bumaby, B.C. V5C 6C8 (604) 665-4851 Sales (604) 685-4881 Dispatch (604) 62-6590 International (604) 665-4727 Messages & Info Greet More is a great way to send your Christmas love. It ensures smooth proces- sing of your greeting cards, at reduced cost. Here’s how it works: Buy Greet More cards wherever you buy your Christmas cards. 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