36 - Wednesday, ‘July 26, 1989 - North Shore News Ea =6Business Bee Being single has tax advantages BEING SINGLE can have its (tax) advantages, even with — or rather, because of — assorted dependent children. And those advantages could run into the thousands of dollars in asingle year. Meet Jonathan, 50, divorced six years. Daughter Catherine, 19, and son Philip, 13, live with nim. He pays $700 a month to his ex-wife, who has custody of the couple’s third child, Claire. With a little expert advice, Jonathan could save or defer be- tween $6,000 and $9,009 in income tax in one year. _ ‘individual's particular dollars and sense Michael Grenby Jonathan is the creation of Elio Luongo, senior tax manager with Thorne Erast &. Whinscy, . chartered accountants. We return this week to our summeriime series of tax-saving tipz, brought to you by the North Shore News and Thorne Ernst. & Whinney, Canada’s largest CA firm. “Jonathan is an employee who doesn’t belong to a pension plan,” said Luongo. —~ . “While he pays his ex-wife $700 2 month in alimony and maintenance, this is only an in- forse]. arrangement based on what beth consider to be fair.”’ Jonathan bought some stocks a few years ago for $3,500; today they are worth $7,500. He had no investment losses last year or this year, mor does he have a cumulative net investinent loss. Catherine is going to university full-time: tuition is $1,500 a year. She earns $6,000 from her summer job. Philip has no income. “The following steps could save or defer for Jonathan between about $6,000 and $9,000 in one year,” said Luongo. ‘‘The exact amount depends on whether he is in the lowest, middle or highest tax bracket, Where he lives can also make a difference, as the provin- cial tax rates vary.”’ IMPORTANT: Luongo stressed he is suggesting the following strategy simply to illustrate how much tax can be saved/deferred by taking only a few basic steps. ‘‘In the long run, a different strategy might produce a better tax result over-all — again, depending on the situation now and in the future,” he said. So if any of these tax tips could save you money, get further details _ and possibly expert advice to make sure the approach is indeed ap- propriate fez you. ()) Transfer the stock to a tegis- tered cetirement savings plan. (For simplicity, Luongo has assumed there is enough earned income to justify the maximum $7,500 RRSP cosiribution.) (2) Make sure the alimony pay- ments qualify as ati cligible deduc- tion. (3) Claim the equivalent-to- married amount/credit. (4) Transfer and claim unused tuition and education amount credits. Transferring his stocks to a self-directed RRSP will enabie Jonathan to claim a deduction equal to the fair market value of the stocks. This contribution trig- gers a capital gain but Jonathan can claim an offsetting capital gains exemption and so pay no tax. **He could even use the tax re- fund he'll get because of the RRSP contribution to make additional How? Call us and qualify for Royal Insurance on collision & com- prehensive coverage. You get com- petitive rates (sometimes tower) and emergency road service at NO EXTRA COST! See Design investments,’’ Luongo said. Jonathan may‘ claim and deduct his alimony payments only if they are made on a periodic basis pur- suant to a court decree, order or judgment, or pursuant to a written agreement. “A recent change in the rules will allow Jonathan to get such an order or sign such an agreement now and claim — retroactively — the payments he has made since the beginning of last year,”’ Luongs said. If Jonathan claims his son Philip as his ‘‘spouse’’ (under the equivalent-to-married claim), he saves about $1,325 tax instead of only the $100 he'd save by claim- ing him as a dependent child. “However, Jonathan would then have to declare Philip’s fami- ly allowance payments as income even it his wife actually gets the money," Luongo said. Because Jonathan supports Catherine, he may claim (within limits) any tuition fee and educa- tion amount credits Catherine doesn’t need to reduce her federal tax fo zero. You'll get alot © Graphic ¢ Camera Service .- eo 195 East Windsor Road, N. 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