Taxes

Let’s face it, we all want to be considered “glass half full” people….but when it comes to taxes, it seems the glass keeps dipping below that 50% mark!! Enough already.

(So, my first draft went on to rant about bureaucracy – but Paul’s Prose is supposed to be a happy place, so Kristin cut it out….)

The last federal budget put the capital gain inclusion rate back up to 66.7%. A little history of the capital gains tax inclusion rate reveals that this is not our first 66.7% rodeo. In 1988 the Mulroney government first increased the rate to 66.7% and increased it again in 1990 to 75%.  The rate was then returned to 50% by the Chretien government in 2000.

This time, however, it is earmarked to affect the wealthy more than joe average. The higher rate only applies if you trigger more than $250,000 in capital gains in a given year.

For the large majority of Canadians this new rule will never come into effect. Quite frankly, even individuals with a few million in investments can plan not to generate more than $250,000 in gains in any taxation year.

Nonetheless, a good number of my clients should pay attention to the following scenarios:

 

• You own a cottage or investment property. Unlike investments that can be sold in increments, a property realizes a gain all at once – if the property is sold or handed to the next generation and the gain is over $250,000 then the new rules will kick in.

• You own a corporation. Unlike personal accounts, the gains within corporations will be triggered from ground zero. This becomes a real planning issue: Should you trigger gains before June 25^th? What if you do and the legislation changes again – I can see people not being impressed if they did this for no reason so please ask your accountant about this so you get mad at them instead of me!

• Estates and trusts –legislation over the past several years has limited the advantages of setting up a trust. However, they are out there and just like the corporations, the new rule does not allow the $250,000 grace amount. (Please confirm all this with your accountants!) When we pass away (without a spouse) there is a good chance the new rules will come into effect. That is, all gains will have to be added to that year’s tax return. Once again, there is some planning to be done here and we will be discussing this in our reviews. By the way, it would really help me in the planning if I know when you were going to take that “final trip”

 

Please see the "Federal Budget" article on this website, which addresses all of this in more detail. Never hesitate to contact us with any questions about this topic  - or pretty much anything!

 

Bell Canada (and Telus)

 

There are so many questions regarding these two laggards in our portfolios. While most of our accounts have had a very nice run over the past year, it was certainly no thanks to the telecommunications stocks! Mind you – the great dividends definitely helped offset the drop in share price.  But what now?? Many of my Private Investment Management clients might have noticed that I did start trimming the BCE position (and some Telus) a few months ago. With that said, if you added new money, I am not adverse to buying more if you were not already at a weighting I felt comfortable with.  No, I am not a hypocrite by buying it for some people and trimming it for others. Every portfolio is unique – has different original weighting and tax implications and income requirements…not to mention personal ties to these companies.  Both are still strong companies that pay great dividend income. I cannot help but feel that these interest sensitive stocks will be supported by any gradual decreases in interest rates. Hang in there and rest assured I am paying attention!!

 

New Associate

Please join Kristin, Maurice and me in welcoming the newest member of our team – Bouran Kaddoura. Bouran joins us with experience working for Toronto Dominion Bank for a number of years and a business accreditation from Algonquin College and York University.  We look forward to her long and successful career at RBC Dominion Securities.

 

Personal Thoughts

• Rosanna and I are looking forward to our upcoming trip to Newfoundland! We fly into St. John's and hang out on George Street listening to music for a couple of days and then we are off to visit puffins and go hiking in Gros Morne. Have heard nothing but wonderful things about this beautiful province.
• Later in the summer, we have a little getaway planned for a few days in NYC to celebrate 35 years married. Yes, my wife is either a saint or she’s crazy!
• We have also taken up tennis – just so I have something else to be bad at instead of just golf! I have been playing squash most of my life but instead of helping me I think it hinders – totally different swing that I can’t get used to!
• On the kids front (yap they are still kids) … Leah (and her partner Matt) are now landlords – they bought a duplex on the Quebec side and the day after the closing the fence fell down  … joys of being a landlord – very happy for them – they will learn lots! And if their new properties need some HVAC work they know who to call … Brad has passed his first level HVAC and by the end of June will have level 2 – he has been crazy busy between school, apprenticeship and his window washing business – but he’s young and now is the time to make hay!