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  • Tag: CRA

    A window of tax saving opportunity is closing.

    We have written before about the “unprecedented window of opportunity” for wealthy families to save tax as a result of CRA’s historically low 1% rate on prescribed rate loans.  See our blog post A window of tax saving opportunity…for how long? The prescribed rate dictates the minimum interest that must be charged on income-splitting loans to spouses and family trusts. A popular, low-risk form of tax planning with many of our clients.

    Truth be told, when we wrote that blog piece back in 2010 we didn’t expect the 1% rate would still be in effect in 2013. And from what we hear, it won’t be much longer. [read more >>]

    Congratulations; you are among Canada’s wealthiest! Now the bad news.

    I attended a tax brief hosted by the CICA last week entitled The Changing Landscape Faced by High Net Worth Individuals. I learned about Canada Revenue Agency’s (CRA) new Related Party Initiative.

    CRA launched a pilot project back in 2004 to look at high net worth individuals and their related entities. This evolved into its Related Party Initiative in which CRA is looking at individuals with in excess of $50 million of net worth and at least 30 different entities. It was determined back in 2007 that just 5% of Canadians pay 25% of the tax collected. In the U.S. the top 1% of the population pays 40% of the tax.
    CRA is interested in taxpayers who have used “special purpose entities” to achieve “favourable tax results”. These results can be from increased tax deductions, deferrals or decreases in the effective tax rates from a myriad of tax planning strategies.
    The comprehensive review process starts with a 21 page questionnaire which must be completed and filed with CRA. If you’re one of the unfortunate few to receive CRA’s letter, contact your tax advisor. In the meantime, for anyone who has engaged in any significant tax planning initiatives, you should ensure that all documentation is complete and organized. A review may only be a matter of time.

    A window of tax savings opportunity — for how long?

    CRA announced this week that it will maintain its 1% prescribed rate through to June 30th.

    While that news didn’t make headlines, from a tax point of view it should have.

    After RRSPs and tax deductibility of interest, I think a prescribed rate income splitting loan is the most effective way for wealthy high income earners to reduce their tax bill.

    And a 1% interest rate offers an unprecedented window of opportunity.

    [read more >>]

    No shortcuts to building wealth

    For almost thirty years of my career, I’ve gained immense satisfaction from helping our clients develop sound tax and wealth management strategies. And I’ve been blessed to watch them enjoy the rewards of their disciplined habits through greater wealth, health and happiness.

    So I was struck when I read the Globe & Mail piece on ‘the nine milestones of a financially sound life’ according to Moshe Milevsky, a university finance professor.  While a good deal of what Milevsky has to offer is sound, I would caution against adopting some of the recommendations in the article. Two subjects in particular caught my attention: income taxes and saving:

    [read more >>]