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8 The Canadian Statesman, Bowmnanville, March 23, 1977 Section Two Legiimate Tax-Saver By Larry Eddy, CA Mary and Bill have tax problems. Bill tried to reduce his income tax by simply giving some of is bonds to Mary his wife, to reduce is own taxes. In the end, he found he stili bad to pay tax on ber ircome. 1 Judy and Ralpb, on the other band, don't have that kind of problem. Ralph sold some of is bonds, then lent tbe money to Judy, is wife. Judy re-invested it, and enjoys the benefits of ber lower tax rate. Same situation--two answers, and one of tbem is a legitimate way of reducing taxes. ,Members of tbe Institute of Cbartered Accountants of Ontario answer your questions in Dollar Sense. Mr. Eddy is witb Tho rne Riddell & Co., Toronto. The Income Tax Act bas wbat are known as income attribution rules. Even tbougb Mary and Judy botb reported their incomes in a straigbtfor- ward way, the tax people are entitled to ask wbere tbey got the funds tbey învested to earn that income. The rules are needed be- cause it is obvious that a busband witb a large income, including an investment in- corne, could reduce bis taxes if the investment income were transferred to bis wife. As- suming she bad no other income, the same money coming into the same bouse- bold would be taxed at a mucb lower rate. Income attribution rues are designed to prevent this type of tax reduction. Tbey require that if a spouse transfers property to another, any income generated by it is attributed back to the spouse wbo originally held it. He, or she, must pay tax at their own rate. Wben Mary received an inquiry from the tax depart- ment, she was obliged to say that Bill gave ber the bonds. He paid the tax on the income. It would not even have worked if Bill bad sold ber the bonds at ful market value, for the courts bave beld that the rules apply whetber the trans- fer was a gift or sale. But a bona fide loan--suèb as Ralpb made to Judy--does flot consitute a transfer of proper-. ty. In this manner, Ralph sbifted enough investment income from imself to Judy to enable botb of tbemn to take advantage of theý $1,O00 ex- emption for investment in- corne. Consequently, as a family unit tbey were getting the benefit of $2,000 of tax-free investment income rather than only $1,000. If one is going to take advantage of this aspect of the tax system, it is, very import- ant that the boan be legitimate and properly documented-not merely a camouflaged, gift. For this purpose, use note or boan forms--available at most stationary stores--and be sure to keep your cancelled cheques. It is not necessary that interest be payable, but it is advisable that there be a reasonable repayment scbed- ule or 'period, and that the payments be made. As one boan is paid off, it is a simple matter to make additional boans. In the same way, it is possble to make boans to a son or daugbter under 18. (After 18, attribution rules do not apply). But there is one thing you sbould ask yourself. Do you trust your spouse or cildren enougb to lend them money in February, marking yet anther montbby record, the fiftb in as many montbs. February truck deliveries of 11,579 exceeded last year's 10,292 deliveries, the former record, by 12.5 per cent. 1"ýThe igb level of consumer demand for GM cars and trucks since Announcement and particularly in tbe first two montbs of 1977 strongly supports our view that the 1977 model year will be the best sales year in General Motors of Cànada's istory," Mr. <Cocomb said. CAKE MIXES 190OZ. PKG. Assorted Flavours VALIAINT C RYSTALS 170OZ. PKG. Liquid PALMOLIVE DETERG ENT 32 FL. OZ. BTL. c CHRISTIE'S FUDGYOBARS, gc EACH Available until March 26 only Assorted Flavours DEL MONTE PUDDING CUPS 4x5 FL. OZ. TIN Fored Davis is right, f0 CARTIER TEA BAGS PKG. 0F 150 Mira Mari IMOT CROSS BUNS PKG. OF 6 M c Available until March 26 only 0ve Il everyday- prices as, Iow: as or lower than any'lother ma,,rfood chai . Plus lover 250 weekly specials., ALI PRICES EFFECTIVE MAR. 23 TO MAR. 29, 1977, EXCEPT WHERE INDICATED OTHERWISE, IN METRO TORONTO MISSISSAUGA e OAKVILLE e THORNHILL e BRAMPTON-* MALTON - WE RESERVE THE RIGHT TO LIMIT QUANTITIES.i m cn m Assorted Colours 2-PLY TIFFANY BATH ROOM TISSU E 4 ROLL PKG. Parchment Wrap CH EFMAST ER MARGARIN E 1 LB. PKG. Rich's Frozon CJ;OFFEE RICH 32 FL. OZ. CTN. Ail Purpose MONARCH FL.OUR 5 LB. BAG PUNCH DETERG ENT 5 LB. BOX Champlain, Pony Taïl Wrap WIHITE SLICED) BREAD 24 OZ. LOAF Canada Grade A LARGE WHITE EGGS DOZEN Chunks or Sluces DOLE PIN EAPPLE 1S FL. OZ. TIN WIth Syrup Cri sco 'VEGETABLE 0f L 48 FL. OZ. BTL. 2% Partly Skimmed Fresh MifK <pl us 60e deposit on Jug> 1.25 Mira Mari Chocoate Creme0 Ea Filled Donuts pkg. of 6 Available until March 26 only Frozen MoCain French Fries 1 1 31/ lb. pkg. Blue Bonnet Sof t Margarine 1 lb. siseve 1 Bounce Fabric Sot tener1 0 pkg. of 20 shoots 1 6 Sweet 'N Low Instant Hot Chocoate12 pkg. of 10 env. 1 2 With Sprayer Windex WindowCleaner, 20 fi. oz. bil. Seasoned Green Del Monte Beans3 14 fi. oz. tin 3 Assorted Varetles Rowntree pkoChocoate BarsSU McVltie Digestive CookiesSU 16 oz. pkg. 8 Beef Pallies with Mushroom sauce A or Frozen Holiday Farmki i Salisbury Steak U8 2 lb. plcg. Regular or Olly Shampoo Clairol Herbai I Essence 227 ml bti. c