The following text may have been generated by Optical Character Recognition, with varying degrees of accuracy. Reader beware!

Ww vr 4 = Songer Offigen = Tuesday, April 9, 1996 TAX TVG & WVESTIRNT ADVICE Business losses can be disallowed - don't let it happen to you! When your business enjoys a'profit, you must share part of it with Revenue Canada in the form of income tax. By the same token, when your business shows a loss,# Revenue Canada shares in that loss, since you are ordinarily allowed to deduct the loss against other income, thus lowering the taxes you would otherwise pay. . But first you must meet the "reasonable expectation of profit" test. Revenue Canada is only willirig to share your losses if there is a reasonable expectation that there will be future profits to share as well. If not, your losses will be disallowed as simply personal losses. : This. means that you cannot deduct losses arising from hobbies or similar activities if yout do not ultimately expect them to be profitable. It also means that you cannot deduct 'losses if the size or scope of your business is such that your expectation of profit is simply not reasonable. Because businesses rarely profitable immediately, start-up losses .are usually routinely allowed. However, if your business does not show a profit in a reasonable length of time, those losses may Remember that Revenue Canada can go back as far «as three years, tq disallow any losses previously' claimed. If your losses were significant, the back taxes and interest. can be substantial. Since you cannot know in advance whether your. business will succeed or not, it is important to protect yourself in case you are not able to get your business. "into the black" within a reasonable time. You can avoid having your bona-fide business losses disallowed by taking certain precautions, .the most valuable of which is the five- year business plan. For example, let's say you love photography and have spent a lot of money on equipment. Your work is very good and occasionally you have sold some pictures. It occurs to you that, with a little effort, you could turn your hobby irito a business. After all, it would be nice to write off all that equipment, wouldn't it? Before you jump in, however, take some time to do your homework. First of all, prepare a five- year business plan, showing projected income and expenses over that period. +» Estimate how much revenue you can realistically bring in each year. Then list all the generate that income. Now study, your business plan. Do you have what it takes to run a successful . business? What are the projected profit/loss figures for the first five years? If your business plan indicates serious deficiencies, or projects persistent losses, you should either revamp your plan, or else continue your photography simply as a hobby, not a business. In other words, until you have a workable business plan, you should consider the losses to be the personal cost associated with that hobby and forget about trying to write them off on your tax return. However, if your plan is sound, and the projected profi ~gtatement shows an upward tri resulting in profitability er a - reasonable length of time, you probably have a viable business, even if there are losses in the first few years. If you decide to proceed, use the business plan as your blueprint for building your business. Remember to save one copy of it for your files: it may come in handy if Revenue Canada decides to look more closely at your business sometime down the road. At the end of each year, compare your actual income eventually be disallowed. expenses required to and expenses to the, FORDER-PARKS | INSURANCE BROKERS INC. Nl 34 Water Street, Port Perry, [eH OH Ontario LIL 1)2 = 9858471 WERYIN] PERSONAL ATTENTION TO MLO ' ! YOUR GENE RAL INSURANCE | Will your business be affected § by the fiscal year-end change? Find out about the income tax consequences from u ma H&R Block. We can help you. HR Tr ERI EAI - Because it's your money. HaR BLOCK BLOCK HEE EAR EELL 174 PERRY ST., Nk PORT PERRY = © 985-9803 Open Weekdays 9 to 8; Saturdays to 5 COMPUTERIZED ACCOUNTING & TRAINING + PERSONAL & CORPORATE TAXES MANAGEMENT CONSULTING NEW BUSINESS SET-UP 1-905-985-7531 Van Camp & Keller CHARTERED ACCOUNTANTS B Income Tax Planning & Return Preparation MB Personal Tax Returns Electronically Filed HM Financial, Estate and Retirement Planning pt Personal Tax Retums are being processed now. OFFICE HOURS UNTIL APRIL 30th, 1996 Monday fo Friday 8 to 6 PM, Saturday 9 to'1 204 CASIMIR STREET, PORT PERRY Telephone (905) 985-9725 Toll Free 1-800-215-3852 plan. If your losses were larger than you had projected figure out why. It is important to determine the cause of the discrepancy; and whether it is a one-time thing, or an on-going problem. Then make the necessary. corrections and revise your business plan accordingly. To illustrate the importance of the business plan, let's assunie you started your photography business without one. Let's further assume that things did not go well at first and you showed consistent losses of $3,000 in each of the first three years. You still think ~-that it is a good business which will eventually make money, but Revenue Canada, looking at your track record, decides to disallow your losses for all three years - all on the basis that you had no "reasonable expectation of profit." Without a business plan, it is difficult to challenge that judgement. As a result, you could end up out of pocket! not just for the original $9,000 loss, but for the back taxes and interest on that amount of money. as well. ""*On the other hand, maybe Revenue Canada is wrong. Maybe your expestation of profit is entirely realistic. Maybe the losses were due to unusual circumstances Money transfer the latest Over the past 24 months, the Durham Regional Police Service, has received several reports of local business people receiving letter from Lagos Nigeria asking that they assist people in that Country to move millions of dollars into their accounts in Canada. For this money transfer, these business people are being offered substantial commissions. The latest letter to an Oshawa, Ont. company asks that they assist a Lagos, Nigeria Engineer transfer $28.6 million U.S. For assisting, they could receive up to 30% Police warn of commission and expenses. The letter also asks for the company's bank information, including account number, invoices and letterhead. Police are warning the public, in particular business people, to be very . wary of these letters and in doing business with people they don't know. People have actually lost thousands of dollars in ; these scams. The public is also beihg reminded of the continuing phone calls from companies operating out 'of Montreal who tell their victims, usually elderly, which have since been rectified, or were a necessary part of getting stated in a cut-throat business. A sound business, plan adjusted yearly, will help you prove your case, It will enable you to counter Revenue Canada's perfect "hindsight" with facts and figures instead of unsubstantiated hopes and dreams: As a result, instead of paying taxes on disallowed losses, you could invest that "money in the business. Or ! better yet, spend, it on sofnething fun, like a well earned vacation. ° Article submitted by H&R Block. * scams that they have either won a vehicle, boat or other expensive item and for a fee, this item will be shipped to them. These fees can range from $600 to over $4000. , Police continue to remind people that if it sounds too good to be true, it likely is! If there are any doubts don't send money or give out bank account or credit ! card information. For more information, contact *the - Durham Regional Police Service, Major Fraud Unit at, extension 5228, Staff. Sergeant Sandy Ryrie at' extension 4346. 1D)iNN 0 2 AUCTION Scugog Community Centre SATURDAY, M "Cocktails 6:00 PM Dinner 760 PM + < LIVE AUCTION Y 4th "+ SILENT AUCTION Raffle including Romantic Weekend for Two MC ¢ Brian Callery Auctioneer ¢ Gary Powell Tickets :$50. per person. 'Available from Karl Herder (905) 985-3885 Bus. or 985-9828 Res.