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"Scugog's Community Newspaper of Choice" Taking advantage of capital gains exemptions Until recently, Canadian tax- payers were allowed a cumula- tive life-time exemption of $100,000, referred to as the Capital Gains Exemption. Un- fortunately, this exemption was eliminated in the 1994 Federal Budget. Despite this measure, you may still be able to use up your remaining capital gains exemp- tion by taking advantage of a special one time election proce- dure. If you own assets that have increased in value - such as a cottage, stocks and bonds, rental properties, art or an- tiques, you should consider this election. Even if you're not con- sidering selling your cottage or personal belongings at this time, the election is a way to re- duce the tax burden that may ultimately fall on your estate on death. How will the election work? The election will be claimed by filling a special form with your 1994 T1 tax return. On it, you will indicate the assets on which you are electing, together with their adjusted cost base (ACB - their cost for tax purpos- es) and their fair market value on 22 February 1994. You can then choose any amount be- tween these two values as the CIBC provides investment planning CIBC can now provide clients with the services of Investment Specialist, Lisa Lake Langley. Lisa is a member of a newly created Investment Specialist program recently launched in Ontario by CIBC. "We are really enjoying the opportunity to help our clients by working with them to develop an investment plan that suits their needs, in- vestment philosophy and risk tolerance." At CIBC an Investment Spe- cialist can work with you to de- termine the current structure of your portfolio, and show you how to alter the asset mix of your investments to reduce your overall risk and potential- ly increase your portfolio re- turn. The CIBC Investment Planning Program is being warmly received. As Lisa ex- plained, "I have found that cli- ents want to be educated. They want a solid understanding of their investments and what al- ternatives exist. Investing in what the next door neighbor does may be popular, but it doesn't do a lot for sleep at night." The Investment Planning ap- proach is not just making one investment, looking at one year's RRSP contribution, or se- lecting the best rate in town. In- vestment Planning means building an investment portfo- lio that will meet your needs over the long-term and having a plan to guide you with your fu- ture investments. Investment Planning is a long-term ap- proach. You should be willing to let the asset mix work for you over a period of time to prove the benefits of diversification. Long-term results are achieva- ble when you are not trying to profit from short-term market movements. By using software exclusively designed for CIBC, they can work with each client to develop a unique plan that matches their investment philosophy. Ideally, an investment plan should be reviewed every 12 months to ensure it accurately reflects your needs and objec- tives. It is not an overnight pro- cess to build a portfolio towards a target asset mix. It takes care- ful consideration and time. According to Louis Bourassa, V.P. and National Sales Manag- er for the CIBC Investment Spe- cialist Program, "Clients are de- lighted that we can provide quality Investment Advice in the branches. Our clients face an investment challenge in to- day's complex financial services industry. Should they invest in- ternationally? Should they buy bonds or perhaps a bond fund? There are many choices, and each should be based on suita- bility. The risk/reward trade-off needs consideration. Our cli- ents should be able to take com- fort in knowing they are doing what is best for them. We be- lieve that CIBC Investment Specialists can help our clients meet this challenge." Lisa Langley has an exten- sive background in both the U.S. and Canadian Financial Services Industry. For more in- formation regarding the Invests ment Planning Services call CIBC. Courtesy of, Lisa Langley, CIBC, Port Perry sale price for your 'deemed' dis- position. The difference between your elected amount and your ACB will be a capital gain, which you must include in your return. You then deduct your capital gains exemption to eliminate the gain. For most assets, the elected amount becomes your new cost base for future sales. Determining the ACB for your assets should be fairly straightforward in most cases, although there may be compli- cations for assets owned since 1971 or where there have been adjustments to the cost, such as for improvements or additions. Determining fair market val- ue of your assets, however, may be a little more difficult, and will depend on the specific asset you elect on. What are the drawbacks? There can be downsides to making this election, depend- ing on your personal tax situa- tion. Although any capital gain is sheltered using the exemp- tion, you will still have to in- clude three-quarters of the gain In your net income. Net income is used for measuring your enti- tlement to a variety of govern- ment credits and determining whether you must pay back gov- ernment assistance received. Some of the more common cred- its and benefits that could be af- fected are: Child Tax Benefit payments (monthly); GST Credits (quar- terly); Provincial property, sales and other credits; Married or equivalent tax credit; Medi- cal expense tax credit; Old Age Security and the age payments credit; Guaranteed Income Sup- plements; and Unemployment Insurance. Creating a capital gain could cause other problems, particu- larly if you live in Manitoba or Saskatchewan, where there are flat taxes on net income. For residents of these provinces, capital gains resulting from the Have you used your Capital Gains Exemption yet? This year, the Federal Budget eliminated the $100,000 personal capital gains exemption. Depending on your circumstances, this could cost you as much as $40,000 in extra tax down the road. Don't panic. At BDO, we believe that sensible tax planning NOW will save you significant tax dollars later. To learn more about how the elimination of the capital gains exemption will affect you, contact your professional advisor. BDO DUNWOODY 38 Toronto St. N., Uxbridge WARD MALLETTE 852-97 14 Chartered Accountants Van Camp & Keller Chartered Accountants Income tax planning and return preparations ¢ Personal tax returns electronically filed ¢ Financial, estate and retirement planning INDIVIDUALS - CORPORATIONS - SMALL BUSINESSES - FARMS 204 Casmir Street, Port Perry, Ont.. LOL 1B7 (905) 985-9725 election will not be entirely tax free. And of course, a capital gain can in certain circumstanc- es result in a taxpayer being subject to minimum tax. Act now The actual election must be filed with your 1994 T1 tax re- turn, however, you shouldn't wait until then to do the ground- work. Depending on your situa- tion, there may be several steps you can take now to make the election easier to prepare next year. Here are some of the steps you can take now: Review your assets; Assem- ble your tax returns from 1985 onwards; Check your CNIL bal- ance; Decide the assets that you intend to elect on; Consider CIBC whether valuations are neces- sary; Discuss your situation with your BDO advisor. Agreattax planning opportunity Elimination of the basic $100,000 exemption represents a significant increase in the tax- ation of capital gains, particu- larly since such gains are 75 per cent taxabie. It's not often that the government makes tax planning this easy. Don't miss this opportunity to benefit from your remaining capital gains exemption. Courtesy of, Randyd. Hickey, C.A., Partner, BDO Dunwoody Ward Mallette, Uxbridge CIBC - 145 Queen St. Port Perry, Ontario Tel: 985-4444 PORT PERRY Instant (eller Come to CIBC for all your Personal and Professional Banking needs. Get us working for you: Vv | CIBC § AM RICHARDSON GREENSHIELDS ( | L -- ® 4 THE AMERICAS FUND" A TRIMARK SELECT FUND The Americas Fund™ - the first mutual fund to combine investment opportunities in new, entrepreneurial business in North America with the tremendous growth potential of larger more established companies of Latin America. The Americas Fund™ has indeed found a new world of investment opportunity. ATRIMARK MUTUAL FUNDS WE MANAGE. To OUTPERFORM. 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