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PORT PERRY STAR - Tuesday, January 31, 1995 - 19 The $100,000 lifetime capital gains exemption (CGE) was eliminated in the federal bud- get on Feb. 22, 1994. However, « if you have not used all of your $100,000 CGE, one last chance 18 available on your 1994 per- sonal tax return. If you owned an appreciated capital property on Feb. 22, 1994, you can choose to report a capital gain (even though you did not actually sell the capital property) by filing a special elec- tion form with your 1994 tax re- turn and claim an offsetting capital gains exemption. Why do this? Because your cost base of the capital property will then increase by the amount of the "elected" capital gain and there- by reduce a future capital gain when the capital item is actual- ly sold. Future tax savings could be significant - up to $40,000 per person on a full $100,000 capital gain. You con- trol the amount of the capital gain by selecting anywhere be- tween cost and fair market val- ue. Even for real estate, most of which ceased to be eligible for the CGE in February, 1992, the portion of the capital gain be- fore February, 1992 is eligible and the portion of the gain after February, 1992 is not taxed un- til the property is actually sold. Common types of capital property are land, cottages, ren- tal properties, stocks, bonds, mutual funds, jewellery, art, coin and stamp collections. It is not necessary to consider your principal residence (house + 1 acre) as such capital gains are exempt nor any capital proper- ty held inside an RRSP. Sounds simple enough, but several items must be checked on prior years' tax returns to en- sure eligibility for the capital gains exemption: - how much of the $100,000 CGE is unused? (since 1985) - is there a cumulative net in- vestment loss (CNIL) balance, which will reduce or prevent use of the CGE? (since 1988) - have there been allowable business investment losses or capital losses claimed, which will reduce or prevent use of the CGE? (since 1985) - will there be a 1994 capital loss which will reduce or pre- vent use of the CGE? Now the bad news. Even though this procedure in most cases should cause little or no income tax, several side effects must be considered. Because the elected taxable gain (75 per cent of capital gain) is included in "Net Income" on your tax re- turn (the capital gains deduc- tion is below the net income line on your return) many unrelated items are affected: - the spousal amount credit starts to be eliminated when net income exceeds $538. - old age security pension starts to be repayable when net income exceeds $53,215. - guaranteed income supple- ment eligibility may be affected for 1995, based on a high 1994 net income. - unemployment insurance benefits start to be repayable when net income exceeds $58,110. - the age amount credit (65 or older in 1994) starts to be elimi- nated when net income exceeds $25,921. - medical expense claims, as always, are reduced by 3 per cent of netincome. - provincial property and sales tax credits, as always, are reduced based on net income. - GST credit payments are re- duced based on net income. - child tax credit payments are reduced based on net in- come. - alternative minimum tax could be triggered (although such is recoverable over seven future years). Although your 1994 personal tax return is not due until April 30, 1995, I strongly urge you to consider and prepare for this immediate tax advantage. Last chance to use $100,000 CG exemption capital gains election now, for several reasons: - prior years data may have to be obtained from Revenue Can- ada (takes time). - fair market value determi- nations/appraisals may have to be obtained, depending on the circumstances. - estimated tax calculations may have to be prepared, de- pending on exposure to the "side effects." Courtesy of, Roger B. Moase, Chartered Accountant Robert J, Gow Plan Your RRSP NOW! ROBERT J. GOW 434-7156 or 1-800-267-1522 RICHARDSON GREENSHIELDS TRO TE VT TO SS a TS Sra Sr Investment advisors to Canadian enterprise and enterprising Canadians 111 Simcoe St. N., Oshawa, Ontario L1G 4S4 "Save an extra ile mutual funds are generally designed to reward investors in the long run, theres an investment fund that gives you an 0% in taxes on your RRSP contribution this year Investment Objective "Working Ventures' objective is to produce the superior returns traditionally associated with investment in dynamic and growing businesses, while minimizing risk through prudent Working Ventures Canadian Fund gives you a 40% headstart over just about every other fund in | Here's an example: development and management of the fund. Canada. Investment in Working Ventures $5,000 Private equity investing involves certain risks that are not encountered with many other The Power Of Working Ventures Tax Savings -$2,500 investments. Although Working Ventures provides Canadian Fund "RRSP tax deduction you with a tax credit to help offset those risks, it Now, you can take advantage of a unique (at 50% assumed tax rate) cannot guarantee that its investments will earn a investment fund - Working Ventures Canadian Fund | Federal Tax Credit (20%) -$1,000 specified rate of return, or any return, in the short or - that could permit you to reduce this year's taxes Provincial Tax Credit® long term. In addition, a private equity investment by $4,500! That's 40%* more than the tax benefit of - ---- involves a longer term commitment. ) (20% where applicable) -$1,000 just about every other RRSP in Canada. Participation in Working Ventures should be You receive $2,000 in tax credits® by Your Net Cost $500 | considered as a long term investment. However, you investing 55.000 in Working Ventures Canadian Your Total Tax Savings $4,500 may redeem (cash in) your Working Ventures shares Fund. subject to certain conditions. If you redeem your The fact that Working Ventures shares are also eligible for an RRSP means further tax breaks. For instance, if you are in a 50% marginal tax bracket. a 55.000 contribution to an RRSP would reduce your taxes by a further 52.500. for a total of $4,500 (52,000 + $2,560) in tax savings". Your investment will primarily be reinvested in promising, growth- oriented small and medium size businesses in your province. Experience That Counts Key to the performance of the fund is the expertise and experience of its management team headed by Ron Begg, President. His track record of success combines senior corporate management disciplines with the hands-on company-building skills of a successful entrepreneur. This complements well the investment and finance background of Jim Hall, Vice-President Investments. Jim has solid professional credentials from public accounting and merchant banking, and a record of originating and managing successful investments. Jim offers a prudent, disciplined and seasoned approach to the development of a strong, diversified investment portfolio. Discover How Working Ventures Can Work For You ee « WZ L 4 shares within 5 years of purchase, you will be required to return your tax credits to the federal and provincial governments (some exceptions apply). Working Ventures may restrict total redemptions to 20% of total assets of total assets of the fund in any one year. A fee of 3/4 of 1% of redemption value will be charged for each year shares are held short of 8 years. Poised for Growth Due to the current economic environment, Working Ventures is in an ideal situation, prepared to take advantage of investments in under- valued businesses and positioned to profit as the economy turns around. And, while a majority of the fund's assets will be invested in enterprising businesses to maximize return potential, risk is tempered by investing a portion of assets in short-term, high quality government securities. Important information about this investment fund is contained in its prospectus. Obtain a copy from a securities dealer duly qualified and licensed to distribute these securities and read it carefully before investing. Share value and investment return will fluctuate. "The extra provincial tax credits are available to investors resident in Ontario. Prince Edward Island and New Brunswick. First published October 1993. 111 Simcoe Street North, Oshawa, Ontario L1H 7M9 For more information, call: BOB GOW (905) 434-7156 » 1-800-267-1522 A Re tL Blips ta---- Investment advisors to Canadian enterprise and enterprising Canadians oe WORKING VENTURES