June 30, 2007 by Dan White.

RE: Smith Manoeuvre: How to make your mortgage tax deductable.

While the Smith Manoeuvre works and is very appealing to financial planners because they can get clients to invest the money borrowed against home equity, the program is fundamentally foolish. A prime rule of investing is to not invest borrowed money in risk investments.

People earn money as good business people; they lose money as bad investors. If the true statistics of the investment market were ever known, there would be a lot less investors in things like mutual funds. There is a very real risk that the investor will end up with a tax deductible mortgage payment on money that has been lost. The multitude of transaction fees… (yes I know they are tax deductible) also reduce the return on your money. While I agree that it is a great idea to use the equity in your home to build wealth there is a less time onerous way to do this. It is not as sexy sounding as the Smith Manoeuvre, but is easier and makes more sense.

Simply take out a business loan using the equity in your home as security to get the loan. The debt is registered on title. It is called a mortgage. The mortgage payments are then tax deductable and you have the use of the tax free loaned money to make money in bonified business activities.

Keep a separate account where you track your borrowed money. Open up a bank account to be used solely for accruing tax free money that will be used to reduce your mortgage once a year. Whenever you receive tax free money, such as tax refunds, business refunds, gifts or loans, divert that money into the mortgage fund to be used in reducing your mortgage principal.

Establish a line of credit. Use your line of credit to pay deductable business expenses such as interest so that you free up money to pay down your mortgage…Remember you can use borrowed money and debt money to pay off a mortgage. The real objective here is to restructure things so that 100% of your mortgage interest is tax deductable. You end up with a line of credit and debt that you owe money where the interest is tax deductable and a fund you use in business equal to your equity in your home.

When you consider putting your equity money into an investment, you should be aware that money is often lost in investments; you need to be very informed about statistics before putting your money in someone else’s hands. The odds are not good that you will make money.

Money is made in business. Either you are a worker which to the surprise of many is really a form of business or you are a recognized business. The best investment is always in you; your business or your wage earning power. If you are a wage earner, invest in your education and training that will allow you to earn a greater income for the rest of your life. If you are in business, you should figure out how to make minimal risk investments in your own business. You will earn much greater returns than any passive investment where the odds are working against you.

Having said the negative things above regarding passive investments, I do believe in low risk passive investments for the purpose of preserving wealth. What you need to think about is. If you are paying 6% interest on your money but earning only 5% and paying all kinds of fees to your broker, you are being tax wise and dollar foolish.

The first intelligent step for all investors and all those who consider the Smith Manoeuvre, is “Have I calculated all the numbers and what other right answers are there?”. If you are thinking of turning your home equity into an investment portfolio, I strongly advise you to go for financial advice from someone who has no vested interest in your investments.

Invest wisely.

 Dan White

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June 26, 2007 by Dan White.

This article is courtesy of     www.taxtips.ca

There is no “estate tax” in Canada, but when a person dies there is a deemed disposal of any capital property, so any capital gains would be taxed at this time. This would include assets such as vacation properties and investments. However, if the deceased taxpayer’s property is being distributed to the taxpayer’s spouse or to a “spouse trust”, then under certain circumstances taxable capital gains, allowable capital losses, recaptures of capital cost allowance, and terminal losses may be deferred. The deceased taxpayer’s cost basis for the property would then become the cost basis for the property to the spouse. Thus, any taxable capital gains would be deferred until the property is disposed of by the spouse.More than one tax return may be filed for a deceased taxpayer. One “ordinary” return would be filed for January 1st to the date of death. There are 3 additional tax returns that can be filed as if the taxpayer is “another person”. These returns can reduce or eliminate income tax in the year of death, because certain deductions are allowed to be claimed on the ordinary return as well as the optional returns. These optional returns are available for income from:

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June 16, 2007 by Dan White.

What attitude should a tax preparer display? 

For instance regarding; non prescription Medical Expanses. 

There is an argument that all real medical expenses can be deducted, regardless of from a pharmacy, under prescription or not. 

In the past when it was me doing the tax returns, for clients that has health issues, I prepared documentation that I sent in much the same as if it was for a notice of objection. I can only recall one being challenged by CRA and I sent in a lot of them. 

One of the things we have to watch in how we approach tax returns and our position is the language and attitude we display to our customers. 

The natural accountant instinct is to reduce the chances of an audit, this is wise only to a point of the line in the sand. There has to be a line in the sand where it is not wise to take deductions. We understand that. CRA pushes the line one way and we push it the other. The realality is that CRA pushes beyond reason. WNBC does not push beyond credible reason. 

The official WNBC market position is that we encourage every reasonable expense be taken. We only recommend timidity when the person may have something to hide or needs a “clean year.” (A year where everything is 100% perfect. Auditors usually only audit back to a clean year and stop.) 

This position is what built our tax business. Yes, we did have problems in the past with quality control. That did not mean our position was wrong, what it meant is that we did some shitty work. Fortunately a lot of that work is what caused the problems that we solved that has built our knowledge base and made us the best kick ass CRA issue company in the country. 

WNBC’s official stance is that we will fight for every reasonable deduction that there is a legitimate piece of paper to back up the expense. 

It is important to WNBC that we need to maintain our market approach in terms of aggressiveness. Does this mean more work for us? Yes it does. But it also means we will attract more new business and keep the business growing and profitable. The extra work incurred by pushing the line in the sand is part of our business model. We can not and must not default to the line in the sand where all is cosy and we don’t incur resistance from CRA. The more resistance we get, the more we win and the happier our clients are because our clients simply pay less taxes. WNBC takes pride in the fact that we are fearless defenders of the faith in less tax is better for all. 

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June 16, 2007 by Dan White.

Old Tax Debts – Debts beyond six years are now statute barred by recent court decisions (Mar, 03). Not quite certain if CRA will honour that decision but in the meantime, tax debts never die – they just gather interest. If you had an old tax debt, didn’t have to go bankrupt, and are now making good money – look out for those # 8 brown envelopes with your name in the window.
CRA has up to three years from the mailing date of your notice of assessment to conduct an audit For a Canadian controlled private corporation, the MOF has 4 years. After this time, the particular year is statute barred unless there is a case of fraud, in which case there is no time limit to the period for audit.
 

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June 8, 2007 by Dan White.

This is good news for tax payers and for WNBC. 

When we are not happy with CRA behaviour, we will soon be able to complain to an ombudsman. 

We are expecting that the new ombudsman office will open by this fall to hold the agency accountable for honouring an expanded list of taxpayers’ rights. 

The ombudsman will not offer a cheaper route to challenge tax assessments, however. The taxpayer could still have to use the WNBC services and go to court to object to a tax ruling. 

For the first time, though, the CRA will have to explain its findings to taxpayers who complain. The agency could also see its service standards and performance criticized in an annual report. 

Most other provisions in the 20-point Taxpayer Bill of Rights, including five points devoted to small businesses, are no more than a repackaging of existing promises. Putting everything into a single document is intended to help improve taxpayer awareness of existing practices. 

WNBC welcomes the attempt to make the CRA more accountable. 

The new bill of rights highlights the long-standing right to delay paying disputed taxes until the outcome of an appeal is known. Interest will be charged if the ruling goes against the taxpayer. 

Taxpayers will be reminded they can plead for interest and penalty charges to be waived in light of an unavoidable delay, or because of CRA error. 

As always, our clients can appoint us to act for them in dealings with the CRA by providing authority in writing. (The Consent Form) 

The ombudsman process will still require strategy and experience to unsure the tax payer achieves their objective of paying no more tax than they are legally obligated to pay. This new entity will be a useful tool, but will not be a slam dunk for a tax payer to get justice. 

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June 7, 2007 by Dan White.

   Happy IVGLDSW Day!
Today is International Very Good Looking, Damn Smart Woman’s Day, so
please send this message to someone you think fits this description.
Please do not send it back to me as I have already received it from a
Very Good Looking, Darn Smart Woman! And remember this motto to live
by:
Life should NOT be a journey to the grave with the intention of
arriving safely in an attractive and well preserved body, but rather
to skid in sideways, chocolate in one hand, wine in the other, body
thoroughly used up, totally worn out and screaming “WOO HOO what a
ride!” Have a wonderful day!
To the Girls !!
Inside every older person is a younger person — wondering what the
hell happened.
-Cora Harvey Armstrong-
Inside me lives a skinny woman crying to get out. But I can usually
shut the bitch up with cookies.
(Unknown)
The hardest years in life are those between ten and seventy.
-Helen Hayes (at 73)-
I refuse to think of them as chin hairs. I think of them as stray
eyebrows.
-Janette Barber-
My second favorite household chore is ironing. My first one being –
hitting my head on the top bunk bed until I faint.
-Erma Bombeck-
Old age ain’t no place for sissies.
-Bette Davis-
Thirty-five is when you finally get your head together and your body
starts falling apart.
-Caryn Leschen-
If you can’t be a good example — then you’ll just have to be a
horrible warning.
-Catherine-
I’m not going to vacuum ’til Sears makes one you can ride on.
-Roseanne Barr-
Behind every successful man is a surprised woman.
-Maryon Pearson-
Nobody can make you feel inferior without your permission.
-Eleanor Roosevelt-
When life hands you lemons, ask for tequila and salt and call me
over!!
Never doubt that a small group of thoughtful committed citizens can
change the world. Indeed it is the only thing that ever has.
   Margaret Mead
 

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June 1, 2007 by Dan White.

MORRIS & SADIE-A JEWISH MOAN

Morris came home and found his wife Sadie crying.

Morris asked her what was wrong.

She said, “I found out from Mrs. Goldberg that you’re having an affair vid your secretary. Vy vould you do that to me? I’ve always been a good vife. I’ve cooked for you, raised your children, and have always been by your side for 35 years. Vhat haven’t I done to make you happy?”

Morris replied, “It’s true, Sadie, you’ve been the best vife a man could hope for. You make me happy in all vays but one. You never MOAN ven we have sex.”

Sadie said, “If I moaned vhen ve have sex, vould you stop running around?

Morris said “Yes!”

All right, come to the bedroom so I can show you that I can MOAN during sex.”

They went to the bedroom, got undressed, and jumped into bed.

As they started kissing, Sadie said, “Now, Morris? Should I moan now?”

He said, “No, not yet.”

He started to fondle her and she said, “What about now? Should I moan now?”

He said, “No, I’ll tell you when.”

He climbed on top of her and started to move around.

She said, “Is it time for me to moan now, Morris?”

He said, “Vait, Vait, I’ll tell you Ven.”

A few minutes later, just seconds before he was going to finish, he said “Now, Sadie. MOAN, MOAN!”

She said, “OY, YOU VOULDN’T BELIEVE VAT A DAY I HAD!” 

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