October 1, 2009 by Dan White.

 Quite interesting how there are getting to be more and more savings plans. As in most things in life, you can look at them and see the good and the bad.
Here is what is wrong with this.
You are giving the government control over more and more of your money.
Money in a government program is money where the government can change the rules at will.
And if you run into a tax problem, unlike an RRSP, CRA can just go in and take your money in the same way they take money from people’s bank accounts.
And as this is a plan where you place your AFTER TAX dollars….. you better make sure you understand just what the heck you are getting into.
For me, I love my country, I don’t trust my government.
This same government who says they don’t have to observe Canada’s laws…. eg…. charter of rights and freedoms, when they go out of the country…. It is interesting that they say we have no jourisdiction over the governments offshore policies, but they have jurisdiction over our offshore wealth.
Hmmmmm

Dan White

Registered Disability Savings Plans: A future of financial security

Wednesday, September 30th, 2009 | 11:50 am

Canwest News Service

If you or someone in your family is eligible for the Disability Tax Credit, there is a new registered savings program that you should know about: the Registered Disability Savings Plan (RDSP).

The RDSP was introduced by the Federal Government. This unique plan is designed to help Canadians to save and invest for themselves or a disabled family member in a tax-deferred environment.

“The RDSP is a welcome addition to existing government programs designed to help ensure the long-term financial security for people with disabilities,” said David Birkbeck, head of registered products strategy at Royal Bank of Canda.

Here’s what you need to know to make the most of an RDSP:

Who can qualify?

The beneficiary of an RDSP must be a resident of Canada with a Social Insurance Number, under age 60 and be eligible for the Disability Tax Credit (DTC). To qualify for the Disability Tax Credit, the individual must have a prolonged and severe impairment in physical or mental function, which is confirmed by a qualified medical practitioner and accepted by the Canada Revenue Agency (CRA).

Who can open an RDSP?

The following people can open an RDSP:

-A person with a disability, who is of the age of majority and has the legal capacity to manage his or her finances.

-The parent of a person with a disability who has not attained the age of majority.

-A guardian or other representative who is legally authorized to act on behalf of a person with a disability.

Tell me about making contributions

Contributions to an RDSP are not tax deductible, but they grow within the plan on a tax-deferred basis. There is no annual contribution limit, but there is a lifetime limit for total contributions of $200,000. Contributions can be made up until the end of the year the beneficiary turns 59.

Is there government assistance?

Contributions may be eligible for federal government matching grants (Canada Disability Savings Grant) up to $3,500 annually and the plan may be eligible for government bond amounts (Canada Disability Savings Bond) up to $1,000 annually. The money in an RDSP can be used for any purpose, as long as it is for the benefit of the plan’s beneficiary.

Within Registered Disability Savings Plans, RBC clients will have access to a wide variety of investment options including RBC Funds, RBC GICs and RBC Savings Deposits. There will be no annual administration or withdrawal fees. Clients will also have the opportunity to make regular, pre-authorized contributions.

RBC has also joined forces with Planned Lifetime Advocacy Network (PLAN), a non-profit organization which led the advocacy for the creation of the Registered Disability Savings Plan, to help educate and offer advice to Canadians. As PLAN’s preferred national RDSP provider, RBC is working closely with PLAN to assist Canadians with disabilities and their families.

For more information please visit: www.rbc.com/rdsp.

For more information on Planned Lifetime Advocacy Network (PLAN) or for more about RDSPs please visit: www.plan.ca or www.rdsp.com.

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October 1, 2009 by Dan White.

Windfall for CRA to the current tune of 7.6 million dollars and growing.
Some of you may know that I don’t have a lot of respect for the voluntary disclosure program because I am seeing that this can be guaranteeing your worst case scenario can really happen. VD as we have come to know it, is not that desirable. If you are not prepared for a full audit and if you don’t have all your ducks in order, you are just asking form more tax problems than you already have.

I don’t like offshore for evading tax…. I see offshore as for genuine business. If you are doing tax evasion…. it is not as simple as VD, if you are not doing tax evasion,,,,then simply don’t…. it is not a good idea…. Legal Tax Avoidence is quite another matter, but you need some serious advice to know the difference.

It also looks like the UBS deal is a great bunch of CRA propaganda to scare and bring offshore tax evaders in from the warmth to the frying pan.

Won’t you come into my parlour?, said the spider to the fly.

This is quite a situation…. read on to see wehat Gary Lamphier has to say…. very interesting reading.

Dan White

No teeth to tax watchdog’s war on cheats

CRA relies on ‘voluntary disclosures’

By Gary Lamphier, Edmonton JournalOctober 1, 2009

Back in August, I wrote a column that was highly critical of Jean-Pierre Blackburn, head of the Canada Revenue Agency.

“While the U.S. government has doggedly pursued Switzerland’s biggest bank (UBS) for helping a small army of Americans to dodge the Internal Revenue Service,” I noted, “the CRA has had zip to say about UBS’s well-publicized activities in Canada, or whether similar cases of suspected tax fraud are taking place here.”

My piece followed news of a watershed deal under which UBS agreed to cough up information on some 4,450 bank accounts held by suspected U.S. tax cheats. At one point, the accounts held $18 billion US of assets, or an average of more than $4 million each.

After years of haggling, the landmark U.S. accord finally punched a hole in the dam of Swiss bank secrecy. It followed an admission by UBS that it had taken part “in a scheme to defraud the U.S.” government by helping the bank’s rich clients evade the IRS. UBS agreed to pay a related $780-million penalty.

But let’s get back to Blackburn. My criticism of Canada’s chief tax collector seemed to hit a nerve.

After months of stony silence on the UBS issue, he suddenly emerged from his self-imposed cocoon, granting a flurry of interviews. He was also made available to me, although by then he had already stated his case to other reporters, so I declined.

In those interviews, Blackburn offered a stirring defence of his department’s plan to force UBS to spill the beans on its tax-dodging Canadian clients, just as the IRS had done with the bank’s U.S. clients.

Of course, U.S. authorities had already done much of the heavy lifting for Blackburn, helpfully identifying $5.6 billion of assets held directly by Canadians in UBS accounts in Switzerland, as far back as 2005.

The accounts were set up by UBS’s so-called “Canada Desk,” a clandestine operation of jet-hopping, suitcase bankers who bypassed the bank’s properly licensed Canadian subsidiary, directly wooing clients here in contravention of Canada’s banking laws.

Blackburn certainly talked a good game. He assured reporters the CRA was on the case, and its lawyers were ready to stare down the bankers from UBS, forcing them to disclose the names of Canadian clients.

“UBS tried to delay, but in the beginning of September, we will have a meeting between our lawyers and them to obtain that information,” he told Globe and Mail reporter Greg McArthur, who first revealed UBS’s secret Canada Desk last November.

“Is it a question of thousands of dollars or millions? I don’t know,” he said, in an apparent effort to play down the magnitude of the$5.6 billion of suspect assets already identified by U.S. authorities.

Fast-forward to Wednesday–the final day of September. In a bid to catch up on the progress of Blackburn’s campaign to lift the lid on UBS’s dubious activities in Canada, and its tax-cheating Canadian clients, I called Ottawa. Nope, the minister wasn’t available, I was told. But CRA spokeswoman Caitlin Workman gladly filled me in on the box score to date. I have to say, it’s not overly impressive.

Seems the CRA has managed to conduct just one meeting with UBS officials since Blackburn issued his declaration of war back in August. And although Workman couldn’t confirm it, the meeting was reportedly conducted by telephone, not face to face.

At present, no further meetings are scheduled, she added. She couldn’t explain why.

“It could be that we just don’t have a time yet. It doesn’t necessarily mean that there will be no more meetings, and the discussions are ongoing. But I’m just not at a point yet where I can say, ‘OK, tomorrow there’s a meeting.’ ”

In total, the CRA has received 57 “voluntary disclosures” thus far from Canadians who held accounts with UBS. “Of those 57, we have finished reviewing 20 of them. And from the 20 we’ve finished reviewing, we have assessed $7.6 million in unreported income, as of last Thursday,” she adds.

Got that? Of the $5.6 billion in reported assets secretly held by Canadian account holders at UBS in 2005–a full four years ago– the CRA has so far recovered$7.6 million of unpaid tax money. That’s a little over one-tenth of one per cent of the assets in question.

Upset yet?Hey, this gets better. For tax cheaters who hold money in such accounts, there is no legal means at present to compel them to come forward. Unless UBS discloses their names–which seems pretty unlikely–they could duck the CRA for years.

And if the cheaters do finally “come clean” half a decade from now, they won’t necessarily face any penalty for their tardiness, either.

“The minister has discretion to waive penalties for the previous 10 years,” Workman says. “For the entire period for which your (belated) disclosure is accepted, you will be free from criminal prosecution,” she adds.

“Because you’ve come forward voluntarily and been honest and above-board, even if belatedly, you won’t have the penalty owing, but will still have to pay the tax and the interest. It’s an incentive to come forward, and for the CRA, to recover that income.”

There you have it. Your tax-collection agency at work. Something tells me the lawyers for UBS and their tax-dodging clients aren’t exactly quaking in their boots.
© Copyright (c) The Edmonton Journal

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October 1, 2009 by Dan White.

Well here we go again, another Canadian perk under attack by CRA. If you lottery winning has a skill testing question, expect CRA to check the list of winners and assess you for the winning as your income.

You can be sure this is going to happen within the next three years.

This really sucks.
I guess on the other hand… I don’t enter lotteries, so I guess this will not affect me personally.
But it will really take the wind out of a winner, to get a bill after they have spent and given away their winnings.
Dan White

*
IT-213R Prizes from lottery schemes, pool system betting and giveaway contests
o Other formats

Income Tax Interpretation Bulletin
Prizes from lottery schemes, pool system betting and giveaway contests

NO: IT-213R

DATE: October 19, 1984

SUBJECT: INCOME TAX ACT
Prizes from lottery schemes, pool system betting and giveaway contests

REFERENCE: Paragraph 40(2)(f) (also subsections 52(4), 5(1) and 9(1), and paragraph 69(1)(c))

This bulletin cancels and replaces IT-213 dated May 12, 1975. Current revisions are designated by vertical lines.

Lottery Schemes

1. The amount or value of a prize received by a taxpayer from a lottery scheme is not taxable as either a capital gain or income unless, due to the circumstances applying to the lottery scheme, the prize can be considered to be income from employment, business or property or a prize for achievement referred to in paragraph 56(1)(n).

2. While paragraph 40(2)(f) specifies that no taxable capital gain or allowable capital loss results from the disposition of a chance to win or a right to receive an amount as a prize in connection with a lottery scheme, subsection 52(4) states that for the purposes of computing any tax consequences after receiving a prize a winner in a lottery scheme is deemed to have acquired the prize at a cost equal to its fair market value at the time of acquisition.

3. A lottery has been defined as a scheme for distributing prizes by lot or chance among persons who have purchased a ticket or a right to the chance. If real skill or merit plays a part in determining the distribution of the prize the scheme is not a lottery (unless it is based essentially on chance and the degree of skill is minimal). Again, when the chances of a prize are obtained wholly gratuitously, as for instance, a prize awarded to the winner of a game, the scheme is not a lottery.

Pool System Betting

4. Paragraph 40(2)(f) also provides that no taxable capital gains or allowable capital losses arise from the disposition of a chance to win a bet or a right to receive an amount as winnings on a bet in connection with a pool system of betting referred to in section 188.1 of the Criminal Code. The nature of pool system betting is such that the only winnings are in the form of cash from the respective pool. Consequently, no additional capital gain or loss tax consequences could arise on subsequent disposition of the winnings and thus it is not necessary (as described in 2 above, in the case of a lottery) to deem the winnings to have been acquired at fair market value.

5. A “pool system” of betting is defined in the Athletic Contests and Events Pools Act as a pool system of betting on any combination of two or more professional athletic contests or events. The fact that a degree of skill is involved in the selection of the outcome of the contest or event in the pool betting distinguishes it from a lottery scheme as described in 3 above.

Other Schemes

6. Where a prize has been won otherwise than through a lottery scheme or a pool system of betting, neither paragraph 40(2)(f) nor subsection 52(4) will apply. The tax implications of receiving these other prizes will vary, depending on the following factors:

(a) When the prize has been received as a gift, it is not included in computing income at the time of receipt. However, the recipient will be deemed to have acquired the prize at its fair market value pursuant to paragraph 69(1)(c), so that a subsequent disposition of the prize will result in a capital gain on any increase in value since the time of its acquisition. A prize can be reasonably considered to be a gift from the viewpoint of the recipient, even though chance and/or skill may have been involved in the win. Ordinarily a gift is not considered to have been made until the donee has received delivery of the gift and accepted it in a completed and irreversible transaction.

(b) The prize will be received as income where it is received by virtue of the recipient’s employment pursuant to subsection 5(1) and paragraph 6(1)(a), received by virtue of the recipient’s business pursuant to subsection 9(1) or received in respect of an achievement in a field of endeavor ordinarily carried on by the recipient pursuant to paragraph 56(1)(n) (see IT-75R2).

(c) Where the prize is not received as income as described in (b) and is not a gift as described in (a), no amount will be included in income upon receipt of the prize and the provisions of paragraph 69(1)(c) will not apply. Such a situation would arise where the contestant has incurred a cost towards winning the prize such as purchasing a ticket or paying an entrance fee entitling the contestant to participation in the contest. In such a case, while there are no tax consequences resulting from receipt of the prize, any subsequent disposition of that prize may result in a capital gain or loss. In computing any such gain or loss the taxpayer’s cost of the prize will be the original cost of the ticket or entrance fee rather than the fair market value of the prize as used in (a) above.

It should be noted that where “personal use property” is involved, the $1,000 exemption contained in subsection 46(1) may eliminate any capital gains on disposition of a prize as described in (a) and (c) above.

7. In some instances, a ticket (or entrance fee) of the type described in 6(c) above entitles the holder to something in addition to a prize, for example, some entertainment value. Where, in such a case, the portion of the ticket that relates to the prize is considered insignificant in relation to the total cost of the ticket, the fact that a portion of the cost has been incurred towards the prize may be ignored and the prize will be treated as a gift to the taxpayer as described in 6(a) above.

8. Where the winner referred to in any of the paragraphs above is a syndicate, the income tax consequences to the individual members of the syndicate are the same.

9. Some examples of the manner in which the rules in 6 to 8 above apply are given in the paragraphs which follow.

Employer-promoted Contests

10. Where an employer who was accustomed to awarding employees with a bonus has provided a scheme or giveaway contest in which the bonus or some amount in lieu of a bonus is divided among the employees as prizes following a draw, the scheme would not be a lottery and the prizes are considered to be employment income under subsection 5(1). However, if the employees and their families account for only a small percentage of the participants in a scheme, are not given a favoured position in relation to the other participants and they are subject to the same contribution requirements (if any) towards the scheme as other participants, the value of any prize won by chance is not employment income but is considered a win from a lottery scheme. Therefore, paragraph 40(2)(f) and subsection 52(4) will apply. IT-470, “Employees’ Fringe Benefits - After 1980″ and Special Releases to IT-470 discuss holiday trips and other prizes.

Television and Radio Programs

11. The value of a prize or other award received by a person for being at or participating in a radio or television program is generally not included in income when the person is not party to an employment or business contract, and

(a) it is awarded through a draw because, for example, the person is in a “lucky” seat or has a certain brand of merchandise at home, even though the person may have to demonstrate some minor degree of skill or knowledge before being eligible to receive the prize, or

(b) the prizes that go to winning contestants, the consolation prizes that go to losing contestants or the merchandise gifts given to all participants are all that the person receives for appearing in the program. On the other hand, if a contract exists, such as may be the case where a professional actor, an entertainer or some other person appears on a television show as a celebrity and receives a giveaway prize or wins a prize by skill or chance for appearing or participating in a contest on the show, the prize will be subject to tax as business or employment income.

In all cases cited in this paragraph, the capital gains implications will be established on the basis of the particular circumstances in each case through application of the rules given in 6 or 7 above.

Free Tickets in Lieu of Volume Rebates or Bonuses

12. Volume bonuses or rebates from suppliers are included in computing a purchaser’s business income. However, where a supplier provides customers with free tickets for a draw for a prize with the winning ticket to be drawn strictly by chance, the prize is ordinarily considered a gift. Its value is not included in the recipient’s business income and the application of paragraph 69(1)(c) to the deemed cost of acquisition of the prize is as set out in 6 above. On the other hand, if real skill or merit is involved in the win, it will be a question of fact to be determined in accordance with the circumstances in each case whether the prize is a gift or whether its value is business income to the recipient.

Annuities as Prizes

13. Where the prize in a lottery scheme is an annuity, for the purposes of determining the amounts to be brought into income, the initial adjusted cost basis of the annuity is considered to be the fair market value of the annuity when it was acquired in accordance with subsection 52(4). Should the annuity be a prescribed annuity contract, as defined in Regulation 304, the adjusted purchase price of the annuity will be its fair market value at the time it was acquired. For prescribed annuity contracts and those other annuity contracts not subject to the accrual rules, annuity payments are brought into income under paragraph 56(1)(d) and a deduction from income is allowed under paragraph 60(a) for a portion of the adjusted purchase price as determined under Regulation 300. For other annuity contracts, which are subject to the accrual rules, the income from the annuity is determined according to the provisions of paragraph 56(1)(d.1) and section 12.2 in which the adjusted cost basis is a determining factor. In the case of the application of paragraph 56(1)(d.1) and section 12.2, the income calculation should be furnished by the issuer.

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