Time is stretchy. Like the Silly Putty I used to play with as a small boy, it is elastic in retrospect. For example: UNBC is celebrating its 25th Anniversary this coming year, but the cute little school on the hill still feels like a brand new thing to me. If it were snow tires, it would still have the little rubber nibs on it that scratch off in the first few miles of test driving. When it was in its inaugural year in 1990, I was just graduating from Simon Fraser University (SFU). My school at that time was also 25 years old, but the giant concrete cubicle on Burnaby Hill already felt ancient by 1990. The quarter century that preceded me there seemed much longer than the quarter century our beautiful northern edifice has under its belt.
Perhaps some periods bring so much change that they take longer to digest. Picture a young man, say 25 years old just a few years after the Second World War in 1950. There he is -- enthusiastic, sleeves rolled up, ready to build his life. Consider his music, his clothing, his expected role in work and family life. He was the output of a nation. A war won.
Now fast forward 25 years, to 1975, and consider the different role expected of the 25 year old then, male or female. The music, the clothes, the work and family life he or she would look forward to. So much societal change was packed in to the years that the 1950 and 1975, the relative youth might as well be from different planets.
Although he does not give us a specific age for the third stage of life's learning journey, Aristotle defines this stage in terms of a person being able to hold government office and drink strong wine, (at the same time?)
Like a mountain-top viewpoint, the perspective of time can be breathtaking, especially if we take ourselves to that spot by our own two feet. But bring your glasses; focus is tricky at this age.
A New Year Approaches:
As year-end draws near, take some time to review your financial affairs. Doing so may yield significant tax savings. To ensure that you leave no stone unturned, we have summarized some common year-end tax planning strategies in this four-part article, part two of this series is here:
Carry forward or Carry back of Capital Losses
A capital loss must first be applied against any capital gains (including capital gain distributions from mutual funds) of the current year. However, once the capital gains of the current year have been offset, the balance of the loss can be either carried back three years (to capital gains realized in 2011, 2012, or 2013) or carried forward indefinitely to offset future years' capital gains. When you apply a net capital loss back to a previous year's taxable capital gain, it will reduce your taxable income for that previous year. However, your net income, which is used to calculate certain credits and benefits, will not change. Note that this is the last year in which you can carry your losses back to 2011 and offset them against your 2011 capital gains.
If you plan to trigger a capital loss in a corporation, you should speak to your accountant prior to doing so, as it may be advantageous to pay out a capital dividend from the capital dividend account (CDA) balance prior to triggering the loss.
Capital Gains Deferral
Deferring a capital gain to next year is also a common tax planning strategy. As we approach the end of 2014, if you currently have unrealized capital gains you may want to consider deferring the realization of capital gains until 2015 for the following reasons:
a) Your marginal tax rate may be lower in 2015 compared to 2014;
b) Realizing capital gains at the end of this year means that any tax payable associated with the gains would have to be remitted to the Canada Revenue Agency (CRA) by April 30, 2015. Realizing capital gains at the beginning of 2015 means that any tax payable would not have to be paid until April 30, 2016 (unless you are required to make tax instalments); and,
c) If you have net capital losses in 2014, you can carry back those losses against previously realized capital gains in 2011, 2012 and/or 2013. However, before losses can be carried back, they must first be used to offset capital gains in the current year. Therefore, realizing capital gains at the end of 2014 would reduce the amount of capital losses you could carry back.
As always, consider the merits of the investment itself above or at least equal to the tax considerations.
This publication is not intended as tax or legal advice. Readers should consult a qualified legal, tax or other professional to ensure that their individual circumstances and the latest information have been considered properly.
Mark Ryan is an advisor in Prince George with RBC Wealth Management, Dominion Securities (member CIPF) and can be reached at [email protected].
