2013 Year-end Tax Planning Checklist

November 2013

    

Financial planning is time sensitive. While the following list is not exhaustive, here are some items that must be considered, incurred or paid prior to year end in order to be included in your 2013 tax return.

Prior to December 24, 2013:

  • Put tax loss selling strategies to work by following these steps: 
    1. Calculate the capital gains that you have realized for 2013.
    2. Identify and sell investments that are in a loss position. Trades entered by December 24th will settle funds in the account prior to December 31st.
    3. Net your capital losses against capital gains on your 2013 tax return.
Note: If your spouse has unrealized capital losses, extra steps can be taken to incorporate them in your tax planning. In all cases, you should be aware of the superficial loss rules when employing these strategies.


Prior to December 31, 2013:

  • Make charitable donations. Donating qualifying securities instead of cash can increase your tax savings. 
  • Contribute to your child’s RESP.
  • Withdraw funds from a TFSA, if needed. Any withdrawals will increase your contribution room in 2014.
  • If you are age 71 this year, you must convert your RRSP to a RRIF. Consider the following: 
    • Use your younger spouse’s age for minimum payment calculations. 
    • Consider an advance contribution to your RRSP for earned income from this year. 
  • For Corporations: 
    • Pay non-eligible dividends prior to year-end as the tax rates will be changing in 2013.
    • Consider delaying the sale of a business until after 2013 to take advantage of the increased Capital Gains Exemption; increased to $800,000 beginning in 2014. 
  • If you own an insurance policy with a “10/8” strategy, you should contact your insurance advisor to properly restructure this strategy. Certain tax benefits could be denied starting January 2014. Additional complications can arise if you do not unwind this strategy before March 31, 2014. 

Changes for 2013:

  • If you hold foreign property with a cost base greater than $100,000, file the Foreign Income Verification Statement (Form T1135). Beginning in 2013, additional information must be disclosed to CRA.
  • If you are a U.S. Person for tax purposes, understand your IRS reporting requirements. U.S. Persons (even those who are resident in Canada) have tax reporting requirements in the U.S. For example, U.S. persons are required to report any holdings in Passive Foreign Investment Companies (PFICs). 

Note: Beginning in 2014, Canadian financial institutions are required to report certain information on U.S. persons as a result of the U.S. Foreign Account Tax Compliance Act (FATCA).

We recommend you discuss these strategies with your professional investment, tax and legal advisors prior to implementation to ensure they fit within your overall wealth plan. 


         To receive more information, including complimentary copies of our education articles on the any of the above topics, please contact your Investment Advisor.
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