Canadian Personal Finance Questions & Answers

Need help filling out the w-8ben

2011-05-30T20:51:00.000-04:00

Just need specific instructions to what needs to be filled and what doesn't.
i am a permanent canadian
and submitting this as an individual

thanks

My version, assuming an individual (Note IANAL and other disclosures to keep me out of jail and to keep the LSUC happy). If this is for a corporate entity or something more complicated then consult your accountant and/or counsel.

Part I:
1. Name - fill it in
2. Skip for individual
3. Check as appropriate - likely "Individual"
4. Residence address - fill it in
5. Mailing address - skip unless different from residence - don't abbreviate canada
6. Skip
7. Skip
8. Skip unless noted by broker - sometimes they say to add your account number.

Part II:
9. check a. and put word "Canada" on the dotted line (I'm assuming you are resident in Canada for this). Don't check any others.
10. Skip

Part III:
11. Skip

Part IV:
Sign name and date, put word "Self" on the far right dotted line asking capacity.

Done. Send back to broker and keep copy for your files.

So bmo just sent me a letter that they will be taking me to court

2011-05-29T22:06:00.000-04:00

I'm sorry if this is a little off topic, doesn't appear to be a financial forum here. I'm curious if anyone here is familiar with our laws in this situation. I have an outstanding amount that I owe, been out of work for 7 months, but I have applied to like 50-60 jobs or more in 2011, nobody has hired me.

What will come from this? I don't own the property I live in, and I don't own any assets.

Looking for some advice on what the process is like, I cant really seek legal council since I have no money, what are my options here?

The letter tells me that they already requested a court filing and that a judgement could be made against me which would include leans on property, assets and wage garnishes.

If BMO were taking you to court, you would be served with From 7A, informing you of a claim against you in small claims court. You would then have an opportunity, within 20 business days to file a defense (form 9A). At that time, you can either dispute the charges, or propose payment arrangements. If they dispute your financial arrangements, they may take you to court and try to have a judgment filed against you on their terms.

I'm not sure if they sent you these and you just ignored them for 20 business days. If that is the case, then you are pretty much at their mercy.

If you would like actual legal counsel, there are options. I would suggest getting in touch with the CFW Group Their rates range from free to reasonable, and they will help sort you out.

1.) Get one thing through your head. At this point, your credit is already trashed for 7 years. There's not much more they can do at this point. The best thing you can do is start on the road to repairing it.

2.) If they haven't filed for a judgment, then you still have time to file a defense. Download the form here

3.) If you file a defense, there is still a 6 month waiting period before you would have a pre-trial. This gives you time to get a job, or work out some payment arrangement.

4.) I've taken the liberty of preparing a defense for you. You are going to have to edit it a little. See here

Now let's take a look at your defense, and why we're taking this angle.

1.) Notice that we're not denying that you owe them money. It's important that you agree to the sum claimed in your form 7A. A small claims court judge is going to look more favourably on a David & Goliath case like this, where David is actually taking responsibility for the money he owes.

2.) We don't want this to go to pre-trial, and neither does BMO. If it goes to pre-trial, they have to spend a few hundred bucks on a lawyer to show up and waste a judge's time. Then, if it continues going to trial, and you actually lawyer up, they could end up spending thousands, all in an effort to get a few thousand. It's in their best interest to settle.

3.) I understand that you have no money. Feel free to move the date of the first payment forward (but don't get too ridiculous) by a couple months, if you need more time to find a job.

4.) GOING FOR SUSPENSION OF INTEREST IS KEY. While you are admitting to monies owed, you will save thousands of dollars (I believe BMO charges 13.xx%) over the 30 months that you are making payments. Also notice that we are not agreeing to pay interest while the loan is in litigation. Makes sense, right?

5.) The reason I've numbered the first entries in the defense, is because if you look at the charges, they will be numbered. In your defense, you should reply to each charge that you are in dispute with, using the same numerical system as they used.

6.) Make sure where it says "NAME OF DEFENDANT" to use the exact syntax that they use in the form 7A to name you. If you go by Chris, and they call you Christopher, then your name should be Christopher.

7.) The other stuff you might erase. The reason I included the stuff about charge slips and credit limit, is because BMO tends have an opt-in process for receiving credit slips, and before Jan 1, 2010, it was legal in Ontario to raise the credit limit of a card without informing the creditor. It's my hope that a small claim's judge will recognize this.

8.) The point of this defense is not to get out of paying the money, it is to suspend interest, take responsibility for the amount owed, and come to an amicable payment arrangement that will save both of you the headache of court costs and lawyers.

Once you've filled out your defense, print it in triplicate, and take it down to the courthouse mentioned in the 7A lawsuit you received. You will need ~$45 to file it.

(Disclaimer: I'm not a lawyer.)

Manulife IncomePlus funds (and the like) , and how it affects OAS, GIS?

2011-04-22T00:12:00.001-04:00

hello,

my parents who are in their 60s are considering incomeplus (and the like, big insurance companies has their own). they heard that it is an efficient way to get fixed income and also get the maximum OAS/GIS compared to had they invested in Life annuities.

i'm not too experienced in this, does anyone have some insight?

after going through their site, http://www.manulifegifselect.ca/incomeplus/
they actually don't explain how it is tax efficient.

i had to dig a little deeper.
i believe the gist of it is, if you hold them in a rrsp account no matter what your withdrawals out of your rrsp will be taxable income.
however in a non registered account similar to series T mutual funds, you can elect to have it withdraw a certain percent every year as Return of capital which is tax deferred. it would be like giving you your own money back, there's no tax on that. however once the principle amount dries up the rest would be taxable.
if it's taxable it may affect oas, gis.

my first time hearing about this product and it looks interesting.
it's not too clear about how the fees and mer affect payout but i'm sure those will eat at your return.

because i'm meticulous with these things (heritage funds haha inside joke)
the mer on some of their funds are quite high... as well if you pick the riskier funds there's a higher fee.
Fund Fee Rates range from 0.35% to 0.85%, depending on the risk level of the Fund.
it's likely that if you select the option to receive return of capital that will increase MER.

conclusion
probably something to look in to.
the most attractive thing is the guaranteed 5% for life if you choose the payout at 65. it's unclear if fees are still charged.
definitely not for me but for someone seeking guaranteed income and planning to live past 85, it could be worth a look.

compared with life annuities same thing if it's in a rrsp, it'll be completely taxable
if it's in a non registered account only the interest portion will be taxable.
the interest would increase your income which could potentially reduce gis and oas payments.

Canada Life Participating Life Insurance - Wealth Achiever

2011-03-18T00:46:00.002-04:00

I have a life ot death question I got a phone call from Investors Group, spoke with them in person and they suggested the following life insurance product. This life insurance is offered by Canada Life and is called : Participating Life Insurance - Wealth Achiever
This is what they told me: The main benefit of that product is that all the investments made are tax deductible and not taxable when withdrawn(kinda like a TFSA but no 5000$ limit) However if i commit to a certain amount per month and need to make the payment otherwise there are penalties (getting smaller the closer you get to 20 years).

The example they gave me, If i put 25 000$ a year (way to much for me btw) in 20 years i can withdraw ~ 620 000$ tax free, and every year after that the amount was considerably higher. Basically, i get a 120 000$ return with 500 000$ after 20 years. That's good but the every year tax deduction is what attracts me the most.
I'll get a call within a week to buy that insurance, but since i find it to good to be true, i'm starting to have doubts.

Any useful imput would be appreciated.

This is a great question.

Participating Insurance is "permanent" insurance wherein the growth of your investment is participating in the performance of the insurance company.

THERE ARE NO TAX DEDUCTIONS FOR LIFE INSURANCE DEPOSITS..is that clear?

However, the invested value will grow on a TAX-DEFERRED basis, NOT TAX FREE.

If you withdrawal the funds, all the growth will be taxed to you as income...OUCH!!

IN order to access your funds in a "Tax free" way (as they say), then you need to obtain a loan against the value of your policy...this loan is NOT GUARANTEED and the amount of the is also NOT GUARANTEED.

Read this article on permanent insurance (sometimes called Universal Life or Whole Life)...HERE

If you don't fit the criteria, then stay away. From what you have posted so far, your are very misinformed by the advisor or not yet understanding the product. Make sure you completely understand what you are getting into before giving them any money.

don't get sold on RATE of RETURN...it is not guaranteed.

One more thing....

PERMANENT INSURANCE (like the one you're proposed) IS A TAX DEFERRAL MECHANISM...ONLY PROCEED WITH THE GO AHEAD OF A TAX PROFESSIONAL...your accountant, not a sales person.

Don't be afraid to get a second opinion from an independent advisor that you trust.

All the best.

investment property/principal residence question (no one can give me an answer

2011-03-10T18:49:00.000-05:00

I have talked to several real estate lawyers and a few accountants and no one can give me a definite answer. Everyone seems to be telling me something different.

Here is the situation.

My parents are looking to purchase a new condo. Either 1 through assignment that closes in a couple months or 1 to 2 pre construction units that close in 2014.
If they treat this as investment property with intent to rent it out right away what kind of taxes (HST) would they have to pay on the purchase, and how much of this is refundable. I have heard rates such as 1.5%, 7.8% and 13%. Some people have said they get all of it back up to $24,000 per unit and some have said they only get up to 6% back. Everyone is giving me a different answer :S

Option 2.

The condo is purchased by them. But one of there siblings who are over 18 will live there for a bit. Since it would be a principal residence we would not have to pay any extra HST.. Say the sibling moves out and then they decide to rent the place. How are they effected? How long does the sibling have to live there? Can the property still remain as principal residence or does it have to turn into rental unit.

any help is appreciated.

AFAIK the HST rebates are only for primary residences AND NOT for investment properties.

May be this link can provide some answers http://www.rev.gov.on.ca/en/notices/hst/pdf/04.pdf

"Primary place of residence
One of the main conditions for a new housing rebate to be available is that you must buy or build the house for use as your or your relation’s primary place of residence.

Your primary place of residence is generally a house that you own, jointly or otherwise, and that you intend to live in on a permanent basis. You may have more than one place of residence, but you are considered to have only one primary place of residence.

Note
If you buy or build a new house in Canada but your primary place of residence remains outside Canada, then your house in Canada would be a secondary place of residence and would not qualify for the new housing rebate.

The following are examples of some of the factors we may consider to determine whether a house is your or your relation’s, primary place of residence for purposes of the new housing rebate:

•whether you consider the house as your main residence;
•the length of time you inhabit the premises; and
•the designation of that address on personal and public records.
To be eligible for the new housing rebate, your intent to use the house as your or your relation’s, primary place of residence must be evident at the outset of buying, constructing, or substantially renovating the house.

For rebate purposes, a house is not your primary place of residence if, for example, your intention is to use the house as your primary place of residence upon some more distant occasion, such as retirement. Further, a recreational cottage or an investment property is not your primary place of residence for rebate purposes. No new housing rebate is available in these cases."

It's time to retire and they have no clue what to do

2011-02-01T14:27:00.000-05:00

neither do I to tell you the truth.

Here's the situation. My parents are about to retire and they don't have a clue what to do financially.

They both have RRSPs and other assets like a house, cash, investments and so on.

The problem is that they really don't have a plan. They are old school and we really have never talked about their money. They are worried about their RRSPS and RIFS, benefits they are about to receive from the government and so on.

My problem is that I don't know much more than them. I know some basics, but I'm not an expert.

What I need is a primer on the web or a book or some advice so that I can educate myself and then offer them some very basic advice.

For starters, can anyone offer any information on what benefits they are about to collect??

Cheers and thanks in advance.

Claudio

The most pertinent question is how old are your parents or how far away are they from turning 65?

There are 4 primary sources of retirement income:

1. Canada Pension Plan - CPP

The amounts received are based on the amount an individual puts into the plan over their working career. You can start to take CPP at age 60 and must start receiving it by the time an individual turns 70. For each year before 65 you take your pension you get a couple of percent the of amount you would receive lopped off. Similarly, for each year after 65 you get an extra couple of percent. IE: if at age 65 your CPP would be $700/month, if you start taking at 63 it would end up at maybe $660/month and if you start taking at 67 you might get 750/moonth.

I believe for ppl currently turning 65, there was no incentive to wait until after 65 as the additional amount was quite small and in some cases takes years to recoup (i think for my dad it would have taken 15 years for him to have received the same total pension if starting at 70 vs 65).

I should add that you can only start taking pension before 65 if you are currently out of work. Strangely, you only have to be out of work for the month after you start receiving pension. What this means is that many ppl get their pension, dont work for a month and then go back to work while collecting their pension. It seems like a large loophole, but depending on cash flow needs ive seen many ppl do this.

In terms of getting this money, you simply have to apply. You can send in the application online which asks some ID questions, but if I remember correctly does not require any supporting information (like copies of passports etc etc). There is a signature pagethat has to be mailed in regardless of whether your file on line or not. The government determiens how much you are entitled to.

2. Old Age Security - OAS

Starts at 65. The maximum benefit is about $500 per month. The amount that an individual receives is based on how long they have been in Canada. You have to have spent 40 years since turning 18 to get the full pension. Below 40 years, you get a fraction depending on how long you have been in Canada. There are some other exceptions and rules that might specifically determine how much you will receive.

Again yuo have to apply for this. This application, unless you were born in Canada, requires proof of citizenship, and also proof showing how long you have been in Canada (so for example if you state you entered Canada december 15, 1975, you would need proof that shows that, such as the entry mark on your old passport). The govt determines how much you are entitled to.

3. Registered Retirement Savings Plan - RRSP

Money has to be moved from RRSP to an RRIF or other similar account by the time turn 69/70. There are different options. You can continue to contribute to yuor RRSP until 69 and once you are done contributing to your own you can contribute to your spouses RRSP until they are 69 as well.

4. Company pension

May or may not apply. The company and their pension provider would be responsible for determining how much you receive depending on how long you have worked, the type of plan etc. I imagine you would inform them of your retirement once you are ready to collect.

Things to consider:

-OAS gets clawed back once an individual total icnome for the year goes beyond about 65k
-Low income retirees, ie no company pension, no RRSP, are eligible for the guaranteed income supplement which adds about another 600/month to monthly pension payments

Hope this little primer helps...not an expert by any means but i do have some familiarity so id be happy to help any way i can

Loaning money to your spouse for income splitting purposes

2011-01-25T21:25:00.000-05:00

How does this actually work for people with combined bank accounts (ie, how is the interest paid)? Would you just use the shared money and put the brokerage account in the lower income spouse's name? Would paying interest be necessary or would it be considered a gift?

Another thing (from http://www.rbcfinancialplanning.com/...t-purpose.html)

Another simple but very beneficial strategy is to use the income of the higher earning spouse to pay living expenses and tax liabilities and use the income of the lower earning spouse to make investments. This way, investment income earned will be taxed at the lower earning spouses’ rate.

Again, how would this be done if you have joint accounts? Just putting the investments in the lower income spouse's name?

According to the link you posted, no interest = attribution rule applies, so yes paying interest would be necessary. I would 100% set-up separate accounts to attempt this. That way you have a paper trail to give the CRA if/when they accuse you of tax evasion (and then you can prove it was only tax avoidance, which is legal).

As mentioned by the other poster, you need to charge interest or attribution rules will apply. It is even better to have a signed contract (see a lawyer) which states loan amount, interest rate, and repayment terms so that it is a bonafide loan and cannot be challenged by CRA. The interest rate you would want to charge would be the lowest rate you can so you are not stuck including a lot of interest income on your tax return. Check the CRA website for prescribed interest rates and use these rates as the interest rate. Hope this helps.

PS. I am a Chartered Accountant and have done this for clients in the past. With the low interest rate environment that we live in, prescribed rates are really low and can be really beneficial in income splitting and loans to spouses.

you should be aware your spouse is still paying you taxable interest. so you have to declare that interest as income. if you don't then you'll get hit with the attribution rules.
and this isn't a one time thing. the loan goes on until it's fully paid back, so you'll keep earning interest from your spouse until it's paid off.

just something to consider

CRA Rules re Joint Investment Income

2011-01-23T18:15:00.000-05:00

Hello,

Looking for some help re a joint savings account for two individuals. I gather the typical institution reports interest income on the primary owner's tax slip.

What exactly are the rules re basic investment income (interest) splitting? Are we only allowed to do a 50/50 split regardless of whose slip the amount appears?

Thanks.

Interest should be reported based on the amount of money each person deposits to the account. It doesn't really depend on the SIN number on the slip.

E.g. if one person puts in 60% of the principal in the account and the other 40%, that's how the income should be reported.

It is common practice to simply split the income 50/50.

Ideally, the lowest income earner would save 100% of their income and report the interest due to the preferable tax rates. The higher income earned should pay all the bills in order for the lower earner to invest.

Ontario Student Loan Default from 1996 -- Question re Statute of Limitations

2011-01-22T09:25:00.000-05:00

I had an OSAP loan back in 1996.

This was back when the bank would take the loan and it was funded through the government (two parts to loan, federal part and provincial part).

Long story short, I defaulted on about 7k owing for the federal portion of the loan. For several years collection agencies called me. After awhile the calls stopped. I called one of the collection agencies around 98 - 99 and they said that the loan had been recalled by the bank.

Around 2005 I tried to track down who I needed to pay spending hours on the phone. Nobody could find any record of the loan. Not on my credit bureau, not through National Student Loan Centre, various government departments, I even called ScotiaBank with the loan number and they couldn't find it (I think that I got the loan in the year just before they changed the whole OSAP system to one integrated loan done through the government instead of the banks.)

Finally I gave up and figured as long as it's not hurting my credit score who cares.

Has the statute of limitations passed on this debt? I know 10 years needs to go by from when you were last in school, however I returned to college in 2005 for one year.

Just worried that one day in the future I'm going to get a call "You owe us the original 7k + god knows how much interest".

Canada Student loans granted under the Canada Student Loan Act and the Canada Student Financial Assistance Act have a six year limitation with exceptions as outlined in the Acts. Read them as they can be read online. Ontario has no limitation period for student loans. The new Limitations Act which has a basic limitation period of two years specifically notes that such limitation period does not relate to student loans. See also Interpretations Act in Ontario re crown debt.

If you have gone bankrupt prior to the expiration of the 10 year limitation period set out in s. 178 1g of the Bankruptcy and Insolvency Act, you may apply to the bankruptcy court after the expiration of the 10 yr period for an order including the loans in your earlier bankruptcy provided you have acted in good faith regarding payment of the loan and the debt continues to be an ongoing burden. See s. 178 1,1 of the BIA. I have made over 70 such applications for clients all of which have been successful.

Childcare tax question

2011-01-20T17:02:00.000-05:00

How much you can deduct for childcare expenses? If you paying $x per month, how much do you get back on your taxes? Which spouse should claim the deductions?

http://www.cra-arc.gc.ca/E/pbg/tf/t778/t778-10e.pdf

an excellent 4 pages in detail on the topic. if you have child care expenses every year like I do, you may want to educate yourself. it is just a quick 15 min reading but very informative knowledge.

have fun.

Real estate agent for rental unit..what are they responsible for?

2011-01-18T21:32:00.000-05:00

I was wondering what is the job of a real estate agent for a rental property?...are they suppose to check on references,credit history of the potential tenant?..if there is issues with the tenant do they assist the owner?...

The buyer agent is responsible for bringing the seller agent a client. Both agents ensure that both parties are happy with any reference checks or whatever. The value added is just a series of very minor paperwork and gathering of documentation like credit report and drafting the agreement etc. Surely advice is thrown around somewhere.

Do they assist owner? Probably not. After they collect their commission, they'll probably never want to talk to you again. This is why most people prefer to have a friend or relative as their agent.

What a real estate agent does will be highly variable. The minimum level of service is very minimum: they'll put an ad on MLS, and help you find a tenant if they've got nothing better to do.

Good agents may also take pictures of the property, put ads up on other sites and/or in the newspaper, show the property to tenants (or let a buyer's agent bring tenants by), and if you're really lucky, they may help you do a credit check or swing by staples to pick up a lease document for you.

Bad agents (and I've seen many) will put the ad up on MLS and then not even return phone calls from prospective tenants -- and if they do, they may just try to sell the tenant on buying, not owning, so they can get a buyer's agent commission, and not a month's rent from your rental ad.

I don't think any will help you out with the ongoing stuff like collecting cheques or dealing with issues down the line. For that you want a rental agent or property manager, not a real estate agent (though sometimes a rental agent who will help with that also happens to be a real estate agent).

If you're in Toronto, some people I can recommend 2nd or 3rd hand (don't own a rental myself):

http://landlordrescue.ca/service/

Rogers wireless phone plan cancellation penalty...

2011-01-13T21:24:00.001-05:00

Hi there,

Just wondering if you anyone had experience with cancelling their wireless phone contract with Rogers...
I still have 2 years left with my 3 year contract with Rogers, and they are charging me $400 for the maximum monthly penalty and on top of that $100 for the data plan cancellation. They said the only way to avoid the penalty is to transfer the plan to someone else.

Does anyone know other ways around this hefty cancellation penalty?

Any help would be much appreciated!

Thanks.

- If it's for the sake of iPhone 4, you will need to wait another year before you can get another subsidize phone from Rogers (and extend the contract by 3 more years).
- If it's for affordability, call retention and negotiate an affordable plan.

If you really need to get rid of it.
1. Get Rogers retention plan.. to make it attractive.
2. Post your plan in kijiji, craiglist or RFD - FS section.

2 years contract will be a hard sell. You might need to add some cash incentive... Better than paying $500 to cancel it.

if your plan is good, u can convince someone to take over your contract, and that way u'll not need to pay anything (assuming that the person is not asking for money to take over your plan).

Hi guys Collection agency terrorizes me please someone give me an advice I need your help so desperately.

2011-01-12T22:42:00.002-05:00

In March, 2008 I lost my job and couldn’t been able to pay my lease every month. During one of my telephone conversation with company representative that I leased the car from, I was advised to return the car back. So I did. I returned the car with mint condition. A month later I received the letter from the same company informing that they lost all my personal information in the way of transporting to the credit burro. They also worried about as it is against the code of confidentiality and if my personal information goes to bad people they can do an Identity fraud. Another month passed I received invoice notifying that I have to pay to the company $16000 CAD as they sold the car with $14000. When I started my own research in OMVIC regulation I found out that before selling the car company should contact with me and ask my opinion about an offer that they have for the car. (Of course if I knew about the $16000 gap I would take my car back) So now collection agency is terrorizing me always motioning that they will take me to the Court. What should I do please help me with your advice. Thank you very much.

If I understand you correctly, you were going to default on your lease so you returned the car back to them. And now you are being faced with a charge you do not understand.

Allow me to explain, I may be wrong so I would advise to go over your original contract. When terminating your lease early you are responsible for any fees and penalties. This includes a very important factor called the residual value. When you obtained your lease they estimated the residual value of the car, the higher the value the lower your lease payments would have been. However there's a downside to that after voluntarily surrendering your leased vehicle, the bank or leasing company sells it. Usually, the vehicle is sent to a dealer-auto auction. Once the vehicle is sold, the net proceeds are applied to your balance at the time of surrender. This balance is not the same as your lease-end residual balance; it equals the lease-end residual plus the remaining payments on your lease contract.
In short, don't default on a car lease. Especially when car prices have dropped which means your car depreciated much faster over the years.

What you should do now depends on your current financial situation. Your credit score is probably very poor so trying to finance out of it will be difficult and it's ill advised unless you want to make 15-20% interest payments. If you have little assets i would declare bankruptcy, but please do check the rules in your province and know how you would be affected before doing so.

http://www.canadian-money-advisor.ca/threadview/4007.html

Thinking about investing in a second house for investment purposes. Have some Q's

2011-01-12T19:07:00.000-05:00

What are the investor rules for purchasing an investment single family dwelling?

Does my existing house's rental income count as part of my income qualifications? What about the potential income from the investment house?Does that count to qualify for the mortgage? I know you can't do this for your principal dwelling, but is it different for investment/rental housing?

I know I need a min. 20% down, but if I go only the min 20%, do I still need CMHC mortgage insurance as it is below the 25% level?

I know that all expenses can be written off against rental income, but if I have more expenses than rental income, can I write it off against my employment income? If so, how far (ie how long, how many years) can I do this before CRA deems it an investment not having a reasonable expectation of making a profit, or does that even come into play with real estate?

Yes, existing rental income does count, but only a percentage.
Yes, potential rental income does count, but only a percentage.

20% is the minimum that may waive you from CMHC. However, there are other consideration too. Bank may insist that you need CMHC regardless. One of my friend needs 35% down to waive the CMHC requirement.

Yes, you can write against employment income.

You can claim a loss indefinitely under certain circumstances (far too many variables to answer that the same for everyone) but of course you would not be able to use any portion as principle residence at any time.
i.e. if this is a duplex and you rent out both units and take a loss, then you can claim a loss indefinitely . If you were to live in one unit, then no.

- only part of your current and potential income will be included for qualification purposes
- if you are struggling to qualify under current conditions you probably should forget this idea
- residential real estate is one of the most risky options out there today
- current real estate costs are unsubstantiated and could fall dramatically costing you a fortune
- many other investments let you sleep at night, why get into an investment that could
wake you up with gross and trivial emergencies or have you subsidizing a
deadbeat that you can't evict?

You're willing to part with 100% of your money to gain < 50% back as a deduction?

You are hedging on asset appreciation bailing you out of negative cash flow real estate holdings... good luck with that gamble.
- unless you're prepared to do some unsavory things, big profits may be hard to come by

your deductions will not be denied for failing the 'reasonable expectation of profit' test. its pretty dumb to buy a property that is not instantly cash-flow positive especially at today's extremely low interest rates.

What your lender requires as a downpayment is between you and your lender, including the requirement of CMHC insurance. 20% is the minimum without CMHC insurance at a Canadian chartered bank.

I found this to pose a very interesting question and it ends with cra being able to deny expenses which do not have the "pursuit of profit" in mind.
To go back to the OP, it would depend on what sort of expenses he's claiming. If he's actually reinvesting money into the property and the payoff is when he sells for a large profit later, then it makes sense. As stated before he is losing cash flow in the attempt to reduce taxable income.

home ownership tax question...

2011-01-12T18:09:00.000-05:00

so we are trying to sell our condo, which is our primary residence. we will be dropping the price which will eventually lead to a loss. (buying this place has not really worked out and we really want to get out after staying here for more than 3 years)

can i write off the losses from this transaction with my income? in other words, do i get any tax benefit for the losses i will incur on account of the sale of the condo?

and if i move out into another place, make this an investment property, and sell at a loss... i can probably get the tax benefit????

No, you can not deduct the loss from your income. Because it was your principal residence you will be denied claiming a capital loss.

If you convert to an investment property, the adjusted cost base for determining gain / loss will be the fair market value as of the day you convert it.
It will technically remain a principal residence for taxation purposes until the year end.

ebay question about taxes

2011-01-12T17:39:00.000-05:00

hey guys
just got a quick question
so basically im letting my friend use my ebay account/paypal
to post stuff on ebay cause i have over 50+ feedback from 2 years of using ebay
and now hes doing about 12,000 in sales a month
and then he transfers it to my bank account via paypal
and i withdraw it for him
im worried about taxes? as im not claiming it nor is he
what are the possible outcomes as far as taxes goes?
i read that the cra now audit ebay sales
this has been going on for about a month and a half
any info would help
thannks

Yeah eventually you will attract the CRA, and will be asked to provide some sort of accounting between your cost of inputs, and the sales revenue you receive. If you sell >$30k in a year you also have an obligation to register for, and collect GST on the entirety of your sales.

You need to a) stop sharing your eBay account with others (this is a violation of your eBay agreement), and b) tell your friend to start keeping records that can be audited on his own account, or the CRA might just send him a tax assessment for the entirety of his reported eBay sales.

Selling Stock Shares on EI

2011-01-12T17:35:00.000-05:00

Hi. I'm currently on EI and stocks I've purchased with my previous company is doing well right now.

They were purchased through an employee stock purchase plan. They collected a bit from our checks for a period of time. At the end of the period, they look at the market value at the start and end of the period. We buy at the lowest of those two points.

I'm thinking about selling them (about $18k right now) and wanted to know if I had to report it as earning on EI. I called EI, they didn't know and would have a specialist call me back. But I was hoping to sell today and it's up again.

Thanks in advance.

Investment income is not considered to be employment income.
If you were on welfare then obviously it would be a different story.

If they had a matching % contribution then it would have already been a factor in your income.

About mortgages, Please help

2011-01-12T17:22:00.000-05:00

I have a mortgage with TD. The last mortgage payment day is April 1st 2011.

Q1: Which day is the start day of the new mortgage term? April 1 or May 1

Q2: When do I need to shop around?

Q3: If I still stay with TD, the new mortgage will become a collateral mortgage, is that right?

Q4: If the new mortgage is a collateral one, what benefit I can get? For example the house worth 400k and have 300k mortgage balance left.

Thanks for any input.

Great questions and I hope you'll find my answers helpful. I work with TD so remember you can always give us a call at 1-866-222-3456 or come and talk to us at a branch http://www.tdcanadatrust.com/locator/index.jsp

Q1: Which day is the start day of the new mortgage term? April 1 or May 1

If April 1 2011 is your maturity date, then your new term begins on April 2 2011, and your first monthly payment on the new term will be due on May 1, 2011. TD mortgage payments are collected in arrears and not in advance, hence your payment for May 1 2011, will reflect the new term/rate.

Q2: When do I need to shop around?

You will receive a renewal notice 60 days in advance of your maturity. However, I would advise that you meet with your local TD branch, up to 120 days in advance to discuss all your available options.

Q3: If I still stay with TD, the new mortgage will become a collateral mortgage, is that right?

When you stay with TD, and opt to renew your mortgage on maturity (not refinance for additional funds), your charge will remain as is. If however, you refinance or take out additional equity (provided you are qualified/approved for the increase) your mortgage charge would be updated to the new collateral mortgage charge.

Q4: If the new mortgage is a collateral one, what benefit I can get? For example the house worth 400k and have 300k mortgage balance left.

If you refinance for additional funds, where the old charge is replaced with a new collateral charge and you choose to register your collateral charge for more than the approved principal amount of the mortgage, by up to 125% of the property value, you could then increase your future borrowings without having to re-register the charge under certain circumstances. This would save you money on your future refinance activity against the same property.

So in your example:

Your house is worth $400K today and you hold a mortgage of $300k, but you decide to set up a charge for $500K, and in 2014 your property value has increased to $450K and you would like to refinance some additional equity. Provided you qualify for the added amount and the property value supports the new request, your can refinance your mortgage and re-use the collateral charge if the following criteria still applies:
The mortgage was registered with a collateral charge.
The property value supports the new request.
The amount of the collateral charge will support the customer's new lending application request.
The borrowers on the new application match the property and the existing registration.
There has been no subsequent lending on the property.
This eliminates any Solicitor/In-House Registration fees.

And the other benefit is that you can switch between a mortgage and a Home Equity Line of Credit without having to re-register the charge – offering you more flexibility and choice

Best of luck,
Farhaneh Haque, Regional Sales Manager, TD Canada Trust

The last mortgage payment would be the day that the balance is due in full. Should be on your paperwork.

Q2: When do I need to shop around?
Sooner, the better. Preferably, you don't want to be 'under the gun' and forced to accept something that's not optimal.

Q3: If I still stay with TD, the new mortgage will become a collateral mortgage, is that right?
Maybe. The collateral mortgage change applied to all new mortgages issued by TD, but not renewals of existing ones.

TD might offer you a line of credit for $20k, secured by your house, under a collateral mortgage charge. I would be wary of really having flexibility and choice because if you refinance for 125% property value you will be tied to it because will need to pay that off fully before being able to transfer to another institution.

TD HELOC: can you still get one that increases as you pay mortgage?

2011-01-12T17:01:00.000-05:00

I have read elsewhere on the web that TD used to offer a HELOC whose limit increased concomitantly as you paid down your mortgage. Do they still offer this? My TD lady is not aware of it, but she didn't seem too sure.

What you can do is get a HELOC for 80% of your home's value and within that HELOC create what's called a Fixed Rate Advantage Option (FRAO), which is essentially a mortgage (mortgage rates, mortgage terms/ammortization, closed). As you pay it down, availability on the revolving part of the line of credit increases.

Example:
-Purchase a $300K house, $60K down, $240K on a HELOC.
-Initially the $240K will be revolving at a rate of Prime +1%.
-After the purchase you lock in that $240K to a FRAO with a 25 year ammortization for a 5 year term at a regular mortgage rate
-Each payment you make reduces the balance of that FRAO below $240K, the difference is available on the revolving credit line (just as if you didn't fix it in, if you make a payment on the HELOC, it makes credit available).

Group rrsp, DPSP and pension adjustment

2011-01-12T16:56:00.000-05:00

Can someone educated me how this works. Ive read http://www.cra-arc.gc.ca/tx/bsnss/tp.../bx52-eng.html but dont understand.. how to calculate it.

I contribute to a company group rrsp $500 and they match dollar for dollar.

If my employer contributed $500 to the DPSP (deferrred profit sharing plan), it says I will receive a "pension adjustment" and will reduce my next years rrsp contribution limit.

if my annual income is $50,000 my rrsp contribution limit should be $9000 (18% of income). because of the $500 DPSP, it will be reduced to $8500? ($9000-500) am i right?

Let's assume your income was $50,000 in 2009 and that you began participating in the program in 2010.
*
Your 2010 RRSP contribution room is $9,000. In 2010, you contributed $500 to a GRRSP and your employer matches the contribution dollar for dollar.
*
Your employer also contributes $500 to a DPSP.
*
Again your 2010 RRSP contribution room is $9,000. You contributed $500 to an RRSP and your employer contributed $1,000 ($500 as a matching contribution and $500 as a DPSP contribution).
*
Your PA is your employers contributions, or $1,000.
*
At the end of 2010, your carryforward room is $9,000 - $500 (your contribution) - $1,000 (PA) = $7,500.

Quick question about RBC CC History and what happens to it...

2011-01-12T16:52:00.000-05:00

Hi there...

Thanks in advance to all the experts in this forum... I've been able to take advantage of some pretty creative minds in here...

Quick question for you... I've been meaning to upgrade my current RBC Gold Visa card to the Platinum AVION and have been approached a few times by the bank to upgrade, but am concerned that I would lose all my credit history with my older Gold card (12 yr history) if I switch. I understand that it's the length of time that is important for your credit score... I'm sitting around 740 right now and don't want it to drop...

By upgrading the card, will my credit history automatically get transferred over to it, or will it start new? just wondering...

Thanks

if you upgrade your card the accounts will be linked on your report.
for sure you won't lose your history unless you request to close it and then apply for a new card.

R9 to R1

2011-01-12T12:20:00.000-05:00

Recently one one of my credit card companies agreed to change the R9 rating it gave to the respective account in my credit profile to a R1. Does anyone know, once it has changed to a R1 in the credit profile, how long it takes to improve my credit rating?

That's an unusual change. Generally once the trade line is rated R9 it can't be changed unless the creditor made a big mistake. Make sure you don't fall for any mambo jumbo given to you by a phone rep and that you get this in writing from your credit card company. Such changes typically take 30 to 60 days. Check your profile on Equifax and Transunion in about two months. No need to pay unless you need access to it right away. You can order your report for free by mail.

I will also say thats one of the oddest things ive ever seen or heard of.
It usually takes 4-6months for an account to go to R9 status. That means all phones calls and mailing notices have been ignored and the creditor has no choice but to deem the account uncollectable, or whats internally called a charge-off.

A R9 is much more than than just a negative mark on you the card holder. For the bank its an important process. It moves the delinquent account from accounts receivable ledgers to bad debt/uncollectable ledgers. This must be done in a timely manner (4-6mths) to prevent inflated quarterly earnings by banks as set out by the currency comptroller banking regulations.

So once the R9 is registered its pretty well impossible to have the account reversed. (almost impossible if your story is in fact true)

I would pay very close attention to who you are paying your balance to.

Making a return on your mortgage in RRSP? Not sure how it works...thoughts?

2011-01-12T11:53:00.000-05:00

Below is the article and link...my questions are as follows (I can't see to get my head around it):

1) How does Mortgage and RRSP mix? (if someone can explain the idea below to me in dummy terms...would be appreciated)
2) How does RRSP contribution room come in to play?

May have follow on questions depending on answer.

http://www.theglobeandmail.com/globe...1815416/page2/

Making a return on your mortgage

Now to the question of whether it makes sense to put your mortgage in your RRSP from an investment point of view. If we take all the startup fees mentioned above, we end up with a cost of roughly $1,000 to $2,000 in the first year, assuming a $100,000 mortgage. Essentially, you could have a first-year fee of up to 2 per cent if you decide to pay your mortgage insurance upfront.

The cost looks more attractive in subsequent years, when the $225 annual admin fee works out to a fee of just 0.23 per cent.

These fees tell us that conservative investors earning 2 to 3 per cent in their retirement savings should not find it hard to get a better return from the mortgage-RRSP strategy.

“If you have fixed income in your RRSP and if it’s generating a very low yield, then this may be something worth looking at,” Mr. Tsai said. “The greater the difference, the more economic sense it might make to do this.”

Mr. Wise, the Calgary investment adviser, said the mortgage-RRSP strategy works best if you use the mortgage to replace the bonds and GICs in your portfolio while leaving your holdings in the stock market.

If putting your mortgage in your RRSP leaves you light on equities, take the mortgage payments flowing into your retirement plan and invest them in stocks, funds and so forth. In fact, investing each successive mortgage payment gives you a nice little dollar-cost averaging program.

Making mortgage payments into your retirement plan does not affect your RRSP contribution room. So you can further diversify your retirement savings using the money you annually add to your RRSP, separate from your mortgage.

One of the challenges in putting your mortgage in your RRSP is to find a trustee for the plan. In addition to TD Waterhouse, the online brokerages CIBC Investor’s Edge, RBC Direct Investing, Scotia iTrade and ScotiaMcLeod Direct Investing all allow this. Bank of Montreal says it no longer offers this program. If you have an investment adviser, he or she should be able to find a trust company to hold your mortgage RRSP.

Don’t forget the usual strategizing if you’re putting your mortgage into your RRSP – amortization period, biweekly versus monthly payments and so on. An interesting question arises here: Do you put the priority here on getting your mortgage paid off as quickly as possible, or on building your RRSP?

“If I can get a fixed income investment in my RRSP that will give me 5 per cent, I think I’d want to keep that as long as possible,” Mr. Wise said.

---------

HOW TO DO IT

Investing your registered retirement savings plan in the mortgage on your home is not for everyone, but it can generate steady returns that beat what bonds and term deposits offer.

Step One

Find a bank, investment dealer, trust company that offers this service; some investment advisers may also be able to help you set this up.

Step Two

Tally up fees – expect to pay a set-up fee, an annual mortgage administration fee, legal fees to set up the RRSP mortgage, mortgage insurance fees and possibly discharge fees if you're breaking your current mortgage.

Step Three

Pick mortgage terms. Expect rules guiding the rate you can use, the mortgage terms available and so forth.

Step Four

Use the money you're paying into your RRSP to diversify your RRSP investments, possibly by making regular purchases of stocks or equity funds and ETFs

WHAT YOU SHOULD KNOW

Four things to keep in mind about investing your retirement savings in your mortgage:

1. You can invest RRIF money in your mortgage, but you must have enough cash on hand to fund the required minimum annual RRIF withdrawal.

2. Some banks will allow you to use RRSP money to buy a residential investment property, while others allow this only for an owner-occupied residence.

3. It may be possible to invest in a mortgage on someone else's property.

4. You'll need mortgage default insurance even though you're lending to yourself and even if you have a lot of equity in your home.

sounds like you're confused with all the numbers.

First thing you should know is that if you plan to buy a house with a 200k mortgage and fund it with your rrsp
u need 200k in your rrsp.

there's the hbp which will allow you to loan 20k to help your purchase but this method says forget that i'm going to hold my entire mortgage in my rrsp and pay myself back.
that's the essential the article goes on to list the pros and cons which you should know.

i would highlight in the article it says that if you have to sell your stocks/bonds/whatever yielding 5% then it's probably not a good idea.

2, it wouldn't affect your contribution room.

The basic idea is that you can loan the money you've put in your RRSP to other people to make a return (interest), i.e., loan it to the bank in a GIC, or via bonds to other companies/governments/etc.

With your mortgage, you borrow money from other people and pay them interest to buy a house.

An RRSP mortgage is a way to lend yourself the money to buy a house from your RRSP. You become both the lender and the borrower, and the interest you pay on the mortgage becomes a return for your RRSP.

If you have enough in your RRSP to lend out to cover your mortgage, then the payments you make on that mortgage are treated as, well, payments on your mortgage. They're not "contributions", so you can still contribute to your RRSP on top of the mortgage repayments. From the mortgage side, it's just like if you were paying the mortgage off to the bank -- you have to make your payments every month. On the RRSP side, it's just like if you loaned the money out to anyone else: you expect to get back a stream of interest and principal repayments.

What's the typical monthly/annual expense for owning a Condo?

2011-01-12T11:47:00.001-05:00

Talking about a 1 bedroom + den around 700 sqft or more specifically http://www.studiocondos.ca/vip/

-maintenance fee
-utilities
-property tax

can anyone provide a guestimate? any other fees?

You can rent a 700 sqft condo built within the past 4 years for about 1400 in Toronto with underground subway access.

Condo fees alone at a few places run about $450-500. Add on tax, etc.. if it's eating about $600 total, you may be hard pressed to have a comparable mortgage for $800.. it may be better to rent instead.

My condo is about this size and these three items are 575 per month.
Keep in mind that the cost of property tax, water and electricity may or may not be part of the condo fees.

Make sure you factor in the cost of condo owner's insurance. Mine is about $200/yr.

Condo fees have become hard to compare. Some places include electricity in their condo fee. You've got to read carefully. For that size, I think you're looking at $400-$600 a month in condo fees and utilitiess together. Utilities is hard to gauge. When it's shared, people tend to be more wasteful and as a whole, everyone pays more.

For property tax, it's based on government's tax assessment value of your property. Not sure how much that condo's worth, but I'd expect between 2.5-3.2k a year based on just size.

Other fees to think about
-They charge an arm and some kidneys to replace keys. Take good care of them as you can't simply make a copy of them
-Some condos charge a fee for party room usage
-Public liability insurance. I totally forgot how much this was. $200 a year?

-maintenance fee with annual adjustments most likely a slight increase
-utilities
-property tax
-additional condo/content insurance
-pay-per-use fees (parking fees, party room, elevator moving rental)
-one time special assessments or charges relating to the condo
-extras: parking spot rental, key/garage fobs, lock/key replacement - has to be done by condo corp or approved by the condo corp (in most cases)

Also, if you're comparing rent versus buying a condo, you need to add an amount for interior maintenance of the condo. A landlord will replace the carpets and appliances periodically, while, if you own, you're on the hook. This is an item that is not included in a condo fee, and unfortunately, not even included in many of those rent vs. buy calculators.

Some comments,

Condo Fee: Really depends on how old your condo is and where it is located... older condos cost more to maintain... I've seen fees ranging from $550-770 per month of the same size of condo with similar amenities but varying age and location. If you're condo does not have swimming pool the fees will be slightly cheaper. If you have additional parking your condo fee will be more expensive too.

Property Tax: Can't avoid paying the tax man, but if I remember correctly new condos often quote property tax ~1% of the sales price it is slightly over budget for me but it can be use as a good proxy.

Hydro Bills: Depending on whether if you have separate meters you might have to pay this on top of your condo fee. I have not lived at my place long enough to have a stable read but I hear $50 bucks per month for average use. Make sure you time your heavy appliance use if you're in Ontario due to the recent change in time based energy billing.

Condo Insurance: This is optional, insure your contents and damages from your neighbors. Some people say it is good to get some people say it is waste of money. For me. It helps me lower my car insurance while having condo insured as added benefit so I see why not. This will depend on varying factors such as how far is your place to the nearest fire station, community safety... etc. ~350 per YEAR maybe over estimate but as good budgeting practice you want to have a decent buffer

Banks: Unlike that radio channel game show, unless you pay all your money up front to buy the place, you can't beat the bank. While you're enjoying your place, the bank is also enjoying the interest they reap off you. You can know this by getting pre-approved mortgage quoted so you know how much interest you'll be paying.

Fixes and Renovation: Light bulb goes out, kitchen sink crack... things that are not covered either by Condo Management Corp. or the insurance. Difficult to budget unless you can tell the future of when things will break. If you are willing to pick up that DIY book and learn a thing or two you can save things by doing minor adjustment yourself. Wall mounting a shelf, custom closet unit maybe, just leave the tough stuff to the pro even if you have any doubt about your ability to handle it (i.e. pipes, electric wires... etc)

Young sister received cheque. Don't have bank account

2011-01-12T11:35:00.000-05:00

Hello folks. I was wondering if any of you opened up accounts for kids.

My 11 year old sister received cheque in her name and bank teller said he can not cash it because she did not have ID (I wanted to deposit it into my own account with same last name).
She has OHIP which was not understandingbly accepted. She has no DL obviously, no SIN card and passport is expired for a long time. Is there any way to cash the cheque?

And second part ofthe question, are there any benefits to opening up kids account? Which bank would be more ideal for that? It just seems iffy to me opening up an account for a child.

Kids don't need a SIN to open a youth bank account. My GF just opened one for her son and he doesn't have a SIN yet. The way she talked, the bank would have preferred it, but it wasn't necessary. (edit. he's 12.)

To answer the OPs question. Just have her sign the back and give it to you. You give her the cash and then you can just deposit it in your bank account.

Why is it "iffy"? I had a bank account when I was like 6. It teaches kids about money. Youth accounts don't cost anything so there isn't really any reason a kid shoudl not have one. And this kid is 11??? Jebus she may be in middle school next year??? I can't believe she doesn't already have one in this day and age to be frank.

EDIT: As far as the SIN goes, banks are required by law to collect the SIN for any interest-bearing account. It is not an option. Most youth accounts are interest bearing so that they can learn about interest (even if it is next to nothing), so yes you will likely have to give her SIN. But again, she is freaking 11 - when I was that age I had a SIN, of course since I had my own paper route and was making $200 / month. 11 is not as young as you seem to think it is. Shes nearly a teenager.

My son is 10 and got a paper route just before summer. I have an account with RBC. We decided to add him to my account. He has a child's savings account and I can easily add his allowance from my chequing account into his online. I had to show 2 pieces of ID but my son only needed his birth certificate. He could've gotten his own account but the lady at RBC said since he just has a paper route this could be easier to keep track off since it's attached to my account.