March 1996 CEN-TAPEDE - Insurance and Mutual Funsd as a Tax Shelter

March 1996

the CEN-TAPEDE

david ingram's US/Canadian Newsletter      Page 159-162

 

OFFSHORE WEALTH BUILDING SEMINAR

 

Put on by Jerome Schneider ((604) 682-4000), author of the "COMPLETE GUIDE TO OFFSHORE MONEY HAVENS", the OFFSHORE WEALTH BUILDING SEMINAR at the WATERFRONT CENTRE HOTEL on March 19 and 20 was unbelievable with about 330 individuals paying $700 US to attend PLUS hotel, motel, and airplane fares. Only about 60 people were from Canada and they were from Edmonton, Calgary, Toronto, etc. In fact the people were from at least 10 countries and every state and province in North America. The topic was OFFSHORE TAX SHELTERS AND ASSET PROTECTION TRUSTS, which was the topic of the November 95, CEN-TAPEDE. In fact, some of the material handed out came from past CEN-TAPEDE newsletters.

 

The general theme of the seminar was that it was still possible to deal offshore but it was necessary to be in an "ACTIVE" business offshore to succeed. Stephen Holmes of the HOLMES GREENSLADE law practice in Vancouver made it very clear to the assembled group of Canadians at the final "Canadians only" session, that, in his opinion, a person could not just take their money or their stocks or their bonds offshore and escape Canadian Income Tax legally. He stated quite clearly, that in his opinion, organizations promoting the "set up corporation offshore, give your funds to the offshore corp, get power of attorney, get bearer shares, tear them up, and have no absolute right to dividends" would not work "legally" because the mind and management are in Canada.

 

Stephen Holmes went on to say that the "other" method of "setting up an offshore trust, having a trustee and a protector, settlor not a beneficiary" would not work either because of sections 75 and 95 and of course the GARR rules. If it is not a REAL active business, then the profits cannot be accrued offshore without paying current income tax to Canada. As this was the general theme of my own November 95 newsletter, I agreed with this answer although it was NOT what the audience wanted to hear.

 

1-800-BEAT-IRS (from BC, 1-880-232-8477)

 

I have always given away pens as business cards. I was "out-penned" at this seminar by one of the more interesting and talented speakers. Donald "Mac" MacPherson, from Phoenix, is a lawyer who specializes in tough tax evasion cases. His pen which sports the stars and stripes as a motif, has the unforgettable phone number "1-800-BEAT-IRS".

 

His book, "Tax Fraud and Evasion, The War Stories", is a "must read" for every tax lawyer, accountant, and any individual who has a fight or anticipates a fight with the IRS, Inland Revenue or Revenue Canada. To quote from the "Opening Statement" of the book,

 

"This book is not in the main about issues, but about people. Their beliefs, their courage, their stand. What happens to them mentally, physically, and financially. They have, after all, the temerity to raise the issues, "to go where no man has gone before." What has happened to these people mentally, physically and financially? Read in this book the documented cases IRS will never share with you: ironworkers and doctors, airline pilots and housewives, plumbers and publishers, farmers and engineers, politicians and preachers. This is their story as much as it is mine. As I said, a MUST READ. Try 1-800-BEAT-IRS for your copy at about $30.00 Canadian.

 

Mac Has defended many of the famous U.S. cases which we have heard about on 60 Minutes and Hard Copy and other U.S. News Magazine Shows. He has worked through the "Triple Trusts" in the criminal court system and his experience and wisdom was a refreshing warning to those who would buy a package for $1,300 from an ad in a magazine or take a book like "Take your Money and Run" and assume that if you followed the same, techniques, you will be free of Canadian Income Tax. All our situations are different. Just because someone you met at a meeting in Santa Fe, New Mexico says "you can do it", does not mean you can do "it" and succeed.

 

WARNING - TOP OF NEXT PAGE

In my opinion, "Take Your Money and Run" is one of the most dangerous books on the market for those who would escape the long arm of Revenue Canada. You cannot move to Barbados or Costa Rica and then spend 182 days a year in Canada. Revenue Canada will walk all over top of you. Furthermore, "tearing up the bearer bonds" still leaves mind and control in Canada and leaves you liable for $500 a month fines (max $24,000) under new rules taking effect on January 1, 1997. In my opinion, following the precepts in Take Your Money and Run is like promiscuous sex with or without protection. Sooner, or later, "you will get AIDS or another STD".

 

Insurance and Mutual Funds as Tax Shelters

 

William Donoghue, a regular guest on CNN, etc., a 13 year financial columnist in many U.S. newspapers like the Chicago Herald and Denver Post, and now the publisher of Donoghue's WEALTHLETTER spoke on the use of mutual funds and life insurance in tax planning for Americans. His sample newsletter also had a centre section on VIATICAL settlements which is the purchase of the death benefit proceeds from a terminally ill person. You may have seen Mike Wallace cover this very favourably on 60 Minutes in January. As CEN-TA has been looking at this for some time now and there are only two companies in Canada handling this type of investment at the moment, I was highly interested to say the least. Returns can be up to 10, 12 or even 20% tax free. Look into it, if you have a chance. For a sample edition of his newsletter fax your enquiry to 1-508-478-6092.

 

TWO PERSPECTIVES (Norman vs Fisher)

 

Two other interesting speakers did a bit of "Mutt and Jeff" or Abbott and Costello routine which imparted a lot of knowledge in a entertaining manner. William K Norman is a lawyer with ORD and NORMAN in Los Angeles and Howard Fisher is another Los Angeles attorney who helped Jerome Schneider with his book. It was interesting to see the slight differences in opinion between the two men who attacked the difficult subject of offshore businesses from two different and yet similar perspectives. I got the idea that if one took note of everything that the speakers said "didn't work", you would have a successful offshore company and not need the services of Mac MacPherson at "1-800-BEAT IRS". 

 

 

IF YOU OWN MUTUAL FUNDS, YOU LIKELY NEED THIS NEW FORM TO CALCULATE YOUR CAPITAL GAINS TAX FREE AMOUNT. Remember, If you forgot to file for your exemption in 1994, you can still do so now by paying a penalty of 1/300 of the exempt portion for each month you are late.

 

FLOW SHEET to record Your Exempt Capital Gain Balance on your Mutual Fund

 

Please note that you need a separate worksheet for EVERY Mutual Fund you own.

 

Deemed Dispositions on Feb 22, 1994 - Reason for Capital Gains Election on T664

 

  

Name of Fund: CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TACEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TACEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA-CEN-TA

 

 

1994 Capital Gains Data from T664 - CEN-TA

Deemed proceeds of Disposition _______________ (1)

Less: Original Adjusted Cost Base _______________ (2)

Equals your ECGB - FOR THIS FUND ONLY _______________ (3)

 

Capital Gains Earned AFTER Feb 22, 1994

 

Feb 22, 1994 to Dec 31 94 - CEN-TA

Capital Gains Distributed _______________ (4)

Plus Capital Gains Realized _______________ (5)

Equals Total Capital Gains in 1994 _______________ (6)

ECGB Used on line 039 of 94 return (6 or less) _______________ (7)

Equals ECGB available to use in 1995 (3 less 7) ______________ (8)

 

Jan 1 to Dec 31, 1995 -CEN-TA

Capital Gains Distributed _______________ (9)

Plus Capital Gains Realized _______________ (10)

Equals Total Capital Gains in 1995 _______________ (11)

ECGB Used on line 039 of 95 return (11 or less) _______________ (12)

Equals ECGB available to use in 1996 (8 - 12) _______________ (13)

 

Jan 1 to Dec 31, 1996 - CEN-TA

Capital Gains Distributed _______________ (14)

Plus Capital Gains Realized _______________ (15)

Equals Total Capital Gains in 1996 _______________ (16)

ECGB Used on line 039 of 96 return (16 or less) _______________ (17)

Equals ECGB available to use in 1997 (13 - 17) _______________ (18)

 

Jan 1 to Dec 31, 1997 - CEN-TA

Capital Gains Distributed _______________ (19)

Plus Capital Gains Realized _______________ (20)

Equals Total Capital Gains in 1997 _______________ (21)

ECGB Used on line 039 of 97 return (21 or less) _______________ (22)

Equals ECGB available to use in 1998 (18 - 22) _______________ (23)

 

Jan 1 to Dec 31, 1998 -CEN-TA

Capital Gains Distributed _______________ (24)

Plus Capital Gains Realized _______________ (25)

Equals Total Capital Gains in 1998 _______________ (26)

ECGB Used on line 039 of 98 return (26 or less) _______________ (27)

Equals ECGB available to use in 1999 (23 - 27) _______________ (28)

 

Jan 1 to Dec 31, 1999 - CEN-TA

Capital Gains Distributed _______________ (29)

Plus Capital Gains Realized _______________ (30)

Equals Total Capital Gains in 1999 _______________ (31)

ECGB Used on line 039 of 99 return (31 or less) _______________ (32)

Equals ECGB available to use in 2000 (28 - 32) _______________ (33)

 

A Red Letter Day - The end of the 1900's

 

Jan 1 to Dec 31, 2000 - CEN-TA

Capital Gains Distributed _______________ (33)

Plus Capital Gains Realized _______________ (34)

Equals Total Capital Gains in 2000 _______________ (35)

ECGB Used on line 039 of 00 return (36 or less) _______________ (36)

Equals ECGB available to use in 2001 (33 - 37) _______________ (37)

 

Jan 1 to Dec 31, 2001 -CEN-TA

Capital Gains Distributed _______________ (38)

Plus Capital Gains Realized _______________ (39)

Equals Total Capital Gains in 2001 _______________ (40)

ECGB Used on line 039 of 01 return (41 or less) _______________ (41)

Equals ECGB available to use in 2002 (38 - 42) _______________ (42)

 

Jan 1 to Dec 31, 2003 - CEN-TA

Capital Gains Distributed _______________ (43)

Plus Capital Gains Realized _______________ (44)

Equals Total Capital Gains in 2003 _______________ (45)

ECGB Used on line 039 of 03 return (46 or less) _______________ (46)

Equals ECGB available to use in 2004 (43 - 47) _______________ (47)

 

Jan 1 to Dec 31, 2004 - CEN-TA

Capital Gains Distributed _______________ (48)

Plus Capital Gains Realized _______________ (49)

Equals Total Capital Gains in 2004 _______________ (50)

ECGB Used line 039 of 2004 return (51 or less) _______________ (51)

Equals ECGB to be added to ACB (48 - 52) _______________ (52)

 

 

(1) * Deemed Proceeds of Disposition is the amount from Column 2, of chart A of the Form T664 which you should have filed with your 1994 income tax return but can still file late if necessary.

 

(2) * Adjusted Cost Base is the amount in Column 1 of Chart A of the Form T664.

 

(3) * Exempt Capital Gain Balance (ECGB) is amount from Column 5 of Chart A on the T664.

 

(4) * Capital Gains Distributed is the amount from Box 21 of your T3 slip, or Box 18 of a T5 slip, or as designated on a US 1099(misc) slip.

 

(5) * Capital Gains realized is the total of any gains realized from the actual sale of your mutual fund units during the year.

 

(6) * ECGB used is going to be the amount you elect to use in a year. This amount goes on line 039 on schedule 3 of the tax return for 1994 and 1995 and hopefully the line number will remain constant in 1996 and beyond.

 

(7) * ECGB available for the next year is what you can use any year up to the end of the year 2004, when the ----->

 

* -----> Remainder of ECGB If any ECGB remains at Dec 31, 2004, this amount will then be added to the ACB of your individual mutual fund.

 

 

Remember, the CEN-TA Group provides full accounting and tax preparation services for smaller U.S. and Canadian Corporations and all individual matters. Call David Ingram,  US / Canada tax consultations or preparation. (604) 913-9133 - Fax (604) 913-9123 

 

Presented by david ingram of the CEN-TA Group

Last Updated Tuesday, June 30 2009 @ 10:06 AM PDT|5,893 Hits View Printable Version

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