Invitation to make a voluntary disclosure


I hold a number of shares in the company of NCCC (National Credit
Counsellors of Canada)
I purchased these shares in 2003/2004 at an average price of 25 cents, and
the company declared their value at the time to be $1.00. I swapped these
shares into my self Directed RRSP at their declared value of $1.00, and have
just received a letter from the legal firm representing NCCC saying that the
increased value of the shares made by NCCC was incorrect. This has
considerably reduced the value of my RRSP, and to add insult to injury, NCCC
has reduced the share holdings of all share holders by 10 to 1 (100 shares
now becomes 10 shares)
The legal firm representing NCCC has sent shareholders a letter suggesting
that any shareholder affected by the disclosure by NCCC may come forward and
make a voluntary disclosure to CRA. I would be interested in your opinion
and advice as to what course of action, if any, I should take.
Thanks in advance for your help.

david ingram replies:

In my opinion, you should be putting the excess cash back into your RRSP to
reflect the true value. Then you should amend your tax returns for that
year to include a capital gain or maybe even a straight gain on any
difference between what you paid and the value that you actually put them
into the RRSP. Of course, a proper method would likely be to put the shares
in at exactly what you paid for them.

Sending the CRA a letter stating that you have corrected the innocent
mistake should suffice.

The good news is that because the stock in in an RRSP, the loss is 100 %
deductible. I have often said that the only stock to put in an RRSP is
stock that goes down because you get twice as much of a tax deduction that
way. I believe that if you are buying stock or mutual funds, they should
always be outside any RRSP so that you get the favourable tax treatment on
Capital Gains and Dividends.

Fred Snyder has a worksheet that shows that you break even at 4% and make
more money on a leveraged purchase where you borrow $100,000 and use the
interest as your 5% a year write-off as an alternative to putting $5,000 a
year into an RRSP.

Get him to do the paperwork for you.

Every Thursday Evening, Fred Snyder of Dundee Wealth Management conducts one
of 17 different financial seminars in the boardroom of his office

Time: 7:00 to 9:30 PM
Date: Every Thursday evening
Place 1764 West Seventh
Vancouver (corner of Burrard)

Phone (604) 731-8900 to register

No cost - no obligation

Topics always cover mortgage interest as a deduction

other topics - getting the mortgage, estate planning, critical care
insurance, income taxation, differences between stocks and bonds, and
usually the most innovative HELOC mortgage offered in Canada from Manulife

If you are starting in downtown Vancouver and do not want to go home first,
one of the excellent THAI HOUSE restaurants is in the same building and
makes a nice start to the evening. If it is your first seminar, Fred will
buy you dinner if you are pre-registered.

I, david ingram, will be at the Thursday evening following the last Sunday
of each month to cover mortgage interest as a deduction and give the class
an adding test.