Everyone seems to have a hate/love relationship with them.

By Adrian Spitters and Win Wachsmann

We hate paying them.

We love it when others are paying them.

Thus THEY get to support all the government bureaucrats and departments – infrastructure, services and public safety.

However, no one really believes they should be free of paying taxes.

It’s just that most people want to pay their fair share within the guidelines of the tax code so as to pay the least tax possible.

Often when looking at our investments, we often evaluate the investments in isolation from tax planning.

We ask the broker/money manager to get us the best rate of return in non-taxable pension plans and taxable non-registered accounts.

Then at the end of the year we have the tax accountant to comb through our investment earnings to see how to minimize taxes.

Because no one person has the big picture of how best to plan the investment at the beginning of the year so as to reduce taxes, investors are very often stuck with needlessly high tax bills.

For example. Because many investors like the safety and security of bonds, they have been investing in a wide range of bonds over the years.

And yet government bonds that guaranteed a positive pre-tax return will result in losses after taxes and inflation are calculated.

Why? Because the bond coupon is taxable EVERY year as interest income and often at the highest marginal rate – fail!

On a further note, the tax code allows capital losses to only be deducted against taxable capital gains. What are the chances that this will happen?

What if there was a way to plan your investments in such a way as to take care of these worrisome tax rules and think in terms of maximizing after-tax returns.

A number of investment firms have developed funds known as Corporate Class funds. Structured as a corporation (thus the name Corporate Class) rather than as a typical mutual trust fund, this fund can hold the same investments as the mutual fund and produce similar returns.

These funds provide many of the benefits found with tax-free savings accounts or other registered accounts.

A key component is the ability to defer most of the tax on investment income and realized capital gains.

The investments will grow quicker and become larger over the long term. A second benefit is the ability to make investment decisions, such as rebalancing your portfolio, without worrying about the tax consequences.

So how does it work?

Thanks to the Income tax Act, an investor is permitted to switch between classes of capital stock of the same corporation without triggering a capital gain or loss.

A further benefit is that any money (distribution) paid to the shareholder will only be a capital gains dividend or a Canadian dividend. Dividends are the most tax-advantaged forms of income, meaning that the tax paid is lower than interest income.

Structured properly, Corporate Class investments will allow seniors collecting Old Age Security benefits to live like kings while paying taxes like paupers.

And yes, it’s all legal and above board.

Adrian Spitters, FCSI, CFP, FMA, is a Senior Wealth Advisor with Assante Capital Management Ltd.  He can be reached at aspitters@assante.com or visit his website at www.adrianspitters.ca

Win Wachsmann has been helping businesses improve their marketing and helping them get ready to sell their business. He doubles as an author, journalist, syndicated columnist, filmmaker and businessman who makes his home in the Fraser Valley of British Columbia. His articles and columns can be found in some of the finest offline and online magazines, journals and media properties.
He can be reached at 


Win Ad Sept 2014

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