# I need advice on my financial plan



## Dave (Apr 5, 2009)

It is my turn to ask for advice. I am 30 and single. I am getting incorporated this year which will decrease my marginal tax rate from 48% to 19% in Quebec. http://www.taxtips.ca/taxrates/qc.htm. 

My savinags: 200K (including TFSA) that have already been taxed at 30%.
RRSP Room: 50K (no contributions so far)

Also, I will have the ability to pay non eligible dividends to my parents and my brother through the cie: 
- my income requirement is 30K before taxes (40K at 24% marginal tax rate for dividends)
- brother is still a student (12% tax rate for div)
- father is unemployed on wlefare (12% tax rate for div)
- mum is in the 1st tax bracket, a few dollars from the 2nd (so dividens will increase her marginal tax rate from 28 to 32% on income and from 12 to 17% on dividends).

My goal is to spread payments in such a way as to minimize the amount of tax and create maximal family wealth. My accountant suggested to live from my savings as long as possible to keep as much as possible in the cie for tax deferral. Dividends do not reduce welfare payments till a certain ceiling, since thet are based on salary.

My questions:

1) Since my future income will most likely be in the forms of dividends, it will not add more RRSP room. Should I max out the current RRSP or spend all the $ on living expenses and keep what I can in the cie (aka never contribute to the RRSP) ?

2) In the same line of thought, would you still max the TFSA each year or leave as much as possible in the cie ?

3) The goal of the dividends to family is to max out their TFSA. To top everyone's TFSA now, I would need to gift 35K. Would it be better to make a gift from my savings (already taxed at 30%) now or wait and pay them dividends from the cie ?

4) If my needs and lifestyle remain stable, 200K will last for 5-6 years. Would you invest some to hedge for inflation ? I am thinking of dividend growers.

5) Anything else you would do in my situation ?

I have already asked for professional advice, but I would also like to get some input from this board. I love to read everyone's responses to such threads, and now it is my turn. Let me know what you think 

Dave


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## larry81 (Nov 22, 2010)

have you evaluated the possibility to actually invest the money at the cie level instead of distributing it to family members through dividends ?

thats what i do


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## andrewf (Mar 1, 2010)

Incorporating does not actually drop your tax rate in half. It gives you some discretion over when to pay tax, but generally the corporate tax rates are set such that you would be indifferent between earning into through a corporation and receiving dividends vs earning a wage.

Keep in mind that in order to consume the money in the corporation, you need to pay another set of taxes (dividend or wages).


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## Causalien (Apr 4, 2009)

Pretty interesting stuff. There are a few things that you did not state and I have to assume. Mainly whether the cie will have continuous income or not (I assumed yes) and what you are going to do with the 50k if you did not invest in RRSP. (I assumed invest in stocks)

Just some approximate calculations that I use to answer your questions. Again, there might be errors since I made a lot of assumptions due to lack of data.

http://minus.com/mc7g86l


1) If you were to withdraw at 65, keeping it in the company nets you $32,738 extra. In today's dollar, that's $11,271. The accumulated cost (to your cie) of withdrawing the 50k in year 1 till you are 65 is $2,563,524 (future $) while keeping it in the company is $2,497,735 (future $)

2) Maxing the TFSA and reinvesting it at 5% nets you $1,524,422 (in future $) While the pretax cost of the extra withdrawal to your company is $3,208,261. I did not adjust the tax based on the extra withdrawal and still assumes 24% since you did not provide that. Since I don't know how much you will have left in your cie, I cannot compare the total wealth between the two strategies if you do a drawdown of all assets at 65. Simple calculation of net worth with $3,208,261 - $1,524,422 gives me total cost of $1,683,839. Assuming the same tax rate, it is $2,215,577. Less than any of the cost in 1) So yes. Stuff it all into TFSA if your revenue stream can afford it.

3)Since you already took the tax hit from savings. Max out the 35k TFSA.

4) If you will have no income in the 5 years. Then no. You will likely encounter a 20% drop within 5 years and there will not be enough time to recover. Unless you are a very experienced investor and have the confidence to say that you can wade the waters during 2007~2008 and still come out even.

5)Get more income.


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## the-royal-mail (Dec 11, 2009)

What's cie?


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## humble_pie (Jun 7, 2009)

just to clarify, is this a situation in which the OP has a grand total of something like 200,000; is not gainfully employed; is planning to incorporate with this 200k so as to save on taxes; & intends to spend it all over the next 5-6 years.


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## Causalien (Apr 4, 2009)

Forgot to make it viewable by public. 

cie = company. Using op's slang


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## humble_pie (Jun 7, 2009)

cie is not slang. It's a standard french abbreviation that has been used for hundreds of years.


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## MoneyGal (Apr 24, 2009)

I think he just meant he was using the OP's nomenclature or convention, not that "cie" is literally slang. 

To the OP: if the goal is to fully fund your family members' TFSAs, then you should do that now from savings already in place. There are no tax consequences to you or to them, as you've pointed out. 

I have to admit I don't fully understand this plan, but of course that is neither here nor there. I guess, I just think, that a lot could change for a single 30-year-old over the next 5-6 years. If you set up a structure that is predicated on you having the same goals over that timeframe as you do now, you may not retain enough flexibility if and when those goals change. 

Gifting funds to your family members for their TFSAs is extremely generous. If that is your plan, I'd do it now...and then re-evaluate future gifts, whether via dividends or any other mechanism, as you progress. Right now you don't know whether your corporation will continue to be profitable. Your expenses might change. Your goals might change...there are many moving parts to your plan and you don't control them all. 

Best of luck to you.


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## the-royal-mail (Dec 11, 2009)

humble, I don't care if it has been used for hundreds of years in another language. I do not speak french and to suggest I should know this (without answering my question) is rather ignorant.


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## MoneyGal (Apr 24, 2009)

Did you miss a post? Causalien responded to your question. Humble responded to Causalien.


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## humble_pie (Jun 7, 2009)

i am so not getting this. What's to incorporate. There are modest savings of 200k & unless there is a whole other dimension that i'm not seeing, i for one think it's a scandal for any accountant to serve a client with the kind of badly designed tax "planning" set forth in this message.

OP says his 200k will last 5-6 years at the most. He says he is not gainfully employed. When the funds run out, OP will be 36 years old & penniless. Where is the plan for the rest of his life.

they say free advice is worth what you pay for it, so here are my suggestions. I'll caution now that they are on the brutal side, so the faint of heart should stop reading instantly.

here goes. Get a job. Cut the parents loose. Look into investing in your own education so as to develop & enhance a satisfying career, hopefully a prosperous career. Other than a thousand or 2 as a christmas or holiday gift, forget about the brother & his school bills. He should be funding his own education. Fire the accountant. With only 200k, you don't need an accountant, just a tax preparer which you can find for less than $200.

the fact that you have 50k in rrsp contribution indicates that you have worked in the past, so now might be a time to make the contribution you have never done. It would be an excellent idea to set up & max-fund a tfsa at the same time.

these chops to the 200k will whittle it down to 135,000. This is not enough to incorporate imho, although part of it could be used to purchase a pleasant dwelling. Failing that, it will make a very nice lifetime investment account, providing you don't endanger it with this nonsense about spending it all over the next 5-6 years.

lastly, do you have a large mirror at home. Could you please practice saying before it, every single morning, I am not my brother's keeper. My life is important. I will never be able to help anyone unless i prosper myself. My life is important. I was not born to be the family doormat. My life is important.


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## the-royal-mail (Dec 11, 2009)

Thanks MG. Sorry. I misunderstood. I understand now. cie is company, got it.


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## Simon_oa (Jul 26, 2011)

humble_pie said:


> the fact that you have 50k in rrsp contribution indicates that you have worked in the past, so now might be a time to make the contribution you have never done.


Humble_pie is so right on everything but here's my opinion on this one

if you do as he suggest " . Look into investing in your own education so as to develop & enhance a satisfying career " You might want to keep some rrsp for later since at 30k income you don't pay that much taxes. under 40k ur on the first bracket for any extra income you should use ur RRSP

Otherwise don't go all-in on RRSP this year and keep your income over ur basic tax credits ( 10-12k )


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## Plugging Along (Jan 3, 2011)

I didn't realize the OP was unemployed. Did I miss something?

I agree 100% with Humble. 

I think if you are unemployed, and trying to just spend this money, you are doing yourself the greatest diservice. Take the money, invest it wisely (education counts too), don't think about how you can live measely life on it, and focus on living, and finding something you with enjoy doing for the rest of your live. 

I also did not understand the part about supporting your parents and brother. 


Other factors to consider is the cost of incorporating, and the creating the books/taxes each year with an accountant. This will eat away the little savings you are able to get back in taxes. 

We have incorporated, and have a legitamate revenues each year. There were a couple of years where we didn't have much of business activities, and our accountant suggested that we fold down the business (which of course there is a cost to that too), because of the extra costs to file and have a corporation.


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## MoneyGal (Apr 24, 2009)

I don't think the OP is unemployed, _per se_ - my interpretation was that he has a small business, which is a going concern, and which he is going to incorporate. 

He *also* has savings which can be used to fund living expenses such that profits can be kept in the corporation and then distributed to family members (or not, but that seems to be the plan).


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## humble_pie (Jun 7, 2009)

MG that is a good possible explanation.

also possible that he won loto quebec with family pitching in to pay for the tickets but only his name was on the winning draw. So now he'd like to divvy up fair n square.

tentatively i'm thinking it must be a montreal thing. This is the 2nd montrealer in 6 months to come on here & rabbit on about his circumstances like a nutcase. All is clear as cie for see-the-comp-agn-gnee.

i mean, if it's a business why not say. If it's loto Q why not say. If it's a mafia debt being repaid maybe not say.


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## Dave (Apr 5, 2009)

Ok, there has been a huge misunderstanding. I apologize for that. 

I am working and the income will be going into the company (cie). I thought that it was not relevant how much, but the estimation is roughly 400-600K. That is why I am setting up the cie to defer the tax hit. I will pay myslef 40K in the form of dividends or combination of dividens/salary, but right now my accountant wants me to live off the savings.

As for the family, the goal is to decrease the total tax burden by spreading out the dividends, and also to make them happy because honestly I have no clue what to do with the money. I do not want to save it all for a potential spouse or children that might or might not come.

Dave


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## Causalien (Apr 4, 2009)

Today I learned so many of the long timers here speaks French.


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## MoneyGal (Apr 24, 2009)

Bien sur mon vieux! In fact I am at a French video shoot all day today.


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## andrewf (Mar 1, 2010)

French gives me a headache sometimes. I thought mon vieux meant my old person/my old fart, but apparently it means my old friend? Colloquialisms get me every time. I would say Mon vieux ami, but I suppose that sounds clunky.


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## MoneyGal (Apr 24, 2009)

It was a play on "old-timers." Un _jeu de mots_, s'il te plait.


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## Plugging Along (Jan 3, 2011)

Dave said:


> Ok, there has been a huge misunderstanding. I apologize for that.
> 
> I am working and the income will be going into the company (cie). I thought that it was not relevant how much, but the estimation is roughly 400-600K. That is why I am setting up the cie to defer the tax hit. I will pay myslef 40K in the form of dividends or combination of dividens/salary, but right now my accountant wants me to live off the savings.
> 
> ...



The amount actually does matter, as it only makes sense to incorporate under certain circumstances and amounts. I would say that $400-600K per year, makes alot of sense to incorporate because it will give you much more flexibility. 

What you do with your money is totally up to you. If it makes you happy to give it away, I would certainly be in line to make you happy, and will send you my account information.  In terms of what you should do with your money, I think you need to sit down and develop a plan in terms of what is it that you are working for. What is your age? If you are younger, then even though you don't have kids or a spouse, you may want to look at investing for your own future, prior to giving it away to your family. What about investing for your retirement?


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## Causalien (Apr 4, 2009)

I think most people misunderstood what the op plans to do with the TFSA. The maneuver is that of gifting to relatives who doesn't make any money so he effectively has 15k per year of TFSA contribution room. Then when time comes to withdrawal, op can have the family member gifting back to himself. Or if some tax laws changes, just have the family member buy the things he needs. 

Tax management at its most glorious light.


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## MoneyGal (Apr 24, 2009)

TFSA is all tax-paid capital, so there's no tax evasion. And in any case, where did the OP say that the money, once gifted by him to his relatives, would be repaid back to him in any way?


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## humble_pie (Jun 7, 2009)

salut les mecs.

vous disiez mon vieux ? bonté gracieuse et toute cette sorte ce chose. (une expression pittoresque provenante de l'ontario)

notice please that causalien has a good idea. Would all cmfers with unused tfsa room please register with the Cause.

you'll be screened for reliability in paying back debts of honour.

next, high tax bracket cmfers will fund your tfsas to the max.

in the end, you'll be expected to pay most of it back. There'll be a percentage you'll get to keep for your troubles, of course. Cause, too, will be paid a handsome fee for godfathering this project.

don't get no lippy ideas about working at a high-paying job or (worse) marrying money. The idea is for ya'll to stay barefoot & po' in the kitchen while renting out your tfsa space to the lords of the manor.


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## Causalien (Apr 4, 2009)

humble_pie said:


> salut les mecs.
> 
> vous disiez mon vieux ? bonté gracieuse et toute cette sorte ce chose. (une expression pittoresque provenante de l'ontario)
> 
> ...


Nah, won't work. Gifting has to be done at arms length I believe. Someone understand the law better?


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## MoneyGal (Apr 24, 2009)

Gifting can be done between non-arm's-length parties with no tax consequences. 

And, Causalien, are you suggesting you have non-arm's-length relationships with all of us?


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## humble_pie (Jun 7, 2009)

t'as pas bien compris. Who could be more arms length than a bunch of cmfers. We're not even real people. We're ghosts. With long ghostly lengthy arms that trail invisibly into cyberspace.


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## Causalien (Apr 4, 2009)

There must be someone "sans bras" here.


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## humble_pie (Jun 7, 2009)

Cause i still say there's a market for surrogate tfsas.

if the montreal exchange can do carbon credit futures they should be able to organize tfsa futures.


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## Four Pillars (Apr 5, 2009)

humble_pie said:


> Cause i still say there's a market for surrogate tfsas.
> 
> if the montreal exchange can do carbon credit futures they should be able to organize tfsa futures.


Neat idea, but it's not allowed.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/txtn/vntg-eng.html


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## humble_pie (Jun 7, 2009)

drat ! will just have to take the idea underground, to the betting rings of the real godfathers.

(signed)
sicilian torta


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## Causalien (Apr 4, 2009)

Four Pillars said:


> Neat idea, but it's not allowed.
> 
> http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/txtn/vntg-eng.html


Wait, I need something cleared up here. MoneyGal says you can do it at non arms length without tax consequences. While four pillar disagrees. This is between two professionals so I would like to know what circumstances MoneyGal were thinking of. I am originally with the same thinking as Four Pillar as I saw the same info.


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## humble_pie (Jun 7, 2009)

it seems the rules are different for spousal contributions to a tfsa. If you google you'll see. Here's an extract from a bank of nova scotia tfsa brochure:

_Can I contribute to my spouse's TFSA?
Yes. You will be able to contribute to a spouse's TFSA without affecting your own contribution room. Income attribution rules, which currently govern RRSPs, do not apply.

Would the income earned in that account be attributed back to me?
No. Your spouse owns the TFSA and will earn any investment income and capital gains in the account._


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## Four Pillars (Apr 5, 2009)

I'm pretty sure MoneyGal has referred to a person contributing to their spouse's TFSA.

First of all - that CRA page I linked to is not exactly written in plain English, so it's certainly possible that I misunderstood.

As I understand it - you can give money to someone at non-arm's length (ie your wife/hubby), they can put in in a TFSA, the money grows tax free, they can withdraw the new amount (original contribution + earnings) and give it all to you. You don't pay taxes and neither does your spouse.

If you do this same thing with someone at arm's length - this is considered "advantaged" and is not allowed. 

It should be noted that you are allowed to gift/lend money to an arm's length person - let's say your neighbour. They can put in a TFSA (because it's their money now). But they can't take that money out and give it all back to you tax free. At that point, you have benefited from the tax-free status of the TFSA of an arm's length person which is not allowed (as I read it anyway).

@humble - Yes, you can definitely contribute to the TFSA of your spouse.


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## Causalien (Apr 4, 2009)

Sadly humble. It looks like the only thing we can do with this is a pooled TFSA LBO fund. Round up some homeless people and open accounts for them.


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## MoneyGal (Apr 24, 2009)

Causalien said:


> Wait, I need something cleared up here. MoneyGal says you can do it at non arms length without tax consequences. While four pillar disagrees. This is between two professionals so I would like to know what circumstances MoneyGal were thinking of. I am originally with the same thinking as Four Pillar as I saw the same info.


What I said was that non-connected people (people who are operating at arm's length from one another) can give each other money with no tax consequences. I made no comment on TFSAs, gifting the proceeds of a TFSA, etc. 

You can't use the TFSA to game the attribution rules, and the existence of the TFSA essentially brings a new category of gaming into being. However, this is a separate matter from me giving my neighbour money, or a stranger money; or receiving money from a stranger or my neighbour. 

My comment was just a passing comment about gifting in general; I was making no comment on the existence of advantages arising from a TFSA.


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## humble_pie (Jun 7, 2009)

cause i could see exchange-traded surrogate tfsas as a significant new anti-poverty initiative.

privately & painlessly transferring more wealth to the financially challenged than the rich would have to pay in income taxes while allowing many government services like medicare to self-fund.

i am/am not joking. There must be 15 million canadians who don't have tfsas. Times 15k each. Excess income could be paid out of surrogate tfsas to financially challenged surrogates as medical, educational, justice services, etc, thus relieving the government purse for all taxpayers.

i am certainly not gaming.

in addition, there's value already for some readers in this thread. Who knew that amounts can be gifted into a spouse's tfsa without any attribution rules. Not i, said the pie.


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## Four Pillars (Apr 5, 2009)

MoneyGal said:


> What I said was that non-connected people (people who are operating at arm's length from one another) can give each other money with no tax consequences. I made no comment on TFSAs, gifting the proceeds of a TFSA, etc.


I'm not all that clear how this works. For example my parents are non-arms length to me (I believe). If they gave me $5,000 and I put it into my TFSA (and never give it back to them) - is that not allowed?


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## HaroldCrump (Jun 10, 2009)

humble_pie said:


> cause i could see exchange-traded surrogate tfsas as a significant new anti-poverty initiative.


We should also have call options on a future increase of the TFSA limit to $10K per year.
Then you can do a credit spread with call options


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## humble_pie (Jun 7, 2009)

seriously: i think the issue of who can be gifted in tfsas with non-attribution applying is quite important. 

we seem to have established that spice can gift into each other's tfsa with no attribution of income or capital.

somehow we seem to have established that the spousal giftee can even eventually gift back with no strings attached, although i for one think that asking for tfsa gifted amounts to be returned would be unspeakably tacky.

moving on, what about tfsa gifts for children over the age of 18.
parents.
siblings.
parents-in-law.

anybody else that i've left out (grandparents) (cousins).

it might be surprising what a large family could suddenly develop.


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## MoneyGal (Apr 24, 2009)

Holy crumb. I am giving looks of disapproval all around. ಠ_ಠ	

The act of gifting, in CRA terms, is a distinct act. It is distinct from what the giftee does with the money post-gift. The act of gifting is the act of moving money from MY hands to YOUR hands. 

The act of gifting, considered in isolation, raises no tax issues - whether it is between connected persons or persons operating at arm's length. There is no "gift tax" or "inheritance tax" in Canada. I can give money to you. You can give money to me. CRA is not involved. 

A tax consequence ONLY arises if there are taxable consequences with that money. If my spouse gives me money and I earn particular types of income, that income is taxable in the hands of my spouse. On the other hand, other forms of income and/or investment do not give rise to a tax consequence. Example: my spouse can give me money which I invest to produce capital gains. The capital gains are not attributed back to me. There are many more examples depending on how the gifter and giftee are connected or not. 

If you, FP, receive a gift of money from your parents and put those funds in your TFSA, and then you turn around and re-gift them the same amount, which is the example you gave earlier, *and there has been no gain in value in the account during the time in which the gifted funds were in the account,* there is no tax consequence.

Now I have to type out a long list of provisos. Here is one. If the gift is given by me while I owe money to CRA and CRA believes I gave you the money solely to deplete assets which could otherwise be used to pay my outstanding tax bill, those gifted funds can be seized by CRA. This is not really a "tax consequence" arising from a gift - this is a person trying to circumvent a tax bill. 

The general rule, though, is that gifts = no tax. Tax consequences may arise as a result of post-gift activity while the funds are in the hands of the giftee. But not always. Generalities can kick you in the ***, though. Message boards are not an appropriate source of advice in any real financial situation.

Editing to say I x-posted with Humble. Again, I made no specific comment on TFSAs in this post, just as I did not before.


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## MoneyGal (Apr 24, 2009)

humble_pie said:


> seriously: i think the issue of who can be gifted in tfsas with non-attribution applying is quite important.
> 
> we seem to have established that spice can gift into each other's tfsa with no attribution of income or capital.
> 
> *somehow we seem to have established that the spousal giftee can even eventually gift back with no strings attached*


See this post from 2010: http://canadianmoneyforum.com/showthread.php?t=2114 - particularly carhu's comments.


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## humble_pie (Jun 7, 2009)

didn't 4 Pillars say upthread that spice could give back tfsa funds ... something about "withdraw the new amount and give it all [back] to you" ...


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## MoneyGal (Apr 24, 2009)

Yes. 

And my comment was that if I give my spouse $5000 and he puts it in his TFSA and then the same day he turns around and gifts me back that $5000 (and there have been no other transactions and/or the funds have not been intermingled with other funds in the account and/or there have been no gains in the account) there are no tax consequences. 

Tax consequences, such as they are, arise not from the act of giving but from the activities which are interpolated, in this case, between the acts of giving. The gifts themselves are tax-neutral. But other events may arise which lead to tax consequences.


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## humble_pie (Jun 7, 2009)

yes. But the part i left out of 4 Pillars' quote is that it wasn't a turn-around-and-re-gift-back-immediately situation. The funds went into the tfsa. Time passed. Income was earned within the tfsa. Eventually, in FP's example, giftee spouse withdrew the "new" amount & gave it back ...

btw i did look up your referenced thread & i remain unconvinced in all cases, 100% of the time. Yes i see the potential for abuse in that one spouse could gift to the other's tfsa who could then withdraw the funds & invest without, theoretically speaking, spousal attribution rules. This is not something to condone.

however on a practical level OGG points out how difficult it would be for the cra to investigate a case unless it were a stark black & white situation of one spouse having zero assets save & except for the channelled tfsa funds.

i do see what your source has commented. However the same gentleman has a long history of stubbornly insisting that his interpretations are the one-and-only-righteous-interpretations-because-he-is-the-almighty-incarnate. Here he is providing no precedents or case references for the conclusion he is drawing.

so i still don't know what it is, exactly, that would prevent a re-gifting back by spouse No. 2 to spouse No. 1 after a period of tfsa time has passed. Although i certainly se that some prevention or control should exist to prevent the conduit, because otherwise there is the possibility of abuse.

in real life, i don't suppose this would really happen much. I can't think of anything tackier than expecting a spouse to give back a tfsa. Is that a repulsive idea or what. In a divorce the gifting spouse should accept that the money has flown the coop permanently & will never return.


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## MoneyGal (Apr 24, 2009)

Well, I am being a pedant with my focus on JUST the gifting part, not the "re-gifting." 

What I said in the last linked thread is that I would be cautious. When I studied philosophy as an undergrad I was introduced to the Hart-Devlin debate, which turns on whether we should make law for the 90% who are moral and will not seek loopholes to unjustly enrich themselves and others, or for the 10% who will seek and use the loopholes. I think in the case of TFSAs that *most* people will not attempt to "game" the system. 

By the way, I am mos def NOT "sans bras." I just posted (in another thread, yesterday) that I spent $165 on a single bra on Thursday. So there!


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## Cal (Jun 17, 2009)

I am not sure if things are different in Quebec, however you may want to discuss with your acountant whether an Individual Pension Plan would be a good option for your personal situation.


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## humble_pie (Jun 7, 2009)

cal what on earth are you talking about.


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## humble_pie (Jun 7, 2009)

allez les bras qui se tient debout ensemble !!

you're right, it is philosophy, i don't know exactly how the act reads but quite a bit so far with respect to tfsa would depend upon private rulings, i would imagine. Therefore your suggestions to proceed with utmost caution, every case is different, etc are extremely apropos imho. Including the part about not taking financial advice from internet forums.

i am left with my weekend fantasy fiction about how the rich are to be beguiled into helping the poor via surrogate tfsas. The underlying idea is not a bad one, though, wouldn't you say. The rich should do as much as ever they can to help the nation. Government has already seen the light but could make it even more beneficial, taxwise, for folks to contribute to social justice ...


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## Causalien (Apr 4, 2009)

Wouldn't it just be easy to gift an asset back instead? Since most of the example here are about tax consequences of having a sale of asset and gifting back the cash amount. Although this is probably not doable in the current family structure (imagine your son willing to hand you back the 50K in his TFSA?), but I assume that some wealthy family with centrally planned fund will exploit this.

Humble, I was half joking when I said what I said. I reached the logical conclusion that a fund created by the pooled TFSA of all homeless people will be able to do large buy outs of companies and earn money from that. Since there's no withdraw and re-gifting back to the gifter, there shouldn't be consequences. MoneyGal, please correct any mis-interpretation.

As such, the next phase in this TFSA to fund medicare is to work out incentives for both the homeless and the rich to actually want to pitch in. The rich can be enticed by the tax break granted from gifting to a non-profit. While I believe, the homeless's real problem is in being able to incentivize them enough to actually register. This could be done by the promise of free medical services not provided by medicare. As the amount grow, this is actually a fund that make money from the spread between interest rate and inflation. Some more analysis needs to be done here to see exactly what can be afford by the mere spread.

The next phase, would be the huge problems of how to prevent the poor from withdrawing their TFSA and whether this is actually more efficient than the medicare system that's already in place.


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## humble_pie (Jun 7, 2009)

Cause joking or not this is the lunar edge of anti-poverty programs, so it's entertaining in a kind of solve-this-puzzle way but it's not going to lead to social reform any time soon, right.

but to take another stab at the puzzle, even if only tongue-in-cheek. I for one think homeless people would not be the right population. One would need a surrogate group that is findable, as in locate-able, at all times. Not to speak of stable, reliable & having aspirations for a better life.

so i'm thinking more of the working poor, the folks that don't have & won't have tfsas because all of their resources & all of their energy goes into putting food on the table & roof over the head.

also, i think medical benefits are too huge an area to tackle. How about legal services. Or dentistry. Or physiotherapy. Services these surrogates would like to have but can't afford to buy. Services not usually offered by their work plans, if indeed they are permanently employed (i'm assuming that many are working on contract basis w limited benefits.)

on the other side of things, the rich who contribute need guarantees of final return, which is why i thought facetiously of the montreal aka the tmx exchange. But there could be other structures that could better support a huge number of theoretically-priced future derivatives.


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## MoneyGal (Apr 24, 2009)

I'd rather buy a human capital future: I'll pay for your tuition in exchange for 10% of your pre-tax earnings for the first 10 years after you graduate. Strictly limited in the kinds of tuition I"ll pay for, natch.


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## humble_pie (Jun 7, 2009)

another awesome idea with a kernel of genius.

but these aren't tfsa-related, are they ? would they replace student loans ? in reality they'd probably augment student loans ...

one prob i see is that canada would wind up with a lot of doctors & engineers under such a program; who would buy the social worker or the early child-care specialist's future earnings ...

going back to tfsas, there must be at least 15 million potentials that aren't set up yet & won't be set up because the immediate beneficiaries aren't able to make the contributions. But there might be some way they could benefit.


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