QUESTION:

Dear Mr. Ingram,

I’ve read your Nov 2001 newsletter (along with several e-mail answers) and
you have consistently maintained that one should “kill” their professional
corporation in order to utilize the “cash flow dam” method of the Smith
Manoeuvre.

However, there is seems to be an equally simple way to use the exact same
strategy using a corporation and avoid “killing” it. Many professionals are
incorporated in order to tax defer profits at the small business rate. As
such they have accumulated funds in their company and so it may make no
sense to “kill” the company and pay-out the retained earnings (potential big
tax hit). If there are retained earnings, then the company has to stay alive
and legal/accounting fees will have to be paid anyway.

Consider the following:

1. Professional Corp. sets up 2 bank accounts
2. All revenue is deposited into A/C #1 on and all expenses are paid from AC
#2
3. Shareholder borrows from personal LOC and lends to AC #2 as a
shareholders loan. Interest on LOC is tax deductible since loan can be shown
to clearly pay for operating expenses
4. Company re-pays the shareholders loan from AC #1 which he/she then uses
to pay down mortgage

This is pretty simple to set-up and is no more complicated than the Nov 2001
set-up. Furthermore, if there are multiple shareholders (e.g. husband/wife)
in different income tax brackets, the corporation provides the flexibility
as to which shareholders can contribute towards expenses and thus deduct the
LOC interest. This could be done for example if husband own 100% of class A
shares & wife 100% of class B shares.

In conclusion, simple bookkeeping can ensure that incorporated professionals
can still enjoy tax deferral/small business taxation and still effectively
employ the cash dam strategy in order to make their mortgages tax deductible
without “killing” their professional corporations. Do you agree ?

My question is: Canadian-specific
Subject: tax shelters
Expert: [email protected]
Date: Tuesday November 22, 2005
Time: 10:45 PM -0800

QUESTION:

what can you tell me about putting money offshore where it can't be taxed. I have a friend who wants to do this. I think you may need a Nevada corp or IBC
Thanks for your time
XXXXXX

The Editor, Western Producer

I have always been an urban admirer of the Western Producer and in particular of the Wendy Holm column in the last couple of years. I did attend but did not graduate from the 1965 Class at Ontario Veterinary College and I worked for Health of Animals a while and spent three years vaccinating calves for Bang's Disease. Oh yes, i also worked as an AI technician in 58, 59, 60 and 61. At one time I thought I had been on every farm with a cow in Manitoba, Saskatchewan and Alberta.

I have also always criticized the Canadian Wheat Board for its monopolistic policy.

However, I am totally disappointed in the Western Producer for not running Wendy Holm's August Column which tells another side of the story. It is your DUTY to present BOTH sides of the story.

The column was written by one of the most qualified Agrologists in North America. Her work on water and NAFTA is the bible to read on the subject.

I urge you to reconsider the column.

Columnists are "supposed" to take a stand.

For my own 13,000 plus readers, the following column is worth reading if you are concerned with US / Canadian relations, Free Trade, NAFTA and the cost of a Tim Horton's or Krispy Kreme doughnuts.

If you feel as I do, write some of the Western Producer staff (their addresses are above) and suggest that they reinstated the column and publish this one in particular.

david ingram - [email protected] www.centa.com

My question is : Canadian-specific

Hi David - I signed up for a condo under construction
and paid 10% down on my LOC this year. The possession
date is mid-2006. Will I be able to deduct the
interest charged on my LOC this year or do I have to
wait until next year? Since the funds from LOC were
taken to pay for the revenue property, I am assuming
the interest is deductible. Your answers to these
e-mails are very helpful.

Thanks

Hi David

How can you put your prof-corp. "on hold" without paying out the retained
earnings ?

Thx

My question is: Canadian-specific

QUESTION: I have a house which I am living at for over a year but I would
also like to buy another house and flip it. What kind of taxes are involved?
Is it 50% tax free and 50% claimed as income in Alberta?

QUESTION: I recently became a landed immigrant in canada. I am on a h1b in
the USA . I am apprehensive about moving to Canada without a good job offer.
Is there anyway I can compensate the 3 yr period rule for citizenship while
on h1b .
Iam considering moving to windsor and working in detroit.

Your answer to this will be appreciated

Hello,

My question pertains to a move outside of Canada.

The company I work for wants to send me to either its Aberdeen, UK or
Portsmouth, UK office.
I would become an employee over there (its a different division of a large
European oil comany which operates under a different name in Alberta) as
opposed to being "seconded", and as such receive a salary in sterling.

Could you please tell me what problems would arise from the fact that I own
a condo in Calgary,
and whether renting this out as opposed to leaving it empty would cause me
any trouble taxwise.

Also they told me I would probably be sent to work in the Rotterdam office
after 9 months. I do not forsee myself returning to Alberta until at least
18 months to 2 years.

I am a Canadian citizen, but have a UK passport through my parents.

Thank you in advance for taking time to read this query.
-----------------------------------------------------

David,
I am new to your daily newsletters. Enjoy them very much. I am a US citizen
now living in Canada with Permanent Resident status since Jan. 2005. I do
now have a SIN as well as a Social Security number. I currently do not do
any work within Canada. I am an entertaiiner working Vegas, TV, cruise
ships, and corporate convention dates....all in the US. I also formed a
s-corp in April of 05 but have not used it at all. I intend to file a
dormant return on that and intend to keep it in the event I chose to use it
in the future. I make quarterly estimated payments to the IRS. My Canadian
wife and I live here in BC and we own a house together that we bought in
Dec. of 2002.

1. Am I to assume that I will be paying Canadian taxes as of 2005?

2. Am I assuming correctly that I will be required to file my 1040 federal
return to the US and then have a Canadian accoutant file a British Columbia
return?

3. I have been deducting my mortgage interest on my US 1040. If I have to
file a Canadian return too, will I be able to deduct the mortgage interest
in Canada as well?
4. My wife is a school principal. Can she deduct the mortgage interest on
her Canadian return?
Thank you.