When it comes to tax savings or complete tax avoidance, if it sounds too good to be true, it probably is. Here are three popular myths you may encounter and accept as truth:

Unlocking funds

I can use my RRSP, LRIF, LIRA, or LIF as collateral for a loan or exchange them for special investment shares and "unlock" these funds without facing any tax consequences.

The Canadian Association of Pension Supervisory Authorities points out that companies and individuals who offer this type of program are violating tax laws in their attempts to circumvent provincial pension laws. The result could be a deemed disposition, and the annuitant could be forced to declare the full amount as income in the year the transaction takes place.

"Participants in such schemes could stand to lose a significant portion of locked-in funds as 'commissions' or 'fees' for these transactions, and may face large, unexpected tax bills," warns the CAPSA public advisory.

Offshore Accounts

I can hide my assets from the Canadian tax authorities by keeping them in a foreign bank account. They will never find out about it if I don't tell anyone.

In this computer age, it is not such a difficult thing for the CRA to conduct a regular cross-search of databases. Besides the many international tax treaties which the Canadian government has signed that allow for the exchange of information, Canada is also a member of the Organisation for Economic Co-operation and Development (OECD). For the last four years, the OECD has been putting pressure on countries it refers to as "uncooperative tax havens," threatening sanctions if they fail to share financial information. It has been a successful campaign - Barbados, Bermuda, Cayman Islands, Cyprus, Guernsey, Malta, the Isle of Man, and the Seychelles (to name but a few) have all agreed to comply.

Donating Art

I can buy a bunch of art at a cut rate and then donate it to my favourite charity or university for a lot more than what I paid - and get a juicy tax credit!

If it sounds too good to be true, it probably is. When a promoter sells one or several pieces of art to an individual at a low price, and then arranges to have the work appraised for several times that amount, it's known as "art flipping," and it's a scam. The CRA recommends that purchasers make certain the appraiser is qualified and is an independent party not connected to the promoters or sellers of the art. If the CRA should decide that the value is inflated, the donation will be disallowed and gross negligence penalties may also apply.

To maximize your tax savings this year, please don't hesitate to give us a call or send us an email. We'd be happy to talk to you.

Yours truly,

Tactical Asset Management, Inc.
phone: (306) 757-2121
fax: (306) 347-3655
e-mail: inquiry@tacticalassetmgmt.com
website: www.tacticalassetmgmt.com