Update for Canadian Investors

As we review 2010, one is struck by the divergence between the year’s gloomy headlines and the generally positive results shown by the financial markets. Some of the challenges facing the global economy during the year included the effects of the major oil spill in the Gulf of Mexico and ongoing concerns that some European governments will default on their debts. These joined lingering problems in the U.S. economy, including high unemployment, slow growth and an expanding government deficit. Nonetheless, many of the world’s major stock and fixed-income markets made gains during the year.

In Canada, the S&P/TSX Composite Index was up 13% in 2010 and benefited from strength in commodities such as gold, oil, copper and potash to become one of the world’s best-performing markets. U.S. equities also moved up, with sectors such as industrials and consumer discretionary products among the leaders. It’s worthwhile to note that those sectors are cyclical – they perform best during a period of economic growth. Overseas, equities in emerging markets and Asia also rose, while European stock markets were mixed. Equity indexes in those countries with the biggest debt problems were down for the year.

Why have so many markets rallied despite what seems to be an inhospitable environment? Stock markets are a leading indicator – they tend to anticipate future developments rather than reflect what is happening now. Judging by the results of the past year, equity market investors are expecting continued recovery and growth.

Indeed, there are several factors supporting a positive outlook. The economy has continued to grow in all major regions of the world in 2010, including Europe. Although government and consumer debt levels are a concern, many corporations are in good shape, with strong balance sheets. This has left them well positioned to take advantage of some of the key trends in the global marketplace – such as the robust growth in emerging markets. Bond markets are also pointing to a strengthening economy, as indicated by the increase in U.S. bond yields in the fourth quarter.

 

Of course, events may conspire to change this outlook. That is why I suggest  having a diversified portfolio tailored to your individual circumstances, and maintaining a long-term view for your equity investments.

 

IMPORTANT: Buy Business equipment by Jan 31/11 - 100% Write Off

Electronic equipment

You can write off 100% of the cost of computers.The accelerated capital cost allowance (CCA) for eligible computers announced in the 2009 budget allows businesses to claim 100% of computer costs (including systems software) purchased after January 27, 2009 and before midnight, January 31, 2011.

To qualify for this rate, the asset must also:
- be situated in Canada
- not used or acquired for use for any purpose before acquired by the taxpaper
- acquired by the taxpayer
- for use in a business carried on by the taxpayer in Canada or for the purposes of earning income from property situated in Canada
- for lease by the taxpayer to a lessee for use by the lessee in a business carried on by the lessee in Canada or for the purpose of earning income from property situated in Canada

PART II: Tax Tips you need to know now, before the year ends!

Part 2 in our series of articles geared towards an early start to planning for your 2010 taxes.

These articles are targeted to presenting what you need to know in advance to make the best use of available opportunities.  In this article we cover subjects such as charitable donations, tax-free savings account contributions, RRSP contributions, RRIF’s mutual funds and investment expenses.  To see the full article.  Please use this link http://www.liwanpo.com/taxes_personal.php

2010 Tax Tips you need to know before year end!

Start planning for your 2010 taxes  early.  Don’t wait until it’s too late to minimize your 2010 tax bill.  Use the link here to find out what you need to know in advance to make the best use of available opportunities. http://www.liwanpo.com/taxes_personal.php

If you haven't already, then start planning for your 2010 taxes now:

Investors may be able to leverage tax-loss selling to reduce or recover taxes.  Consider making use of  capital gains or investment transfer opportunities to reduce or delay taxes payable for the 2010 tax year.

Retirement Pro: CPP Reforms 2011-2014

Retirement Pro: CPP Reforms 2011-2014: "Canada Pension Plan Reforms On May 25, 2009, the Ministry of Finance announced changes to the Canada Pension Plan (CPP). These changes were ..."

How to avoid RRSP Over Contributions

It is a sometimes confusing and not well understood fact, but over contributions to your RRSP may be subject to  penalties.  This penalty tax is exorbitant! To help avoid this additional tax burden, read the following tips on RRSP Planning and advance strategies.

If you inadvertently contribute more than your contribution limit, you will be subject to a 1% penalty tax per month to the extent that the over contribution amount exceeds $2,000.  This penalty tax is exorbitant so it is not worthwhile to make over contributions above the limit. Canada Revenue Agency has stepped up its monitoring of RRSP over contributions lately, so here are some tips to help avoid paying this additional tax burden.

 

http://www.liwanpo.com/taxes_personal.php

Managing Severance Packages

Severance Pay, Retiring Allowances, Tax Deferral, RRSP Transfers.  If you need to know more about these subjects, then the following article may be of value to you. 

With the downturn of the economy, some who have lost their jobs, may have received large sums in severance and the uncertainty of what to do with it.

Although receiving a large or modest severance package can help soften the blow of losing your employment, the sudden influx of cash can have serious tax consequences if not managed properly. In some cases, it might even be beneficial to negotiate with your employer and arrange to receive severance payments after January 1.

If severance is a one-time payment or a fixed amount payable over a short period with respect to loss of employment, or after retirement in recognition of long service (without continuation of employment benefits), it’s considered a retiring allowance. Retiring allowances are fully taxable in the year received. However, a portion may be eligible for transfer to the recipient’s RRSP, resulting in a deferral of tax on the amount transferred.

Your life and health insurance benefits also need to be addressed rather quickly — often your group insurance can be converted into an individual policy without the need to provide medical evidence, but there might be only a short period of time to do so. Unless you are in excellent health, this could be your only chance to obtain sufficient insurance coverage at a standard rate.

If you would like more details on this subject please see the complete article, at http://www.liwanpo.com/taxes_personal.php