Part IV – Real Estate: Creating Cash Flow from the Proceeds from Selling Your House

Prior to selling your home, we encourage you to have a clear plan of what the next stage would look like.

If that next stage is renting, then meeting with your advisor ahead of time is recommended.   Once you sell, the good news is that you no longer have to worry about costs relating to home ownership, including property taxes, home insurance, repairs and maintenance.

Budgeting, when your only main expense is monthly rent, makes the process straight forward.  The key component is ensuring the proceeds from selling your house will be invested in a way that protects the capital and generates income to pay the rent.

The first step is determining the type of account in which to deposit the funds. The first account to fully fund is the Tax Free Savings Account (if not already fully funded). Then open a non-registered investment account for the proceeds.  Couples will typically open up a Joint With Right of Survivorship account.  Widows or singles will typically open up an Individual Account.

The second step is to begin mapping out how the funds will be invested within the two accounts above. A few types of investments that are great for generating income are REIT’s (Real Estate Investment Trust), blue chip common shares, and preferred shares.  Not only do these types of investments offer great income, they also offer tax efficient income, especially when compared to fully taxable interest income.

When you purchase a REIT, you are not only getting the benefit of a high yield, but you are generally getting part of this income as return of capital. The return of capital portion of the income is not considered taxable income for the current tax year.

As a result of receiving a portion of your capital back, your original purchase price is therefore decreased by the same amount. The result is that you are not taxed on this part of the income until you sell the investment at which point if there is a capital gain you will be taxed on only 50% of the gain at your marginal tax rate. You have now effectively lowered and deferred the tax on this income until you decide to sell the investment.

Buying a blue-chip common share or a preferred share gives you income in the form of a dividend. The tax rate on eligible dividends is considerably more favourable than interest income.

Another tax advantage with buying these types of investments is that any gain in value is only taxed when you decide to sell the investment and even then, you are only taxed on one half of the capital gain, referred to as a taxable capital gain. For example, if you decide to sell a stock that you purchased for $10,000 and the value of that stock increased to $20,000, you are only taxed on 50% of the capital gain. A $10,000 capital gain would translate to a $5,000 taxable capital gain.

We have outlined the approximate tax rates with a couple of assumptions.  Walking through the numbers helps clients understand the after-tax impact.

To illustrate, Mr. Jones has $60,000 in taxable income before investment income, and we will assume he makes $10,000 in investment income in 2016.  His marginal tax rate on interest income is 28.2%, on capital gains 14.1%, and only 7.56% on eligible dividends.

If Mr. Jones earned $10,000 in interest income, he would pay $2,820 in tax and net $7,180 in his pocket.  If Mr. Jones earned $10,000 of capital gains, he would pay $1,410 in tax and net $8,590 in his pocket.  If Mr. Jones earned $10,000 of eligible dividends, he would pay $756 in taxes and net $9,244 in his pocket.

The one negative to dividend income for those collecting Old Age Security (OAS) is that the actual income is first grossed up and increases line 242 on your income tax return. Below line 242 the dividend tax credit is applied.  The gross up of the dividend can cause some high income investors close to the OAS repayment threshold to have some, or all, of the OAS clawed back which should be factored into the after tax analysis.  The lower threshold for OAS claw-back is currently at $72,809.  If taxable income is below $72,809 then the claw-back is not applicable.  If income reported on line 242 is above $72,809 then OAS begins getting clawed back.  Once income reaches $118,055 then OAS is completely clawed back.

The schedule for dividend payments from blue chip equities and preferred shares is typically quarterly.  For REIT’s, it tends to be monthly. Once you decide on the amount you want to invest, then it is quite easy to give an estimated projection for after tax cash flow to be generated by the investments.

Preparing a budget of your monthly expenses makes it easy to automate the specific cash flow amount coming from your investment account directly into your chequing account.

Kevin Greenard, CPA CA FMA CFP CIM, is a Portfolio Manager and Director, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria.  His column appears every week in the TC.  Call 250.389.2138. greenardgroup.com 

This is for information purposes only. It is recommended that individuals consult with their financial advisor before acting on any information contained in this article. The opinions stated are those of the author and not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member Canadian Investor Protection Fund.

Part II – Real Estate: Mandatory to Report Sale of Principal Residence

In our last column we talked about the tax benefits for Canadians owning a principal residence. One of the positve parts about selling a principal residence in the past was that you didn’t even have to let Canada Revenue Agency know you sold it.

 

That is about to change.

 

On October 3, 2016, the Government announced that the Canada Revenue Agency now has a new reporting requirement for the sale of a principal residence. Starting with the 2016 tax year, individuals will be required to report basic information about the sale.   This new rule will require individuals who sell a home at any time during 2016 to report the disposition in their 2016 tax return.

 

The reporting of the sale will be done on Schedule 3 of your tax return. CRA will modify this form for the 2016 tax year.  It is anticipated that you will be required to report the date of acquisition, proceeds of disposition, and description of the property.

 

If the disposition is not reported to CRA, it will not be bound by the normal three-year limitation period for reassessing the disposition. The reassessment period for unreported dispositions will be extended indefinitely, regardless of whether the taxpayer’s failure to report the disposition was innocent or not. Prior to this change, the CRA could only reassess beyond the normal three year limitation period where the CRA could prove carelessness, negligence, willful default or fraud in failing to report the disposition.

 

Listed on the Canada Revenue Agency website, a property qualifies as your principal residence for any year it meets all of the following four conditions:

  • It is a housing unit, a leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation you acquire only to get the right to inhabit a housing unit owned by that corporation.
  • You own the property alone or jointly with another person.
  • You, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year.
  • You designate the property as your principal residence.

 

The actual rules with respect to the disposition of your principal residence have not changed other than the disclosure component. CRA has been increasingly focused on those non-compliant with the rules.

 

In British Columbia, the CRA doubled their efforts on auditing the real estate sector in 2015 and they have started a review of 500 high dollar value real estate transactions in this province.

 

The end goal for CRA is likely to uncover any unreported tax issues.   With computers, real estate information obtained from third parties can more easily be used in their risk-assessment tools, and analytical work.

 

It always amazed me over the years that CRA focused on the reporting of investment income on dividends, interest, and other income as it was mandatory that those amounts were recorded on a tax slip such as a T3 or T5.

 

For most of the years that I have been a Wealth Advisor, CRA did not have a mechanism to monitor the actual disposition of stocks in taxable accounts.

 

As Wealth Advisors we would send a realized gain (loss) report to clients which they would report in part 3 of Schedule 3. If clients failed to report this, CRA had no mechanism linked to a third party to monitor for non-compliance.  It is not until recent years that CRA has required financial firms to report the capital disposition of securities in taxable accounts to CRA. CRA now has a mechanism to monitor for non-compliance for sale of publicly trades shares, mutual fund units and the like.

 

Of course, the process of non-compliance is not black and white. A simple example is CRA targeting the short holding periods (the home may not qualify as capital property, a condition of being a principal residence), a house that was not ordinarily inhabited in each year of ownership by the vendor (another condition to qualifying as principal residence), or builders who build, then occupy, a house before selling (these would be considered inventory and not a capital property).

 

No doubt this change will result in many more audits and reassessments to deny the principal residence exemption.   Careful attention should be paid by trustees and executors to obtain a clearance certificates prior to distributing estates where there has been a recent home sale where the principal residence exemption could be questioned.

Kevin Greenard CPA CA FMA CFP CIM is a Portfolio Manager and Director, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week in the TC.  Call 250.389.2138. greenardgroup.com 

This is for information purposes only. It is recommended that individuals consult with their financial advisor before acting on any information contained in this article. The opinions stated are those of the author and not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member Canadian Investor Protection Fund.

Let’s make things perfectly clear

CAPITAL MAGAZINE

When hiring an accountant or lawyer, you’re billed after services are rendered. In the investment world, it’s not so transparent. With embedded costs, market-value changes, withdrawals and deposits, it hasn’t always been clear exactly what you’ve been charged.

The introduction of fee-based accounts and recent regulatory changes are making significant strides in providing better transparency to investors.

In the past, most types of accounts were transactional, wherein commissions are charged for each transaction. With fee-based accounts, however, advisers don’t receive commissions. Instead, they agree to a set fee schedule, usually charged on a quarterly basis. This fee is normally based on a portfolio’s market value and composition. Buy and sell recommendations are based on the client’s needs and goals. If an investor’s account increases in value, so do the fees paid; conversely, if an account declines in value, fees go down.

The recent increase in fee-based accounts correlates to the implementation of the second phase of the “Client Relationship Model” (CRM), a regulatory initiative passed by the Canadian Securities Administrators in March 2012. The CRM affects both the Mutual Fund Dealers Association and the Investment Industry Regulatory Organization of Canada.

While the key objective of CRM1 was relationship disclosure and enhanced suitability, CRM2 is designed to increase transparency and disclosure on fees paid, services received, potential conflicts of interest and account performance. All of these mandatory disclosures are being phased in from 2014 to 2016.

Last July, CRM2 mandated pre-trade disclosure of all fees prior to an investor agreeing to buy or sell an investment. With transactional accounts, an adviser must disclose all of the fees a client is required to pay, such as commissions when buying or selling positions. Many investors have complained about hidden fees, especially in mutual funds. With CRM2, all of these fees now have to be disclosed prior to the transaction.

Certain types of transactions had no disclosure requirements in the past. For example, an adviser used to be able to purchase a bond and embed their commission in the cost of the bond on the trade confirmation slip. Now, fixed-income trades also require full disclosure. In other cases, even if there was disclosure in the legal sense of the word, understanding this disclosure required clients to read the fine print in lengthy prospectus documents.

With fee-based accounts, the client has a discussion about fees with their adviser up front, and an agreement with full disclosure is signed by investor and adviser.

Another reason for the popularity of the fee-based platform is that many advisers can offer both investment and planning-related services. Many advisers can offer detailed financial plans and access to experts in related areas, such as insurance, and will and estate planning.

In a traditional transactional account, where commissions are charged for every buy or sell, it has always been challenging for advisers to be compensated for additional services such as financial planning. Consequently, many transactional-based advisers would not offer these services to their clients.

Fee-based accounts also offer families one more opportunity for income splitting by setting up account-designated billing for their fees. The higher-income spouse can pay the fees for the lower-income spouse.

Another benefit of a fee-based structure for non-registered accounts is the ability to deduct investment counsel fees as carrying charges and interest expense. Anyone who has non-registered accounts would be well advised to read Canada Revenue Agency’s interpretation bulletin 238R2. Investment counsel fees cannot be deducted for registered accounts, but there is the benefit of paying the fees for registered accounts from a non-registered account.

Adviser-managed accounts have been the fastest-growing segment of the broad fee-based group. In this type of account, the adviser is licensed as a portfolio manager and able to use discretion to execute trades. In setting up the adviser-managed account, one of the criteria is that the account must be fee-based. Regulators have made it clear a portfolio manager is not permitted to use discretion when it comes to commissions or transaction charges. One of the starting points to setting up a managed account is to get a defined investment policy statement that sets out the relevant guidelines that will govern the management of the account.

Regulatory Change Helps Drive Popularity of Fee-Based Investment Accounts

CPABC IN FOCUS MAGAZINE

The investment services industry is changing at a dramatic pace, with investors demanding more choice, more transparency, and more personalized advice. One of the fastest growing trends within the financial services sector is the use of fee-based accounts. While there are many reasons for the increasing popularity of these accounts among advisers and clients alike, recent regulatory changes have been a major catalyst.

Traditional vs fee-based account structures

In the past, the most common type of account structure has been a transactional one, wherein commissions are charged for each buy or sell transaction. With fee-based accounts, however, advisers do not receive commissions—instead, they agree to a set fee schedule, usually charged on a quarterly basis. This fee is normally based on the portfolio’s market value and composition. Buy and sell recommendations are based solely on the client’s strategic needs and goals. If an investor’s account increases in value, so do the fees paid to the adviser; conversely, if an investor’s account declines in value, so do the fees paid. With a fee-based structure, the adviser has a direct (and overt) incentive to ensure that the investor’s account increases in value.

Client relationship model initiative enters second phase

The recent increase in the use of fee-based accounts correlates to a large extent to the implementation of the second phase of the “Client Relationship Model” (CRM), a regulatory initiative passed by the Canadian Securities Administrators in March 2012 The CRM affects both the Mutual Fund Dealers Association and the Investment Industry Regulatory Organization of Canada.

While the key objective of CRM1 was relationship disclosure and enhanced suitability, the key objective of CRM2 is to increase transparency/disclosure for investors with regard to fees paid, services received, potential conflicts of interest, and account performance. All of these mandatory disclosures are being phased in from 2014 to 2016.

In July 2014, CRM2 mandated pre-trade disclosure of all fees prior to an investor agreeing to buy or sell an investment. With a traditional transactional account, an adviser must disclose all of the fees a client is required to pay, such as any commissions for transactional accounts when buying or selling positions. However, many investors have complained about “hidden” and unexpected fees, especially with respect to mutual funds. With CRM2, all of these fees now have to be fully disclosed prior to the transaction.

This move to greater transparency is a major shift from certain types of transactions that had no disclosure requirements in the past. For example, an adviser used to be able to purchase a bond and embed their commission in the cost of the bond on the trade confirmation slip. Now, fixed income trades also require full disclosure. In other cases, even if there was disclosure in the legal sense of the word, understanding this disclosure required clients to read the fine print in lengthy prospectus documents. Similar CRM2-type regulations for full disclosure were implemented in Australia and the UK in 2013, requiring transparency regarding all fees. Not surprisingly, this resulted in a significant reduction in the number of financial advisers working in the industry in both countries. It’s possible that we could also see a reduction in the number of advisers here, once the new rules are fully implemented in Canada.

Fee-based accounts are already onside of the new rules, as transparency is embedded in their structure: The client has a discussion about fees with their adviser up front, and a fee-account agreement with full disclosure is then signed by both the investor and the adviser. 

Comprehensiveness

Another reason for the growth in popularity of the fee-based platform is the fact that many advisers now offer a comprehensive wealth offering, which includes both investment and planning-related services. This differs from the role of the stock broker of the past.

Clients have a variety of financial planning needs, primarily with regard to retirement and estate planning. Many advisers can offer detailed financial plans and provide access to experts in related areas, such as insurance, and will and estate planning. An adviser will often communicate with the client’s accountant and lawyer to ensure everyone is on the same page.

In a traditional transactional account where commissions are charged for every buy or sell, it has always been challenging for advisers to be compensated for additional services such as financial planning. Consequently, many transactional-based advisers simply would not offer these services to their clients.

Some unique benefits

Certain benefits are unique to fee-based accounts.

Rebalancing without additional cost

For example, this structure enables wealth advisers to rebalance portfolios as needed to reduce risk at no additional cost. Multiple types of rebalancing are important when managing risk. At the macro level, let’s assume a client’s optimal asset mix is 60% in equities and 40% in bonds. After a period of strong equity markets, the client’s equity percentage rises to 68%. Reducing equities by 8% and allocating this to fixed income is rebalancing at the macro level. At the micro level, there is an optimal position size for one holding. In this example, let’s assume the optimal position size is $24,000 for each company held in the portfolio. If one stock rises significantly above or below the optimal position size, then consideration for a rebalancing trade should occur.

Several trades could be required on an annual basis to rebalance a portfolio. With transactional accounts, the commissions for doing multiple small adjustments would likely be prohibitive. However, not doing the trades because of the commission payable in a transactional account means that you’re not managing risk as effectively.

The adviser’s ability to make tactical shifts in an account is another benefit of fee-based accounts. For example, there are times when investors benefit from moving in or out of USD-denominated holdings. Being able to make these changes when the currency is right should be done without concern for the trade’s commission cost. Being able to move between sectors based on current outlook can also be strategic, especially when transaction charges are not a factor (if a transaction charge is 2% to sell and 2% to buy, then the cost of any switch trade has to increase by 4% to break even).

Income splitting and “householding”

Fee-based accounts also offer couples and families one more opportunity for income splitting by setting up account-designated billing for their fees. For example, the higher income spouse can pay the fees for the lower income spouse. Let’s assume the lower income spouse has an RRSP and a TFSA. The higher income spouse can put funds into the lower income spouse’s account as a contribution of fees without attribution. In another example, a client with multiple fee-based investment accounts (i.e. one non-registered and five registered) can arrange to have all of the fees paid out of the non-registered account.

“Householding” is a term used in fee-based accounts to link accounts together for fee-billing purposes. As the total of the householded assets increases, the percentage fee for the adviser’s services decreases. Let’s say we have a middle-aged couple with $400,000 in investments. The couple has parents with $680,000 in investments, over which the couple has power of attorney. The couple also has a corporate account totalling $120,000 in investments. By householding, or combining all accounts under one agreement, the household value becomes $1,200,000, which results in lower overall fees for everyone.

Deducting investment council fees

Another benefit of a fee-based structure for non-registered accounts is the ability to deduct investment council fees as “carrying charges and interest expense.” Many investors are still not aware of these tax benefits. Anyone who has non-registered accounts would be well advised to read the Canada Revenue Agency’s (CRA) interpretation bulletin on this topic (IT-238R2). The investment council fees cannot be deducted for registered accounts, but there is the benefit of paying the fees for registered accounts from a non-registered account, especially for younger clients where registered accounts are deferred for many years.

Adviser-managed accounts

Over the last several years, adviser-managed accounts have been the fastest growing segment of the broad fee-based group. In this type of account, the adviser is licensed as a portfolio manager and able to use his or her discretion to execute trades.

In setting up the adviser-managed account, one of the criteria is that the account must be fee-based. The regulators have made it clear that a portfolio manager is not permitted to use discretion when it comes to commissions or transaction charges. One of the starting points to setting up a managed account is to get a clearly defined investment policy statement that sets out the relevant guidelines that will govern the management of the account. At this same time, a fee-based agreement is signed that clearly outlines the negotiated fee structure.

Shifting to a new model

As the financial services industry continues to change and evolve, so do the solutions being offered. There is now more flexibility and choice in how a wealth adviser and an investor can work together.

High-net-worth clients are looking for advisers who have the credentials and licensing to offer discretionary portfolio management. Within that context, there is also an expectation that financial planning and other related services will be part of the overall fee-based structure. The traditional model of solely doing stock trades for trading commissions is becoming an increasingly difficult business model to sustain.

Kevin Greenard is a portfolio manager and associate director of wealth management with ScotiaMcLeod, a division of Scotia Capital Inc. and ScotiaMcLeod Financial Services Inc.

A proactive advisor can cut your taxes

Clients are often unaware of investment alternatives, credits, loss-recovery options

I ask every new client to sign a Canada Revenue Agency (CRA) form T1013 – Authorizing or Cancelling a Representative. This authorizes CRA to release tax related information to me, referred to as a “representative.” It is an invaluable tax tool to proactively help clients.

Canada Revenue Agency’s website (cra-arc.gc.ca) is a great resource for general information.   On this website, representatives can access their client’s tax information. When I have clients sign the T1013, I request Level 1 authorization which enables me to view information only. There is no ability to make changes. The most obvious benefit for clients in signing the T1013 is that they no longer have to bring in a copy of their annual tax returns and applicable notices of assessments. This information is available online. I use it for a variety of purposes, primarily to give proactive advice to save tax dollars. Here are a few situations clients have encountered to which I was able to provide solutions as a result of having the T1013 on file.

Situation 1: In examining Mr. Red’s tax return, we noted he had to pay $456 in interest and penalties to CRA for not making his quarterly instalments on time.

Solution: We brought this to Mr. Red’s attention and provided automatic solutions that could help him. The first was that we could begin withholding tax on his RRIF payments. The second was that we could contact Service Canada and request that withholding tax be taken on CPP and/or OAS payments. A manual option was that we could make his quarterly instalment payments to CRA for him directly from his non-registered investment account.

Situation 2:   Mrs. Brown is a new client who transferred in a non-registered investment account. During our initial conversations, she said she prepares her own tax return. My evaluation of her past returns showed there was no carry-forward information for realized gains or losses on her investments. I confirmed that she had sold many investments over the years, but had not recorded these on her tax return.  

Solution: I explained that all dispositions in a taxable account must be manually reported on Schedule 3 (no tax slip is issued for this). We assisted her in obtaining previous annual trading summaries to calculate the numbers needed to adjust her previous tax returns.

Situation 3: Mr. Black has been contributing to his RRSP for many years. In the last year, his income dropped substantially and he was comfortably in the first marginal tax bracket. Mr. Black said he projected that his income would continue at the current level or decline as he approaches retirement.              

Solution: It no longer made sense for Mr. Black to continue to contribute to his RRSP account. His savings should be directed to a Tax Free Savings Account.

Situation 4: Mr. Orange received penalties for over-contributing to his TFSA accounts. In our first meeting, he explained that he had several TFSA accounts and had lost track of his withdrawals and contributions.

Solution: We outlined the rules with respect to TFSA accounts and any replenishment for a previous withdrawal must occur in the next calendar year. I also had him sign the T1013 form. I printed out all of his TFSA contributions and withdrawals from the online service. I recommended that he consolidate his TFSA accounts. I also provided copies of the CRA reports, including a report which shows his current year contribution limit.

Situation 5: Mrs. Yellow has been a long time client whose health has deteriorated over the years. In reviewing her tax returns, I noted that he was not claiming the disability tax credit.

Solution: I provided her with a copy of the Disability Tax Credit form T2201. I advised her to bring this to her doctor to have the form signed and submitted. A few months later, Mrs. Yellow received a letter back from CRA with their approval for her application. They also approved backdating her eligibility to 2009. In assisting Mrs. Yellow and her accountant with the T1-Adjustment form, we projected that she would receive a tax refund of $12,490. From now on, Mrs. Yellow will be able to claim the disability tax credit every year, resulting in significant tax savings.

Situation 6: Mr. White has, in the last few years, completed his own tax return using Turbo Tax. He has correctly reported the taxable capital gains on line 127 of his tax return during this period. Unfortunately, Mr. White did not initially key in his loss carry-forward information. Many years ago, Mr. White had a significant net capital loss on a real estate investment, and was not aware that he could apply his net capital losses to reduce his taxable capital gains on the stock sells.  

Solution:   I arranged a meeting with Mr. White and explained to him the importance of keying in the carry-forward amounts when starting to use Turbo Tax. I also showed him how he can use a T1-Adj form to request CRA change line 253 – Net capital losses of other years. Mr. White had to submit four T1-Adj for each year he missed applying his net capital losses. Combined Mr. White received a refund of $47,024 after all reassessments.

Situation 7: Mrs. Green has recently transferred her investments to us. We noted a few investments with significant losses that she has held in her account for many years.   There is little hope that these investments will recover in value. In reviewing Mrs. Green’s online account with CRA, I looked up all of her previously reported taxable capital gains and net capital losses. In this analysis, I noted she had substantial taxable capital gains three years ago that brought her income into the top marginal tax bracket.   Net capital losses can only be carried back up to three years. Mrs. Green was unaware net capital losses could only be carried back up to three years.

Solution: I recommended that Mrs. Green sell most of her investments that were in an unrealized loss situation. By selling these she triggered the tax situation and created the net capital loss. I printed off the T1A – Request for Loss Carryback form and explained to Mrs. Green how the form works. Mrs. Green was able to recover $29,842 after CRA carried the loss back and reassessed her tax return from three year ago.

Situation 8: Mr. Blue had stopped working at the age of 62, but his spouse was continuing to work a few more years. In looking at his CRA online reports, I noted he was collecting CPP and that this represented most of his income, which was below the basic exemption.  He had not thought about taking money out of his RRSP early as Mrs. Blue was continuing to work and they had enough money flowing in from her income and in the bank to take care of the bills. Mr. Blue had a sizeable RRSP account and Mrs. Blue will have a good pension when she retires that can be shared.

Solution: I explained to Mr. Blue that when he starts collecting OAS, pension splitting with his spouse, and having to withdrawal from his RRIF that his taxable income will increase significantly. We recommended that he convert a portion of his RRSP to a RRIF and begin taking income out on an annual basis immediately. We mapped out a plan to keep his taxable income around $35,000. With these early withdrawals, our projections would keep both Mr. and Mrs. Blue in the top end of the first marginal tax brackets throughout retirement.

Situation 9:   Mrs. Purple is extremely busy with work and has a great income. It is definitely advisable for Mrs. Purple to maximize her contributions to her Registered Retirement Savings Plan (RRSP). Unfortunately, Mrs. Purple never seems to find the time to photo copy her notice of assessment and provide this to her advisor. She was frustrated that last year, she missed contributing to her RRSP because her advisor did not phone.

Solution:   When Mrs. Purple came to see me I explained the benefits of the T1013 form. One of the main benefits is that I can go on-line and instantly obtain her RRSP contribution limits and unused portions for the current year.   I proactively contact each applicable client and advise them of their limits and recommended contribution level based on projections of current and future income levels.