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HomeMy WebLinkAboutThe Brussels Post, 1972-02-02, Page 3S RADIOand TV SALES &SERVICE' ELECTROHOME , an ern' dagiee of Oacellenee QUEEN STREET•SLYTH,ONT.• Phowe, 523-9640 • J. E. LONGSTAFF -OPTOMETRIST- SEAFORTH, GOVENLOCH ST. 527-1240 Tuesday, Thursday, Friday, Thursday Evening CLINTON OFFICE, 10 ISAAC STREET Monday, and Wednesday 482-7010 Phone. Either Office For Appointment HOUSE OF MAX FURNISHINGS - INTERIORS M. L. WATTS FUNERAL HOME PHONE: 887-6336 or 887-6585 BRUSSELS, Ont. CRAWFORD and MILL J. H. CRAWFORD, Q.C. A, R. M. MILL, B.A., LLB. ROSS E. DAVIES, B.A., LLB. BRUSSELS • and WINGHAM PHONE 887-9491 PHONE 357-3630 Wingham Memorial Shop QUALITY SERVICE CRAFTSMANSHIP Open Every Weekday Your Guarantee For over 35 Years of CEMETERY LETTERING Box 156 WINGHAM JOHN MALLICK JIM CARDIFF REAL ESTATE BROKER GENERAL INSURANCE AGENT FOR HOWICK FARMERS MUTUAL FIRE INS. REAL ESTATE BROKER GENERAL INSURANCE FIRE ' AUTO LIABILITY PHONE: OFFICE 887-6100 RES.887-6164 McGavin's Farm Equipment WE SPECIALIZE IN A COMPLETE LINE OF FARM EQUIPMENT Sales and Service BRUSSELS WALTON, ONTARIO SEAFORTH 887-6365 527-0245 DEAD STOCK REMOVAL SERVICE WANTED - DEAD AND DISABLED - CATTLE AND HORSES - TOP PRICES PAID FOR HORSES ON THE HOOF Small Animal Pickup 24 Hr. Fast Efficient Services Brussels Pet Food Supplies tic. 2 /3 -e-70 S FREE OF CHARGE OVER 150 LBS. PHONE COLLECT 887-9334 BRUSSELS What Federal' Tai Changes May Mean To Foirner's stateatOrY interpretation and the general inteet, of the legislation as a Whole, the interPreiatioll adopted which gives the benefit Of the doubt to the, taxpayes,r. This is a big mouth gull. c71?-..- Yietisly not everything is "cut and dried", It will be some time before the implications are clear. The Department of Net- ional Revenue will be sending out special pamphlets on subjects, such as; Valuation Day, capital Gains, Partnerships, Basic Herd, Goodwill (Quotas) etc. Farmers as a group will receive a pack, age, of pamphlete of direct int- erest to them. Each District Taxation office by J. J. HaeartY, Area CO-ordin- ator and F'arrn Managemeet Spec- ialist, Department Of Agriculture Quite frankly it is too early to tell What all the changes might mean, The new tax legistlatieniP now law, Many amendments are still to be included. Just what the official interpretation might be is open to speculation. The administrators are guided by legal advisers and by consider- ations of reasonableness and Practicality. The Department of National Revenue states that "where two interpretations seem to have equal support, having regard to equity, reasonableness, will receive visits, telephene calls and written inquiries. They will be holding special tax reform. briefings in. various communities and individual officers, will be available to speak at meetings. They prefer to de this frpm next May on following the 102 filing season. In the meantime we all have a responsibility to inform our- selves of the basic ehanges. And perhaps put ourselves in a pos- ition of being able to say - what is reasonable and practical. Farmers should be encour aged to record realistic values on all assets as of December 31st, 1971. This is important on records such as CANFARM. These records will be valuable assets in years to come. Some of the major points are as follows: !, Income Tax Exemptions - single exemptions increased from $1,000 to $1,500 - married exemptions in- creased from $2,000 to $2,850 - persons over age 65 exernp- tions increased from $500 to $650 - young people over 16 years of age can earn up to $1,050 without lessening the $550 ex- emption received by their father 2. Estate Taxes Federal Government have ab- olished Estate Tax as of Decem- ber 31st, 1971. Main reason stated for this move is to avoid double taxation on estates (Estate Tax and Capital Gains) at death. 3 Succession Duties The Ontario Government have proposed changes in these Dut- les. Legislation is yet to be introduced, but any changes will be retroactive to January 1st, 1972. The exemptions are: - to a spouse $500,000 - to any other beneficiary $100,000 There will be no Succession Duties on estates less than $100,000. Any donor making gifts must survive for '15 years tc avoid having them 'brought back into the estate (previously 5 years). 4. Gift Tax No Federal Gift Tax. A new Ontario Gift Tax will be im- plemented along with the Suc- cession Duties. Exemptions al- lowed will be $2,000 to any indi- vidual up to a maximum of $10,000 in any one year. 5. Capital Gains Tax to Com- mence 'on January 1st, 1972 Two Evaluation Days - Dec- ember 22nd, 1971 for Stock Mar- ket Shares; December 31st, 1971 for all other assets - The evaluation date affects only items held prior to and on Valuation Day. Subsequent acquisition will be measured for gains or losses on their acqui- sition costs - a farmer should record a present fair market value of real estate, buildings,. existing basic herds and mach- inery as of December 31st,1971. If the farm is a limited .com- pany, all assets should be given a fair market value as this value will determine the value of Com- mon Shares. Every valuation of these properties should be sup- ported with pertinent informa- tion such as (a) land - your purchase price, particularly if recently pur- chased, sales of similar prop- erties - condition of develop- ment, clearing, levelling or til- ing, productivity of property, a detailed sketch showing power lines, roads, perrnanet buildings, etc., a few photos to be included with records might be quite use- ful. (b). Buildings and machinery- structure, material, year con- structed or purchased, major repairs or changes and condi- tion. (c) basic herd - number of animals, age of animals, pro- ductivity (R.O.P. or D.H.I.A. records), weights of animals, similar sale values. If a farmer has been carry- ing assets (real estate) on his books at original cost for some time, he should revalte the real estate to a fair market value as Of December 31st, 1971. Provide as Much doclnenta-, tion as possible and keel) safe place. Reineinber a funda- mental rule Of taxation; a mem- orandum prepared by a taxpayer may be acceptable evidence in ,a tax appeal provided that it was Prepared at the time of the trans- action or event. If the taxpayer reconstructs things later on, the forcefulness of the memo will not be nearly as strong. - One half the capital gain will be taxed at the regular rate of Personal Income Tax. - Unrealized (accrued) gains taxed on death. - One-half of the capita losses in a year first deducted against one-half the capital gains in that year. Any deductible ex- cess up to $1,000 may be deducted against other income. - No capital gains tax will be imposed on gifts or bequests at death between spouses. Cap- ital gates tax would apply when that spouse transfers (sells, gifts or bequests) that asset. - Capital gains tax applies to all other gifts or bequests - personal residences and one acre of land are exempt of capital gains tax when sold. Farmers will be entitled to claim as an alternative to the above, a $1,000 annual deduc- tion against gains on his farm house and all his farm property if this is to his advantage. Should farmers have an offic- ial appraisal of their land, livestock or machinery? Not likely - unless they are in an "area likely to increase dram- atically in value. Appraisals cost money and in'many cases the cost may not be justified. Remember $500 today invested at 8 per cent interest is equal to $4,000 twenty-four years from now. A savings that might result from an appraisal will not be realized until the asset is sold, which might be next year or 30 years hence. If a capital gain occurs, a taxpayer may use either the original -cost or the value of the asset on Valuation Day - whichever is higher (therefore gains which are simply a re- covery of cost will not be taxed). If a capital loss occurs, a taxpayer will measure the loss against the lower of original cost or the value of the asset on V-day. - Alternately, taxpayers may simply elect to use V-day value for all their assets. 6. Capital Cost Allowance (Depreciation) - Straight line depreciation may be used for assets pur- ' chased before December 31st, 1971. - All assets purchased after that date, the diminishing balance method must be used, - Straight line depreciation will be phased out. However, for a' number of years farmers may use both methods. -Assets on straight line depreciation which are sold for more than their V-day value or book value will be subject to Capital Gains. - A farmer could switch all assets to the diminishing balance method if he wishes. - We would not advise a farmer to make this move because if V-day is greater than ,book value e.g. a 'tractor book value $1,500, V-day value $2,500, the trade-in value for the tractor could be up to $2,500 without being subject to Capital Gains. If the tractor was trans- ferred to diminishing balance method, the $1,500 value mustbe used. 7. Averaging - 5 year averaging for farmers Will not be changed. - Automatic averaging will be used if taxable income is up Over 10' per cent of last Year 11-1E and 20 per, eget over last tour` years, Forward averaging will be perinitteo. This v.44. be a. boon. toretiring tarinere. Certain 14rge unusual receipt!. such as, capital Gains. on sale of live, stock, or inventory .of quota can, be invested in an annuity_. This money will then he taxable over a number of wrs AS it is being received at a greatly reduced rate compared to the rate At taxed when first received. 8. Basic Herd No new basic herds can be established after December 31st, 1971 and no further increases made ito existing herds (appli- cation covering 1971 may be made when filing returns for 1971 prior to April 30th). - A Basic Herd will be val- ued as of V-day. Following this date, if a Basic Herd is sold for the V-day amount or less,. this income will not be subject to Capital Gain or Income Tax. If Basic Herd is sold for more than the V-day value, the in- creased value will be subject to Capital Gains but not Income Tax. - Livestock sold outside the Basic Herd will be treated as income rather than Capital Gains. - There is a privilege of electing to decrease the Basic Herd a limited amount each year. This decrease must not be greater than 10 per cent of the size of the Basic Herd as of December 31st, 1971 nor may it be greater than the number of animals sold. The following example shows how cattle sales will be taxed. Basic Herd - 60 animal units average value on December 31st, 1971 - $500.00; Herd of 100 animal units sold 1972 or later Average selling price $700.00 per animal units; Total returns, 100 x 700 equals $70,000; Non basic herd, $28,000 (Taxable as income); Basic Herd, $42,000; Valuation Day value Basic Herd $30,000; Capital. Gain, $42,000 minus $30,000 equals $12,e00. (Taxable as Capital Gain) 9. Quotas Quotas will be included in the “nothings" class like goodwill, How this class will be handled 'varies depending upon whether the quota is now owned or whe- ther it is purchased in 1972 or later. - For quota purchased in 197 2 or later ? one-half will be a non-depreciable capital asset , as has been the case for the entire quota in the past. The other half , will be depreciated at 10 per cent on a diminishing bal- ance basis. For quotas owned prior to 1972 they will be treated as follows: Quotas sold in the first year of the new system, 20 per cent of the proceeds will be included in income and this percentage will increase at the rate of 2 1/2 per cent each year until the thirteenth year, when 50 per cent of the proceeds will be included in income. - The Ontario Milk Market- ing Board sent out a memo to all milk producers regarding quotas - with examples to show how they might be handled in the future. 10. Corporations Farms that are now incor- porated will be able to avoid some of the hardships that will fall upon single proprietorships or partnerships upon the death of the principle owner. Capital gains and the value of inventories and quotas will not suddenly be added to one years income. - Small corporations will pay ax at 25 per cent on the first ;50,000 of annual income until ;400,000 of accumulated income aas been reached. - Everything else taxed at 50 per cent. - Property may be trans- ferred to a corporation without incurring Capital gain. - Three valid reasons for incorporating: (1) Income Tax savings (Continued on page 10 BRUSSELS POST, FEB, 2, 1972 —3