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Clinton News-Record, 1972-01-27, Page 5-Clinton News-Reodrd, Thursday, January 27, 1972-5 ompoonimmimmounownowmilninmoollt . .fifIll-ter • PriiteiPie amiammimeminu‘ Check Your BY si-CARI. lilki1400/VAY Money Tools are now incorporated will be able to avoid stung 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 tax at 25 percent on the first $50,000 of annual income until $400,000 of accumulated income has been reached. -Everything else taxed at 50 percent. -Property may be transferred to a Corporation without incurring Capital gain. -Three valid reasons for incorporating:,.. (1) Income Tax savings; (2) Capital Gains Tax savings; (3) Canada Pension Plan advantages. -On incorporation of a proprietorship or partnership, Capital Gains may be deferred provided the person transferring the assets retains a certain percentage interest in the corporation (at least 80 percent interest). II. Partnerships: Capital Costs Allowance will be taken by the partnership rather than by the partners. Net income will be divided out to various partners for tax purposes. Capital gain or loss will usually result from the liquidation of a partnership-- 1 2 , Summary: Personal Exemptions are increased; No Federal Estate or Gift Taxes; A new Succession'Duty and Provincial Gift Tax; Capital Gains Tax effective Jan. 1, 1972; Depreciation will be determined on the diminishing balance method (double present rate) rather than the straight line method; More averaging provisions allowed, especially forward averaging, quite useful for those retiring; The last chance to establish Basic Herd- up to the end of April 1972 for the 19'71 year; One-half of quotas will now be depreciated at 10 percent on a diminishing balance basis; Corporations will continue to be a valuable tool in farm management; Partnerships are still useful, but some contusion may exist in determining Capital Gain or Loss for individual partners on death; Plenty of records Should be kept and realistic values placed on all assets, BUMEII:RENTHIRE. 4 24-OZ LOAVES .00 BUY 4 SAVE 28c RED BRAND STEER BEEF PRICED LOWER THAN A YEAR AGO SHORT RIB ROAST SHOULDER 'ROAST BONE IN, POT ROAST OR lb i/ A & P IN MARTINS PURE 484koziins COLONIAL A & P 28 oz. 4 Varieties 2-lb pkgs Tomato Juice ANN PAGE BEANS APPLE JUICE COOKIES TOMATOES LIDO PASTAS 3 YOUR CHOICE FOR $11.00 48 oz. TOMATO SAUCE 28,F1•02 TINS RED BRAND STEER BEEF CROSS RIB ROAST BLADE STEAKS 3: STEWING BEEF "S" CROSS RIB STEAKS lb BIG S SALE! 1.1•011110.0, Stock Up! Save Money! sNyDers FRENCH STYLE, GREEN OR WAX BEANS SMALL, WHOLE CARROTS Fancy COHOE SALMON 2 774'0z tins $1.00 V EGETABLES 14-F1.-OZ TINS SOFT MARGARINE (MADE WITH PURE VEGETABLE SHORTENING) JANE PARKER, SLICED SANDWICH BREAD OUR "PREMIUM QUALITY" LOAF JANE PARKER (SAVE 10c) bag I • JANE PARKER (SAVE 10c) DOZEN 59? CHOCOLATE BROWNIES 15-oz pkg 49c JANE LB 35f/ BABKAR COFFEE CAKE 16-0 z cak (esiiiE4i'c)c 8cHNitlEtt'S BEEF PATTIES 21b. box 1.59 Super.Riolit Quality, Sliced Priced Lower Than a Year Ago PORK LIVER lb 29i Town Club Brand, Sweat Pickled, Vacuum Packed, Halves COTTAGE ROLLS 0)68c6 fAiiiDNERS voe prIe 59? Pick up your FREE original recipe al ASP" Meat Coveter. This week's recipe: ITALIAN BEEF ROLL-UPS, OCEAN SPRAY \ Canada No. 1 -Grade, New Brunswick, White Table Stock More Jane Parker Values SLICED, CRUSHED, T1D arts LEE PINEAPPLE 5 19-f1-oz tins $1.00 PALANDA ORANGES MANDARIN 5 10-f ti°41•00 IN TOMATO SAUCE HEINZ SPAGHETTI 2 48-11-°z tins $1.00 COOL MINTS, MINIATURES, GOLDEN MILK BUDS, WILL.O.CRISP CHOCOLATES wilIar-ds 3 7-oz boxes $1.00 HANSON, FRESH, RECONSTITUTED ORANGE JUICE 3 32-fl-oz btls $1.00 G.P, BRAND CALIFORNIA, SWEET, SEEDLESS, NAVELS 3/1.00 ORANGES GREEN -BEANS FLORIDA ENGLISH INN POTATOES 4 JAMS 50 Assorted Flavours 9-FL-OZ JARS CHERRY PIE WEST ST., GODERICH we care .00 3 1-lb tubs $1 All prices shown in this ad guaranteed effective through Saturday, January 29, 1972. 24-oz size, each 5 9 BLUEBERRY OR full 8-inch, More $ Sale Items M RVEL BIZ>s ND (BUY S - SAVE 45c) ICE CREAM 5 one pint stns $1.00 SPECIAL BLEND A&P TEA BAGS 2 pkgs of a $1,00 5 VARIETIES, I ROIEN FARM HOUSE PIES 3 12 '0z pies $1.00 MACARONI B CHEESE KRAFT DINNER 671 /4 .02pkgt $1.00 HAPPY VALE, STANDARD QUALITY, WHOLE KERNEL CORN 61441"o/tins $1.00 WHAT A GREAT WAY TO START THE YEAR! Super-Right Brand, Sliced SIDE BACONI-ibvacpac691z" BURNS BRAND, STORE PACKED, BEEF & PORK SAUSAGES lb 531 SWIFT PREMIUM, VISKING, BY THE PIECE BOLOGNA 16 3 9 F` SHOPSY BRAND ,PRICED LOWER THAN A YEAR AGO CORNED BEEF ,.6,:),IL4s 99? SALES AND SERVICE CLINIC NEW ;ION OH ESERIES AIR PLANTERS (SEE 1'1' IN ACTION) THURSDAY, FEB. 3rd, 1972 AT 8 PM. At our new location 1 1% North of Seaforth INCENT FARM EQUIPMENT Our Motto:- "AFTER WE SELL - WE SERVICE" AYR -GAIL Phony 52/.0120 H-Pazteti FUEL KIDS acquisition will be measured for gains or losses on their acquisition costs-a farmer should 'record a present fair Market value- of real estate, buildings, existing basic herds and ,machinery as -of Dec. 31, 1971, If the farm is a limited company, all assets should be given a fair market value as this value will determine the value of Common Shares. Every valuation of these?-properties should be supported with pertinent information such as: (a) land- your purchase price, particularly if recently purchased, sales of similar properties-condition of development, clearing, levelling or tiling, productivity of property, a detailed sketch showing power lines, roads, permanent buildings etc,, a few photos to be included with records might be quite useful; (b) buildings and machinery- structure, material, year constructed or purchased, major repairs or' changes and condition; (c) basic herd-number of animals, age of animals, productivity (R.O.P. or D.H.I.A. records), weights of animals, similar sale values. If a farmer has been carrying assets (real estate) on his books at original cost for some time, he should revalue the real estate to a fair market value as of Dec. 31, 1971. Provide as much documentation as possible and keep in a -Safe place. Remember a fundamental rule of taxation; a memorandum prepared by a taxpayer may be acceptable evidence in a tax appeal provided that it was prepared at the time of the transaction 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 capital losses in a year first deducted against one-half the capital gains in that year. Any deductible excess 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. Capital gains tax would apply when -that SPOriag i trafigfds '(4,11g; g Lite° r -bequ'eals) that a's6re. -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 deduction against gains on his farm house and all his farm property if this is to his advantage. -Should farmers have an official appraisal of their land, livestock or machinery? Not likely-unless they are in an area likely to increase dramatically in value. Appraisals cost money and in many cases the cost may not be justified. Remember $500 today invested at eight percent 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 recovery 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 he used for assets purchaaed before Dec, 31, 1971, -All assets purchased after tha t da to, the diminishing balance method meat be used, -Straight line depreciation will be phased out, Howevar, for a number of years farmers may tise 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 value 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 transferred to diminishing balance method, the $1,500 value must be used. 7, Averaging: -5 year averaging for farmers will not be changed. -Automatic averaging will be used if taxable income is up over 10 percent of last year and 20 percent over last four years. -Forward averaging will be permitted, This will be a boon to retiring farmers. Certain large unusual receipts such as Capital Gains on sale of livestock, or inventory of quota can be invested in an annuity. 'This money will then be taxable over a number of years as it is.being received at a greatly reduced rate compared to the rate if taxed when first received. 8. Basic Herd: No new basic herds can be established after Dec, 31, 1971 and no further increases made to existing herds (application ,;overing 1971 may be made when filing returns for 1971 prior to April 30). -A Basic Herd will be valued 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 increased 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 percent of the size of the Basic Herd as of Dec. 31, 'I'97T.nOr may it be greater than the number of animals sold. The following example shows how cattle sales will be taxed. Basic Herd-GO 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-$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-$12,000,- (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 whether it is purchased in 1972 or later. -For quota purchased in 1972 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 percent on a diminishing balance basis. For quotas owned prior to 1972 they will be treated as follows; 'Quotas sold in the first year of the new system, 20 percent of the proceeds will be included in income and this percentage will increase at the rate of 21/2 percent each year until the . thirteenth year, when 50 percent of the proceeds Will be included in income, -The Ontario Milk Marketing Board sent out a rnemo to all milk producers regarding quotas- with examples to show how they might be handled in the future. 10. Corporations; Farms that By J. J. Hagarty, Area Co-ordinator and Farm Management Specialist Quite frankly it is too early to tell what all the changes might Wean. The new tax legislation is 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 considerations of reasonableness and practicality. The Department of National Revenue states that "where two interpretations seem to have equal support, having regard to equity, reasonableness, statuatory interpretation and the general intent of the legislation as a whole, the interpretation is adopted which gives the benefit of the doubt to the taxpayer." This is a big mouth full, Obviously not everything is "cut and dried." It will be some time before the implications are clear. The Department of National 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 package of pamphlets of direct interest to them. Each District Taxation office will receive visits• telephone 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 do this from next May on-following the 1972 filing season, In the meantime we all have a responsibility to inform ourselves of the basic changes, And perhaps put ourselves in a position of being able to say- what is reasonable and practical. Farmers should be encouraged to record realistic values on all assets as of Dec. 31, 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: 1. Income Tax Exemptions: single exemptions increased from $1,000 to $1,500; married exemptions increased from ip 0k.016 $2,fi 50 ; er d age d5'"IekerrintibUS""iWe -reed from $500 to $650; young people over 16 years of age can earn up to $1,050 without lessening the $550 exemption received by their father. 2. Estate Taxes: Federal Government have abolished Estate Tax as of Dec. 31, 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 Duties. Legislation is yet to be introduced, but any changes will be retroactive to Jan. 1, 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 to avoid having them brought back into the f state (previously 5 years). 4. Gift Tax: No Federal Gift Tax. A new Ontario Gift Tax will be. implemented along with the Succession Duties. Exemptions allowed will be $2,000 to any individual up to a maximum of $10,000 in any one year, 5. Capital Gains Tax to - Commence on Jan. 1, 1972: Two Evaluation Days--Dec, 22, 1971 for Stock Market Shares; Dec. 31, 1971 for all other assets. The evaluation date affects only items held prior to and on Valuation Day. Subsequent `Oat-MEYER WITH OUk FUEL OIL stAIVEk, FOR rr SUCH A COAOR'r E. PAUL KERRIGAN BP pg, 482-9653 379 VICTORIA 51., 5.,CLINTON born shiver and shake Keep warm with our regular delivery service, Pick up that phone - and call today. The editorial in the winter 1971.42 Market Place Quarterly, presumably written by the Editor points out that Mr, J.R. "Jake" KdIaler, then General Manager of the Ontario Hog Producers Marketing Board, made the suggestion that the Packing Companies Should join together-to form a "marketing agency to sell their meat products to the retail outlets, I was at the meeting and as the editorial suggests there were "squeaks of derision". Most of us had hearil the same Jake Kohler urge the hog producers to form the Hog Marketing, Agency in order to defend themselves against the wielted packing company combine that was setting the price of hogs to the farmers. Surely the editor must remember this as he attended many Hog Producer meetings in the early days. It seems to me that if the packers were well enough organized to control the price of hogs, and I think they were, and probably still are, they are also well enough organized to cope with the chain stores. It is also possible that there is some, inter-locking of Directors on packer and chain store boards. It looks like an awfully good attempt to pass the "buck". I find it hard to understand why the Market Place, a Farm and Country Publication, the official organ of the Ontario Federation of Agriculture, should be so concerned about the difficulties of the packers, One packing plant, with which I am quite familiar, is reported to have doubled its output in the last five or six years. Another is in the process of expanding its facilities for the second time in about the same period. Farmers seem to do this regardless of' profits but Corporations don't. The same publications didn't seem to be too concerned about the difficulties of the packing industry when there were farmer owned packing plants in operation, It seems to me that Pork Pro'ducers Marketing Board should be devoting its efforts to living up to their change of name. As far as I'm concerned I am still producing hogs which the Marketing Board is selling. It is the packer and retail outlet that is selling the "pork", -and they are both doing better than the farmer. Now is the time to check your "money tools" - the instruments you use to build your personal estate. Whether you are sewing, borrowing or protecting, Victoria and Grey has the tools you need, such us: -- Regular chequing accounts (with interest), special savings accounts (with added interest), and Guaranteed Investment Certificates (longer term savings with highest interest), We offer competitive mortgage rates. And collateral borrowing, retirement savings plans, _safety deposit boxes, executor and estate administration services - all yours today at Victoria and Grey. WCTORM and VG GREY TRUST COMPANY SINCE leas Lealand Hill, Manager Elgin and Kingston Streets Goderich 524-7381 IIIIIIIIIIIIIIIIIIIINIIIIIIUhIIIIIIIIIIIIIRIIIIIIIIIIIIIIIIIIIIAIII 4 What Federal tax changes can mean