Mackenzie offers tax planning guide

(March 14, 2005) Rather than simply viewing tax time as the blessed end of financial planning season, last minute meetings and RRSP cramming, advisors can use tax resources provided by fund companies this time of year to help clients and themselves.

One such offering, the Mutual Fund Tax Guide, comes annually from Mackenzie Financial. Carol Bezaire, assistant vice president of tax and estate planning at Mackenzie, says advisors like the line-by-line explanation of investment gains and expenses, and where each should be included in a client’s tax return.

Along with actual samples of current T-slips, the guide gives examples of different investment scenarios to explain exactly what clients are being taxed for.

In other pages, the guide offers a top 10 list of items that are most often flags for a Canada Revenue Agency (CRA) audit. Some advisors should take note — keeping an itinerary and separate tax receipts for spouses who come along on business trips is one of the key recommendations. Other factors that may flag the CRA’s attention include: allowable business investment losses, carrying charges, large charitable donations, and tax installment payments. Medical expenses also made the list this year. Clients are advised to keep meticulous records, especially if they might be moving into a care facility, such as a nursing home.

“We also have some of the different taxation issues associated with different products. A lot of people will sell a labour-sponsored fund once a year at RRSP time, but they forget during the year what the tax treatment or what the benefit is. It’s an all year reference guide,” says Bezaire. “It’s pretty comprehensive. Every year we look to see what else could be added or taken away.”

The 45-page guide also covers issues like the tax implications of fund mergers and the different tax treatments of mutual funds and segregated funds. Also back by popular demand is the Adjusted Cost Base (ACB) worksheet.

“There’s no way that all of the companies know where clients have everything,” she says. “One of the toughest things that clients can possibly do is keep track of the adjusted cost base on their own investments.”

The seven-column worksheet provides space to enter the date and a description of the transaction, the total amounts paid including commission and reinvested distributions, the return of capital component, the ACB of any redeemed units and the number of units owned to calculate the ACB per unit. “It’s a handy thing for advisors and investors to use whenever they buy and sell.”

Whether the guide simply answers questions about the different kinds of income a mutual fund generates, or simplifies the process of reliably calculating a client’s adjusted tax base, each scenario provides an opportunity to give advice and talk to clients about saving money. It also provides an opportunity to refer your client to a trusted tax advisor or accountant if they’re part of your referral network.

This is the ninth edition of the Mackenzie guide. The document was compiled over the course of four to six months by a team of company tax consultants, marketers and client service groups. It’s available for download on Mackenzie’s website.

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com