Canadian MoneySaver magazine has provided Canadians with balanced insight into personal-finance issues since 1981. Now, through an exclusive arrangement with The Costco Connection, Canadian MoneySaver’s experts provide Costco members with answers to their questions about financial issues.
retirement. What’s missing from the information you provided is how much, if any,
private pension income you might expect, or,
indeed, what income you both have now—
some of which might be saved outside your
registered plans for future retirement.
Your lifestyle suggests that both your
home and cabin are important and would not
be sold to free up some cash for retirement.
Artville/Richard Weiss Your share in the office building could provide
Win, lose and spend some cash for retirement, but be aware there
may be some capital-gains exposure here.
Your RRSPs are sizable, and at 7 per cent
earnings they could, for example, grow with
During a visit to the U.S. last winter, my order to make this election, specific rules must no withdrawals to more than $1.5 million in
wife won money on a slot machine in be met regarding the investment, including 10 years and close to $2 million by the time
a casino. From her winnings an amount that the corporation is insolvent (i.e., unable your partner has to make mandatory with-
equal to 30 per cent of her prize money to meet financial obligations), has a nil value drawals beginning around the age of 70.
was deducted for U.S. federal tax. Is there and is expected to be wound up. To make the However, if you retire now, and had a
any way of recovering this amount as election, a letter must be included with your requirement in lifestyle expenditures of
she is a Canadian citizen? tax return, in the year the loss incurred, indi- $50,000 annually, then you would have to
—J.F., e-mail cating that you are electing under s. 50( 1) of withdraw about $91,000 annually from your
the Income Tax Act. You would also complete RRSP, before paying income tax. At that rate,
The 30 per cent withholding from your Schedule 3to calculate the loss. your RRSPs will last only about 14 years!
wife’s winnings is required by the Internal Under current Canada Revenue Agency Compare this to your remaining life expec-
Revenue Service (IRS). However, if you have (CRA) fairness rules you may file tax returns tancy, which for healthy Canadians like your-
good records of how much your wife lost dur- and request adjustments for up to 10 years self should be more than 30 years. So, this
ing the same year in which she had her win, prior. Assuming that your loss arose in 1999, rough calculation suggests retirement should
you can file a U.S. non-resident tax return to you must file a 1999 tax return, if you have not be an instant choice, unless you’re ready to
offset her gambling winnings with her losses. not previously done so. The return should budget your retirement years very carefully. In
She would be taxable only to the extent her include Schedule 3 and the election letter. If fact if you wanted to have your RRSPs last at
winnings exceeded her losses, if at all. The you did file a return for 1999, you can write least 30 years, the most you would be able to
proof of her losses that the IRS will normally CRA requesting them to adjust your 1999 tax afford to generate in lifestyle expenditures (the
want to see can be charge-card records, casino return. Your request should also include a amount you would both have to spend after
records, chip-purchase receipts or just a very completed Schedule 3 and an election letter. income taxes) is approximately $35,000 annu-
good log of money spent on the gambling. The advantage of reporting capital losses ally. Again, nothing is impossible, but you have
The tax form your wife needs to file is IRS is that they can be carried back up to three to cut the cloth to fit.
Form 1040NR, with a deadline of June 15 after years or forward forever to be applied against Before making any decison as important
the end of the year in which she had her big capital gains. They must, however, be reported as retirement, you should ensure that your
win. If she does not have a U.S. Social Security on your tax return in the year the loss is required lifestyle expenditures are affordable.
number she will need to apply for a U.S. Indi- incurred. Further information may be obtained —Frank Duck, Fee-Only Financial Planner,
vidual Tax Identification Number by complet- from CRA Guide T4037–Capital Gains. Forward Finance Inc., Ottawa, ON
ing Form W- 7 and attaching it to the return or —Maureen Peacock,
the IRS will withhold her refund if she is enti- CFP, Chartered Accountant,
tled to one. Caledonia, Ontario, ON
—Robert Keats, Personal finance
author of The Border Guide, I am 52 and my partner is 57. We would questions?
Keats, Connelly & Associates, Phoenix, AZ like to know if you think we are too young Send to: Canadian MoneySaver, The
to retire. We have about $800,000 in RRSPs; Costco Connection Q&A, Box 370, Bath,
In 1998 I purchased stocks in an IPO [initial we own our own home (worth about ON K0H 1G0. Or e-mail to questions@
public offering]. Less than a year later, $200,000), a cabin (worth about $150,000)
canadianmoneysaver.ca (please include
the company folded. I have not claimed this and a half share in a small office building “The Costco Connection Q&A” in the
loss over the years as my income always (half value approximately $125,000). We subject line), or fax to (613) 352-7700.
remained under the basic amount. How are not world travellers, but do like to fish, Canadian MoneySaver will answer
can I claim this capital loss? hunt, Ski-Doo, etc. selected questions in this bimonthly
—G.G., e-mail —R.H., e-mail column. Unpublished questions may be
answered on the Canadian MoneySaver
Since you have not actually sold the You are never too young to retire. It all Web site at
shares, you must elect to claim the loss. In depends on the lifestyle you expect to live after Click on “Ask the Experts Q&A”