Canadian Tax Shelters
Caveat Emptor - Let the Buyer Beware
Here are some practical ideas that taxpayers should think about before putting their money into a tax-sheltered investment.
Here are some practical ideas that taxpayers should think about before putting their money into a tax-sheltered investment.
- There maybe some good tax shelters out there. However, if you are retired or near retirement you should think long and hard before getting into tax shelters. There is a time in life to keep things simple.
- If the tax shelter sounds too good to be true it is probably bull crap. There are, no doubt, people working for the Canada Revenue Agency who have similar thoughts.
- If the tax shelter sounds to good to be true it is probably bull crap. (This really is worth repeating.)
- Remember a tax shelter is supposed to be an investment. The purpose of an investment is to make you money, either by generating income or growing in value. You should view any prospective investment in a tax-sheltered scheme in this light. If the only realistic prospect of a return is the tax deduction forget about it. The profitability track record of tax-sheltered investments from the old days, such as MURBS and LSIFS, is poor. For the most part they didn't make you any money, they lost money.
- Do not buy tax-sheltered investments from tax advisors. Do we not see a wee conflict of interest here?
- Do not trust the tax shelter promoter's claims for the tax deduction. This is where your professional tax advisor comes in handy. This is why you want your advisors to be objective. When your friends regale you with tales of how they smoked the tax department, remember the tax department moves slowly, but there can be a day when the taxman cometh with audit bag in hand.
- The Income Tax Act requires that certain types of tax shelters be registered with the CRA. This does not mean that a duly registered tax shelter is a good investment.
