The SMITH Manoeuvre
Folks,
Now here is a wild and scarey way to try to hood-wink our tax collectors. Go to this site, but for the sake of everyone, don’t do this! Take the book out of your library and read what it entails, make your decision after consulting with folks who know what is going on (not just some nut bags BLOG!).
It sort of starts out oddly, assuming you have $20000 hanging around, but ok, I’ll bite, I have $20,000 hanging around (don’t tell my kids, please). Instead of taking that money and PLUNKING it down on my mortgage (or Line Of Credit in my case), BORROW $20,000 dollars to purchase some Equities (presumably stock), THIS you can write off the INTEREST on the loan, because you are INVESTING. Take the $20,000 you had and plunk it down on your mortgage, now suddenly $20,000 of your mortgage’s interest is now TAX DEDUCTIBLE! Wonderful eh? Well, what happens if you choose the wrong EQUITY (the way I am apt to do)? Evidently the government are looking into this as well, where if you take a loan out to buy EQUITIES they must make MONEY to be able to deduct the interest.
Anyhow, very scarey stuff by me. Just plunk your money down, and save the $20000 up front! Just my opinion –C8j
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September 14th, 2007 at 6:20 pm
“where if you take a loan out to buy EQUITIES they must make MONEY to be able to deduct the interest. Anyhow, very scarey stuff by me.”
You are mistaken here.
The rule is that you must have a “reasonable expectation of earning an income” from the investment. (CRA IT533 bulletin)
So when you buy the investment your expectation should be reasonably making an income. This is why a GIC wouldn’t qualify.
July 14th, 2008 at 7:00 pm
[...] The Smith Manoeuvre Well our amigo over at the Canadian Capitalist mentioned in his Friday update that the Star has an article about the “infamous” Smith Manoeuvre which talks about Frasier Smith’s method for getting the interest on your Mortgage tax deductible. If you remember I talked about this “risky” trick a while back here. [...]
July 14th, 2008 at 7:01 pm
[...] Smith Manoeuvre A while back I put up a post about the Smith Manoeuvre which seems to have caused a lot of hits for my site (I have figured out how to do that, so it is [...]