Canadian Personal Finance Blog

Archive for April, 2006

Folks, this is important, give yourself a chance to forget about everything (including fiduciary responsibilites, Spousal RRSPs, bills, etc.,). Forget about it all and enjoy life for a day. This does not mean drink yourself into a stupor watching sports, or other self-destructive behavior, just let your mind wander and see what wondrous things you can think of. Relax, recover, rejuvinate, it’s a busy week ahead, so just be calm and quiet today.

OK folks,

If you buy gasoline at Canadian Tire (like I do a lot of times), and hold out for the 9x Canadian Tire Money per fill up coupons that appears in their weekly flyers (yup I am that cheap), then the following is just for you.

It seems Canadian Tire is having an intelligence test to see if people are dumb enough to buy gas without a coupon (remember you have to pay CASH for the gasoline, yes I saw someone try to use a coupon with a VISA card and then go SNAKEY on the poor cashier). If you click on the following money saving link you will be able to print up your own coupon which is valid until the end of 2006. Use this and you at least get 4x the Canadian Tire money back! (e.g. if you get 20 liters of gas, you’ll get 20 cents in Canadian Tire Money with this coupon)

If you don’t like Canadian Tire money or never use it, donate it to your Church, or local food bank or someone who might use it (hell mail it to me, I use it all the time to replace parts on my Honda). If I had a lot of Canadian Tire money, I’d buy this sweet ride!

Saving money, this is what is important folks. –C8j

I warned you guys, it’s time to get serious about taxes, my fellow Canadians get your butts in gear, but you have until May 1st to do it, get those taxes done! Remember Rick Mercer is only showing what it REALLY feels like!

It only hurts for a short while, ok, it hurts forever, for those of you without testicles, this really does hurt!!!!

Trying out a new kind of posting, one with a Video from my new favorite site folks, YOUTUBE.COM get those taxes done!!!! –C8j

One of the reasons I write this blog is sometimes I learn things myself on my topics. Now I had been told (by a Financial Advisor no less) about the three year attribution rules in Spousal RRSPs (that I talked about yesterday in this flawed posting).

Luckily our friend over at the Canadian Capitalist (a reputable blogger, who researches things far better than I do), points out that the three year attribution rule actually means, no money was contributed to this plan AT ALL during those three years, so you have to wait three years before the money would be taxed in your spouse’s hands. In fact the TD Canada Trust web page has a very good explanation that I will shamelessly plagiarize:

The three year attribution rule

It is important when considering spousal RSPs to understand the impact of the three year attribution rule. This rule is designed to prevent a high-income spouse from contributing to a spousal plan and having the funds almost immediately withdrawn and taxed to the lower income earning spouse. If your spouse withdraws from their spousal RSP within three calendar years of your last contribution to any spousal RSP, the withdrawal is treated as income on your personal tax return. If the withdrawal is made more than three years after the contribution, the withdrawal is treated as income on your spouse’s tax return. The important thing to note is that the three years are based on calendar years. If your last contribution was made in December 1998, a withdrawal is taxable as your income until January 2001.

If the contribution were made in January 1999, even if it is applied to your 1998 tax return, a withdrawal before January 2002 would be taxable as your income.

The three year rule does not apply in the following cases:

• The spouses are living apart due to marriage breakdown
• Death of the contributing spouse in the year a withdrawal is made
• Either spouse becomes a non-resident of Canada for tax purposes
• If the money is transferred to an annuity

What does this mean? Well, don’t believe everything you read in blogs (well maybe just my blog), always research things (especially things that might get you audited by Canada Revenue), and be skeptical too.

It’s important to learn new things every day, and I did! –C8j

P.S. : My new hero, Mr. Red Paper Clip now has traded up to an afternoon with Alice Cooper! Can someone figure out what I can trade to get that??????!??!??!

So the concept of a spousal RRSP really is a good thing if your household is a SINGLE income household (or if only 1 of the income will have a pension). It allows for a “load sharing” arrangement for income, which then means lower taxes and better things all around for the retired couple.

Are there other things that a spousal RRSP can get you? Funny you should ask that question, because I checked the Revenue Canada site for that exact question and found out that after three years of sitting in a Spousal RRSP the money there is effectively owned by the Spouse, if the spouse withdraws money from the RRSP. This page on Revenue Canada web site explains it, but here is there example as well:

Example
In May 2002, Joshua started contributing to his wife Keri’s RRSP. He contributed the following amounts to her RRSP:

Year Amount
2003 $2,000
2004 2,000
2005 +1,000

Total $5,000

In 2005, Keri withdrew $4,000 from her spousal RRSP. Before 2005, she had not withdrawn any amounts from her spousal RRSP.

Keri determines that Joshua has to include $4,000 in his income on line 129 of his 2005 return, since the amount Joshua has to include as income is the lesser of:

• the amounts he contributed to all spousal RRSP for his wife in 2003, 2004, and 2005 ($5,000); and

• the amount his wife withdrew from her spousal RRSP in 2005 ($4,000).

Keri does not include any amount in her income for this withdrawal.

So this example shows that if Keri took the money out BEFORE three years it is taxed in her husband’s hands, however if she had waited until 2006, she could have withdrawn
$2,000.00 and it would have been taxed as income in HER hands, not her husbands.

Something to keep in mind. Check out the Revenue Canada site to be sure on this one!

–C8j