WOW! Can you believe 2005 is quickly coming to a close? We recently looked back and realized that we have been contributing to OSCAR for almost fifteen years. Thank you to all our loyal readers. We really appreciate your emails and comments.

As for 2005 “Year End Tips”, we have tried to go slightly beyond the standard ideas of making RRSP contributions and charitable donations. Here are a few concepts that may not be as evident to many of you.

If you are planning to place money into a term deposit with a maturity of one year or longer, wait until January. This will defer the tax on interest until 2007. Also, talk to your investment advisor about taxable year-end distributions on mutual fund purchases. You may want to wait until January as many funds make taxable year-end distributions at the end of December.

Review your capital gains and losses. You may want to crystallize any accrued losses on investments. These losses can be used to offset gains this year, or carried back 3 years or forward indefinitely. Using the same logic, you may want to trigger capital gains and utilize any unused capital losses from previous years. Maybe you don’t want to part with a certain investment that has gone down in value. You can give this investment to your child. You will receive the capital loss and your child will benefit from capital gains in the future. This strategy can also help with probate fees if you are thinking this far in advance.

Donate securities that have gone up in value, rather than cash, to your favourite charity. Capital gains on this transaction will attract an inclusion rate of 25% rather than the normal 50%.

Everyone who turns 69 in 2005 must wind up their RRSP before year-end. If you have earned income in 2005 you will be entitled to an RRSP contribution in 2006. The only way to make this contribution is to make an RRSP contribution in December 2005 prior to winding up your RRSP forever. You may have a small over-contribution tax penalty for the month of December, but you will have the tax reduction for 2006 to ease the pain.

Pay your adult children (age 18 or older) for looking after your younger children (age 16 or younger) to allow you to be at work earning an income. You will receive a deduction and your adult child will pay income tax on the money earned.

There are many other sophisticated and possibly complicated tax strategies available, but you should consult with a tax professional to make the proper assessment of deductions, credits and benefits. Have a wonderful holiday season and we look forward to talking with you again in 2006.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of Fundex Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.