FIN 502 Study Guide - Tax Avoidance
Document Summary
Income deferral: bring income into taxable income at a future date, and so deferring the payment of income tax until later: present value of future tax payment is less than if ti were paid at once. Capital gains: no tax is payable until they are realized; shares can increase in value at before-tax rate of return if the return consists of capital gains instead of dividends. Income splitting: allocating income to family members with lower marginal tax rates to reduce the total family tax bill: between spouses: Spouse with the higher income pays all living expenses while the lower income spouse does all the savings and accumulates investment assets. Coupon amounts will be taxed in the higher income spouse"s hands, but earnings on the separate account will be taxed in the low income spouse"s hands. Spousal rrsp: taxpayer may contribute to an rrsp for his spouse, but claim the tax deductions: between other family members.
