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John Tomaselli

Can I negotiate the amount of tax I owe to the Canada Revenue Agency - the way Brian Mulroney's lawyers seem to have done - if I am in financial difficulty?

It is not clear what actually happened in the Brian Mulroney case, but in general there is some flexibility in negotiating what you owe to the CRA.

However, CRA spokeswoman Caitlin Workman points out that the flexibility comes only in figuring out penalties and interest. The rules say you must eventually fork over the full tax you owe, but the CRA can forgive interest or penalties when taxpayers cannot pay on time because of circumstances beyond their control.

If you are in financial difficulty, or you have a serious illness, or there has been a death in the family, a fire in your house or something similar, you may be able to get the CRA to cancel or reduce the penalties or interest for late filing. And you may be able to get the agency to set up an extended payment plan, or to extend filing deadlines.

There's even a special form to fill out to ask for help: "Request for Taxpayer Relief" form RC4288.

Why do some lobbyists and politicians want rules on RRIF withdrawals changed ?

Essentially, the RRIF rules go like this: In the year you turn 71, you must convert your registered retirement savings plan (RRSP) into a registered retirement income fund (or similar instruments, unless you withdraw the funds and pay tax on them). At that point you can't contribute any more to these retirement accounts, and you must begin withdrawing from them.

There is a minimum amount you must withdraw each year. In the first year it is 7.38 per cent of the value of the RRIF. This percentage goes up each year, until age 94, after which you must withdraw 20 per cent of the remaining value in the RRIF each year.

The problem is that retirees who have seen their portfolios shrink are forced to cash in some of their investments in order to withdraw money. That might mean selling securities at a loss because of the decline in markets.

And the percentage RRIF holders must withdraw this year is based on the RRIF's value at Jan. 1. Because of the drop in the market this could mean they will have take out much more than they would have if the percentage was calculated later in the year.

The federal Liberals, several provincial politicians and some organizations that represent retirees have suggested pensioners be allowed to temporarily delay withdrawals so their portfolios have time to recover.

With the sharp decline in the markets, would it be possible for an elderly person's minimum Registered Retirement Income Fund withdrawal this year (calculated on Jan. 1) to be greater than the money left in his or her account, when it comes time to take out the funds ?

Even for those over 94 years of age, the minimum withdrawal is just 20 per cent of the Jan. 1 value of the RRIF.

So it is very unlikely that a RRIF account could decline precipitously enough that there wouldn't be enough left to take that much out.

The problem with the RRIF minimum withdrawal schedule is that many retirees are living well into their 90s and beyond.

With at least 20 per cent coming out each year after age 94, the remaining value of the account will probably shrink rapidly, because it's unlikely investment returns will be enough to build up the RRIF again each year.

Under the minimum withdrawal system a senior's RRIF won't ever completely run out of money, but the nest egg could be depleted so much that it won't meet their income needs.

What is the cutoff date for tax-loss selling, so that my capital losses will qualify for the 2008 tax return ?

The last date in Canada that you can sell your shares and use the losses on your 2008 tax return is Dec. 24, 2008. That's because all trades have to be settled before year-end, and it takes three working days to do this.

Don't forget that trading on the Toronto Stock Exchange stops at 1 p.m. on Christmas Eve. And your broker could very well be on vacation by then, so it's probably a good idea not to wait until the last minute.

In the United States, there is one more day of trading in 2008 (because markets are open on Boxing Day), so the deadline for selling stock through U.S. exchanges is Dec. 26.

Can a husband and wife have joint ownership of a Tax-Free Savings Account? For estate-planning purposes, we like to have our investments held jointly.

The TFSA rules make it clear that each spouse must have a separate account.

There are no joint accounts allowed. The TFSA is similar to an RRSP in many ways, and this is one of them.

As with an RRSP, if your spouse or common-law partner is the sole beneficiary of your TFSA, when you die the account will be transferred immediately to his or her name without any tax consequences.

When organizations such as the Canadian Real Estate Association report house sales figures for a particular month, do they count a sale when the deal is negotiated or when it closes?

CREA says it counts the sale as taking place when an offer to purchase is accepted without any conditions.

That's the same criteria used by the local real estate boards across the country.

Until there is a firm offer, a deal can't be counted. And the boards don't wait until closing, because the timing varies widely from house to house, and that data are not as easily gathered.

Yesterday, you said Dec. 24 is the deadline for tax-loss selling. But can't I sell later and then use the loss retroactively?

You are right that capital losses can be used to offset gains in other years.

The rules say that losses can be carried back to any of the three previous tax years, to offset gains in those years. And they can be carried forward indefinitely.

But if you sell your money-losing stock in 2009, the loss has to be used first to offset 2009 gains, before it can be carried back to 2008.

You'll have to wait until 2009 is finished to figure out how much to carry back to the 2008 tax year. In the meantime, you'll have had to pay any 2008 capital gains that you owed.

Can I use the capital losses within my RRSP to offset gains in my non-registered accounts?

No. You don't have to pay tax on any of the gains in your RRSP (interest, dividends or capital gains), so you don't get to use the capital losses as offsets either.

Is it a good idea to hold stocks that earn capital gains in my RRSP?

Many advisers recommend that investments generating dividends or capital gains - which have a lower tax rate than employment or interest income - should be held outside your RRSP.

Instruments that would normally draw higher tax rates on their income - bonds and GICs, for example - are better held inside the RRSP, to shelter that income from tax.

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