Wondering what tax avoidance/minimization strategies you have used other than RRSPs and what has been your experience.

For example, I am aware of Labour Sponsored Venture Capital Funds which offer tax benefits. However, as yet I have not invested in them due to perceived high risk, MERs, long lock in period and generally, as a group, less than satisfactory performance over the long term.

Another one that I am aware of is flow through shares which offer tax benefits. I became aware of these recently and have not invested yet.

Wondering if any of the other members have invested in the above vehicles and what has been their experience?

Also, interested in hearing from members who have used other tax avoidance strategies.

TIA.

You can use investment financing popularly known as leveraging as a tool to avoid/minimize your taxes. This strategy is used by high net worth/ high income peoples. You will find more details on this topic in various discussions. For more information you can send me a PM or call me at 416-305-0080.

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Live and Let Live. Together we can make a difference.

DP JAIN, CPA, CGA, CPA (US), CA(I), LL.B.(I)
416-305-0080
(Loans, Mortgage, Tax, Accounting, Investments)

Hi Ruby_Ottawa

You wanted to know about experience in investing in LSIF(labour sponsored funds). As you have remarked, there is a lock-in period and they as a group are highly volatile.
However there is one such fund that stands out among the rest- that is the ROI funds, which are involved in mezzanine financing. The returns on this are like GICs 3-5%, but the upfront 30% tax credit is the lucrative pull.

For more info visit http://www.roifund.com/

Positive results since inception.

They have also declared dividends last year and this year.

There have been favourable write-ups on this fund by The Post, Globe and Mail and other periodicals.

For more tax deductions- there is the route of investment loans and/or the Smith Manouevre which acts as a triple whammy- pays down your mortgage faster, gives you more RRSPs and more tax dedcutions and if you work it right, you don't shell out a penny from your pocket, i.e using the famous priciple of other people's money (OPM) and other people's brains (OPB)

You may have heard of the famous OPM and OPB. Nowadays people tend to say OPM squared- Other people's money(OPM) and other people's minds(OPM again).

Check with your financial advisor or pm me for further details.

There are also other methods- as charitable donations.

Hi Ruby_Ottawa

You mentioned tax avoidance- perhaps you can give the board some methods on this. All methods I know of are either tax-deferral or tax-reducing.

Tax avoidance? Sounds enticing. Please elaborate on straight and narrow ways please.

Any other people know of legit tax AVOIDANCE strategies?

DP Jain and Investpro, thanks for the response and sharing the information.

Leveraging / OPM square
I am aware of this strategy and have been using it for a few years now. Prudence is required in its use as it will amplify returns in both direction ie positive and negative. In general, it is suitable for sophisticated investors with at least medium to high risk tolerence level.

At the first glance, the ROI LSIFs look interesting. I will have a closer look into it. Thanks.

I have used the term "tax avoidance" loosely to mean legit ways to either defer payment of taxes (e.g. RRSP) or reduce taxes (e.g., LSIFs).

More to follow.

Quote:

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Originally posted by Ruby_Ottawa

DP Jain and Investpro, thanks for the response and sharing the information.

Leveraging / OPM square
I am aware of this strategy and have been using it for a few years now. Prudence is required in its use as it will amplify returns in both direction ie positive and negative. In general, it is suitable for sophisticated investors with at least medium to high risk tolerence level.

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I have used leveraging conservatively. Just to add a little bit of torque. In terms of financing, I went with one of the major banks with a unsecured, 5 year term, variable rate (mine is right now prime +1 although I am aware that a slightly lower rate may be available if we were to go for an fixed rate). I could go with the brokerage financing at prime rate however there is a margin call with it and I do not like that feature. I am also aware that some companies may offer interest only feature with no margin call, however I understand that they limit the funds you can invest in to their own or selected number of funds. The later feature of not having a free hand in picking your funds which may or may not be on their list is a major turn off for me. Thus I have not pursued this option further, although may need to revisit it again in the near future. I would certainly be interested in knowing if there are any competitive interest only no margin call without fund investment restriction out there.

In terms of investments I am mostly into non-seg mutual funds due to lack of time on my part to build a portfolio of stocks and manage it. Occasionally, I have been tempted to invest in selected individual stocks or ADRs, but so far have resisted the temptation. I have looked into opening an brokerage account in India with for example ICICI direct, HDFC securities, etc. however do not have a clear sense of the carrying costs on such accounts or even if it is possible to open such an account from Canada? If there is someone on this board who is into this then would appreciate if they could share their experience.

I started this in March 2003 which in retrospect turned out to be good timing. I would like to take credit for it but it was in part by chance / luck (as has been demonstrated by some of the subsequent positions I have taken which have turned out to be not so lucky). Overall though, I am in black ie in the money.

Cheers.