I went to a financial seminar where this investment idea was shared. Apparently, it lowers the tax burden that my children would pay once my husband and I have both died. He ran some numbers to show that an RRSP would be taxed much more.
Even if I were not an American, I don't know that I'd want to take out a loan to invest. However, I also wondered what the tax implications would be--how would the IRS view this?
THANKS!
Tax structured open investment loans
Moderator: Mark T Serbinski CA CPA
Putting aside the whole leveraging issue, remember that any discussion of your estate (since that seems to be what we are talking about her) requires consideration of US estate tax.
Your salesman should be prepared to answer these issues before you buy.
General tip though. Even if a salesman pitches a great idea -- completely above board and legit -- never buy from the one making the pitch. take his idea and buy from someone else.
Your salesman should be prepared to answer these issues before you buy.
General tip though. Even if a salesman pitches a great idea -- completely above board and legit -- never buy from the one making the pitch. take his idea and buy from someone else.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
[quote="nelsona"]Putting aside the whole leveraging issue, remember that any discussion of your estate (since that seems to be what we are talking about her) requires consideration of US estate tax.
Your salesman should be prepared to answer these issues before you buy.
General tip though. Even if a salesman pitches a great idea -- completely above board and legit -- never buy from the one making the pitch. take his idea and buy from someone else.[/quote]
Thanks--I hadn't thought about the US estate tax issue. This person wouldn't know about American-Canadian issues. And he wasn't selling anything--he was just giving the seminar at the college where my husband works.
Do you think that investing more in an RRSP is the best way to make sure we aren't taxed too heavily--isn't there an agreement between the US and Canada concerning RRSPs?
Your salesman should be prepared to answer these issues before you buy.
General tip though. Even if a salesman pitches a great idea -- completely above board and legit -- never buy from the one making the pitch. take his idea and buy from someone else.[/quote]
Thanks--I hadn't thought about the US estate tax issue. This person wouldn't know about American-Canadian issues. And he wasn't selling anything--he was just giving the seminar at the college where my husband works.
Do you think that investing more in an RRSP is the best way to make sure we aren't taxed too heavily--isn't there an agreement between the US and Canada concerning RRSPs?
I don't know what you mean be taxed 'too heavily'.
Your initial post seemed to be indicating that your were concerned about your estate more than anything else. taxation now and taxation at death are not the same.
Of course if you generate lots of deductions by payingh HUGE interst costs to invest, you will lower your tax. Its called reducing your income.
But generally, in the long run capital; gains are taxed lower that RRSPs, it just that you get (a) a deduction to start and (b) 100% tax-sheltering until you withdraw the funds.
With an open account, you get neither, so you have to create a deduction by borowwing the money, and then you must 'strategically' sell off these investments so as not to incur too much cap gains. Not so simple methinks.
I am not aware of -- once your estate is settled -- that $1,000,000 in one form will burden them more or less than $1,000,000 in another form. They start from scratch.
When you both die, the RRSPs become collapsed, so you will pay tax on them, regardless of estate tax at that time. So will any non-RRSP investments be sold, so you will pay cap gains at that time too (and pay back any loan). Then whatever is left is your kids', and they will then pay tax on what THEY make on it. That the kind of 'burden' they should relish!
There have been lots of studies done on RRSP vs. Non-RRSP vs. Home, etc. All with different conclusions. Nothing new there.
And now you throw in the TFSA and its a new game as well.
Your initial post seemed to be indicating that your were concerned about your estate more than anything else. taxation now and taxation at death are not the same.
Of course if you generate lots of deductions by payingh HUGE interst costs to invest, you will lower your tax. Its called reducing your income.
But generally, in the long run capital; gains are taxed lower that RRSPs, it just that you get (a) a deduction to start and (b) 100% tax-sheltering until you withdraw the funds.
With an open account, you get neither, so you have to create a deduction by borowwing the money, and then you must 'strategically' sell off these investments so as not to incur too much cap gains. Not so simple methinks.
I am not aware of -- once your estate is settled -- that $1,000,000 in one form will burden them more or less than $1,000,000 in another form. They start from scratch.
When you both die, the RRSPs become collapsed, so you will pay tax on them, regardless of estate tax at that time. So will any non-RRSP investments be sold, so you will pay cap gains at that time too (and pay back any loan). Then whatever is left is your kids', and they will then pay tax on what THEY make on it. That the kind of 'burden' they should relish!
There have been lots of studies done on RRSP vs. Non-RRSP vs. Home, etc. All with different conclusions. Nothing new there.
And now you throw in the TFSA and its a new game as well.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best