Q&A: Low income but she needs a tax shelter

Question: Help!! I’m a single 70-year old woman who suddenly
needs a tax shelter. A family property recently sold for almost $300,000 more
than the purchase price. The profit is divided among three owners.

The problem is that the taxes due will be more than my total income last year
(OAS & CPP). My total income before capital gains will be about $21,000.
I’ve just finished paying off a big tax bill incurred from cashing RRSPs when
I had to leave work suddenly. So I really don’t want to pay any more than I
have to.

I’m NOT risk averse (but I also know that if it looks too good to be true it
probably is!)

Finally, you should know that though I worked for a charity and low wages all
my life, I put the maximum into RSPS every year following your mutual fund advice
– thanks! – M.M., NB

Gordon Pape answers: Frankly, my advice is to forget about
the tax shelter idea if you have no more RRSP room. There is too much risk involved
in shelters such as flow-through shares and wind farms. Based on what you say,
your share of the capital gain is $100,000. Half of that is tax free, so you
will pay tax only on $50,000. That will be at your marginal rate which should
be around 27 per cent. So you’ll end up paying tax of about $13,500 on
a $100,000 capital gain. I suggest you do exactly that, invest the profits in
low-risk income-generating securities, and more on. The stress and risk of tax
shelters isn’t worth it.

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