Letters to the editor

BARGAIN ALTERNATIVES

In “Keeping a bargain a bargain” (Personal financial planning, January/February), David Altro recommends a trust that will be treated as a self-benefit trust for Canadian tax purposes. We believe that in most circumstances a trust or partnership would be better alternatives.

While there may be circumstances where the self-benefit trust is the only plan that will achieve the objectives mentioned, it is not the plan of first choice where the minimization of US estate tax is the ultimate goal. This is because the assets held in the self-benefit trust are includable in the deceased’s estate for US estate tax purposes and the only attempt to reduce the potential liability is through nonrecourse financing and valuation discounts. These items must be disclosed on a US estate tax return, are subject to strict scrutiny by the Internal Revenue Service and may be costly to set up and maintain.

The trust and partnership alternatives do not require discounts or nonrecourse financing to reduce the estate tax but on their own completely eliminate the tax. The self-benefit trust structure relies on each spouse having his or her own funds to acquire the property, whereas the trust and partnership alternatives are possible where only one spouse has funds for the acquisition.

One spouse could settle a trust for the other and eventually the children with sufficient funds for the acquisition. Where borrowing is required, the contributing spouse could borrow funds personally and contribute them to the trust. The trust could be drafted so no part of the trust property would be includable in a beneficiary’s estate for US estate-tax purposes. The 21-year rule should not initially apply to the trust, as it will have a dis-position on the beneficiary spouse’s death. The trust could continue for up to 21 years following the spouse’s death without incurring another deemed sale. The trust avoids probate and guardianship proceedings and offers asset protection.

A Canadian limited partnership that checks the box should be considered where a taxpayer is single, already owns the US property or is not prepared to transfer significant wealth to a trust for his or her spouse. The tax rate on capital gains may be higher if the property is sold before death but this is a small price to pay for estate-tax protection. The owner of the partnership interests could take the steps required to avoid probate and provide asset protection for children through Canadian estate planning. Incapacity issues could be dealt with via a power of attorney.

Benita Loughlin, CA
Partner, international executive services, KPMG
and Elaine Reynolds
Legacy Tax + Trust Lawyers
Vancouver

GIVE CREDIT WHERE IT’S DUE

I feel compelled to express my appreciation of Marcel Côté’s comprehensive article “The culprits” (Outlook, March). In it he pinpoints Wall Street’s largest investment banks as causing the worst recession in 75 years. His graphic description of the moment in which they brought the world’s markets to a standstill in 2007 is greatly admired for its measured high-standard registration.

What I find somewhat surprising is that while the article undoubtedly alludes to the underlying problem as a lack of regulation and control by various governments throughout the world, it fails to give due credit to the Canadian government. Surely the fact that the Canadian banks “abstained from this financial feeding frenzy” and remained “only slightly affected” merits some form of acknowledgment as something other than a chance happening.

Eric Houston, CA
Aberdeen, Scotland

AN IMPORTANT DISTINCTION

On page 14 in News from the profession (April), there is a statement that reads, “An analysis by Accounting Standards Board, Which IFRSs are Expected to Apply for Canadian Changeover in 2011.” In fact, the analysis was not done by the board, it was done by the staff of the board. This might seem to be a subtle distinction without a real difference, but the difference is actually very important. Staff materials are not authoritative and therefore do not have to be followed for a reporting entity to comply with GAAP. Board pronouncements are GAAP, of course.

Peter Martin, CA
Director, accounting standards, CICA
Toronto

IN WITH THE OLD

In the opening sentence of “Moving forward” (From the editor, April), Christian Bellavance writes, “We are … just a few months into a new decade.” No, we are not. We are in the last year of the old decade.

The last year before the birth of Christ was 1 BC, and the next year was AD 1. There was no year zero. A decade is 10 years; therefore, the first decade ended on December 31, 10 (notwithstanding the switch from the Julian to the Gregorian calendar). Similarly, the current decade will end on December 31, 2010.

John R. Ellen, CA
Vancouver

LET’S TALK

It is time to start a discussion. I trained as a student-in-accounts and passed my UFEs in 1962. I received my CA designation but shared the graduation with individuals who had arrived through another route. That was the year of the amalgamation of the CA and CPA institutes in Ontario. The decision was made to move forward under the CA brand and keep the CPA designation dormant but under control. There were a few years of hard feelings but as time passed the resentment became irrelevant.

In recent years I have become aware that our brand, CA, has not been protected but has gained acceptance in identifying other activities.

The first time I was aware of the change was the use of the CA to identify products of Computer Associates. A highway sign that I saw pointing to Lorne C. Henderson CA was not pointing to an accounting office but to a conservation area east of Sarnia, Ont. And I saw an ad in the Globe and Mail revealing that anyone could get their own CA. Granted, the letters were preceded by a dot and were in lower case, but the Internet country code for Canada, .ca, has far greater recognition than the accounting link.

The damage is done. It is time to admit that money spent to advertise the relationship between the accounting profession and the initials is money wasted.

In my opinion, the CA brand in North America is no longer relevant. We need to go in a new direction.

Change is upsetting but people get over it. It is time to dust off the old CPA brand.

James A. Casson, CA (retired)
Welland, Ont.

Letters should be sent to: The Editor, CAmagazine, 277 Wellington Street West, Toronto, Ontario M5V 3H2 (letters.editor@cica.ca). CAmagazine reserves the right to edit / shorten them for clarity.