Investor Learning Centre

Drawing on over 15 years as a private client tax specialist author John Mott has created a one-stop source of tax information for all manner of investments. The book is divided into five parts which respectively cover investment instruments; investment income; special investors; investment strategies; registered plans. Numerous examples and illustrations are included as aids to understanding the tax rules. A comprehensive list of references to relevant Canada Customs and Revenue Agency (CCRA) documents is provided at the end of each chapter. Appendices include a tax planning check list and a chart which shows qualified investments which can be included in RRSPs, RRIFs and RESPs. The book is fully indexed. Though written for Canadian advisors, individual investors who wish to fully understand the tax implications of their portfolio mix would be well advised to take a look.

Andrew Allentuck, Globe Investor

Tax manuals tend to give answers that are quick rather than exploratory. But investment advisors need more than guide to filling out tax forms. Advisors’ tasks are often to consider several approaches to investment and consider which, after tax, is the better for a client and his situation.

John R. Mott’s Tax Guide for Investment Advisors is synoptic, for it covers most of the investment, business organization, and sheltered investment structures available to Canadians.

The table of contents alone is 20 pages of single spaced print. That suggests the thoroughness and organizational strength of the book. But there are limits to the amounts of discussion of the Income Tax Act that can be packed into a single volume. Accordingly, Mr. Mott limits his discussions of the departure tax and the requirement that individuals who cease to be residents of Canada and who do not wish to pay the tax when due post security acceptable to the Minister of Finance. The intent of Paul Martin’s closing of the barn door after the horses fled was to limit scandals of the sort that followed discovery that a wealth family had shifted a trust to the U.S. without paying tax. Legal then, it’s more complex now. The security that is acceptable to the Minister may be shares or, who knows, interests in a trust. Does that make the Minister or his gofers members of the board or companies or de facto trustees? Mr. Mott does not say.

On the matter of whether interest paid to make money is deductible, a sticky point in tax law, Mr. Mott does not go into the depths of the controversy and the historic position that if the interest is not to earn “income,” as in interest or dividends, it’s not deductible. Recent cases hold that a reasonable prospect of making money should make interest paid deductible.Is this the end of it? Mr. Mott could have said more. But he chose brevity, which at least keeps the book to a reasonable length.

Tax guide for Investment Advisors is very good. Thoughtful, clear, well indexed and admirably brief in getting to the point of many tax issues and alternatives for investors and advisors, it’s a best of breed book. And a bargain to boot. It’s vital reading for any advisor, good reading for serious investors, and an essential shelf reference.

Stewart Lewis, Investment Executive

Finally, a tax book for advisors
Tax Guide For Investment Advisors merits space on your bookshelf

There are a number of tax books on the market geared toward average taxpayers, but advisors seeking something deeper for their array of clients may find the search daunting. Toronto writer John Mott has come to the rescue of planners who are not full-time tax professionals.

Mott has more than 15 years experience as a tax specialist. He’s a chartered accountant, a certified financial planner and a registered trust and estate practitioner.

His stated goal in writing Tax Guide For Investment Advisors (2003 edition) was to fill the gap between technical tax publications geared toward tax professionals and guides for everyday taxpayers.

Mott has achieved this goal. His 476-page Tax Guide is comprehensive and focused specifically on investment advisors. For advisors who give tax advice, this book is a useful reference guide to have on the shelf beside the latest copy of the tax act.

Writing about tax in a clear and palatable manner is no mean feat, but Mott has done so, canvassing all the relevant materials and drawing the information together. 
Wisely, he assumes the reader may want to know more or do further research, and he provides a list of references at the end of each chapter.

Before launching into the formal part of his book, Mott sets out useful and understandable definitions of some terms that are commonly used in tax circles and are assumed to be understood. He notes that some of the terms, such as “fair market value,” are not even defined in the Income Tax Act. He also defines terms that have their own nuances in the tax world, such as “property.”

The author quickly gets to the crux of the matter for advisors. He sets out a tax-planning checklist that covers retirement savings, tax-preferred investing, loss utilization, income splitting, trusts, and administration and reporting. It’s a comprehensive list without the initial how-to detail; he provides bracketed references, pointing the reader to elsewhere in the book to find out how to execute his suggestions.

Mott then dives in, looking at each of the various investment instruments and sets out the tax implications. For planners and clients interested in the arcane world of taxation of mutual funds, whether they are set up as a trust or corporation, Mott has set out the differences.

Believe it or not, there is evidence of a subtle sense of humour in this work. For example, in his introduction to tax shelters, Mott writes: “Rather than attempt a survey of the offerings that are currently being marketed this year (but possibly not next year), this chapter covers key provisions critical to how tax shelters are treated in the tax system.”

Mott looks at how investment income, in all its forms (dividends, interest, capital gains, etc.), is treated. He wades into the complexities of capital gains, not just simply explaining the basics, such as the “superficial loss rule” or the “loss carryback/carry-forward rules.” He also examines implications of strategies such as transfers between spouses to take advantage of tax-deferred rollovers.

For advisors who have business owners as clients, there’s a chapter on the treatment of business income and losses. For example, Mott looks at the treatment of transactions based on whether they involve capital or income — an issue that’s particularly germane right now to unincorporated advisors selling books of business — and sets out how the Canada Customs and Revenue Agency characterizes such transactions based on the circumstances.

You may have clients that Mott considers “special investors,” including private corporations, estates and trusts, or non-residents. Mott lays out the technicalities involved in establishing a trust without using too much legalese. He also describes the many varieties of trusts that have been enabled by new federal legislation in recent years.

The book also provides greater detail on income splitting than you would find in the average layperson’s guide. For example, in his section on investing strategies, he looks at topics such as transfers and loans prior to marriage as well as marriage breakdown. The section is rounded out by a look at borrowing to invest and hedging.

The final portion of Mott’s book examines the taxation of registered plans (RRSPs, RRIFs, RESPs and DPSPs). It pulls together a lot of information that is often found only in separate sources.

Keep in mind that amendments to the tax act are made annually, and you must continue to update your knowledge. For example, since this edition was published, new rules for foreign investment entities and the treatment of stock options have been released. Mott, of course, is well aware of the changes and he intends to fine-tune the book each year so you can add to your library annually and tweak your clients’ plans whenever necessary.

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