Weekly Tax Tips
Consider the timing of the taxation of interest earning investments
Date: 2 Sep 2011
Interest on investments purchased after 1990 must be accrued annually on the anniversary date of the investment, unless you receive the interest more frequently. For instance, interest on Canada Savings Bonds (CSBs) purchased on November 1, 2010, must be accrued as at October 31, 2011 and included in 2011 income. This applies even if you have not yet received the interest, such as with compound interest CSBs.
Also, some investment products pay interest at increasing rates over the term of the investment. For tax purposes, you may find that you must report the interest at an “average rate,” with higher income recognized in the earlier years, when the actual interest received is lower.
Be sure to take into consideration the timing of the receipt of income and the tax consequences when investing. Also, if you’re thinking of purchasing a one year Guaranteed Investment Certificate towards the end of 2011, you may want to consider delaying the purchase to early 2012 to defer the recognition of the income to 2013.
This tax tip is a publication of BDO Canada LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of 2 Sep 2011.
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