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media interviews
Jonathan's expertise has been called upon for financial and accounting articles in print media publications such as the Toronto Star, CA Magazine and the Financial Post along with television programs such as TSN's "The Business of Sports" and radio interviews on 680 News.
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SPECIAL SECTION: INVESTING
Jerry Langton
SPECIAL TO THE STAR
Nov. 13, 2008
Balancing Options;
Following investment rules and learning from mistakes can keep you on solid footing ...
In the summer of 1996, Dilip Pradesh earned a $5,000 bonus. The Brooklyn-based graphic designer didn't need the cash, so he invested it in Apple.
"Everyone said I was crazy; at the time, Apple was in dire trouble – they all said I was throwing my money away because Apple would be extinct by the end of the year," he said.
"But it was a good product and a well-known brand name, so I thought someone would buy it and I'd make my money back and a little extra."
A year later, Apple co-founder Steve Jobs resumed control of the company and the stock Pradesh bought for $14 a share shot up to $18. He needed some money and was convinced Apple's rebuilding process would be long and difficult, so he sold, making a tidy 28 per cent return.
Of course, after the iMac, iPod and iPhone, Apple is not only back on track, but one of the most profitable companies in the world. After a split, the stock now trades at about $140 a share.
Faced with the realization that his original $5,000 investment in 1996 would now be worth in the neighbourhood of $100,000, Pradesh is philosophical.
"You can't look back on these things or you'll go crazy," he said.
Jonathan Ruben, a Toronto-based certified accountant and financial planner, disagrees. He thinks Pradesh would be better off learning from his mistakes. Pradesh, he said, broke Rule No. 1 by "investing (if you can call it that) without a proper strategic plan – document time horizon, capital, future contributions/withdrawals."
So while Pradesh made some smart moves by buying into a company with potential to rebound after hitting a low spot, he made a cardinal investment mistake. Warren MacKenzie, founder and president of Toronto-based Second Opinion Investor Services, agrees with Ruben.
"Impatience is one of the most common mistakes an investor can make," he said.
Conversely, another common mistake is holding onto a stock for too long.
"Chasing yesterday's star performer leads most to pay too much," said Ruben. "Many (investors) dig their heels in, refusing to fall out of love with your choices, and end up not getting out soon enough."
MacKenzie has a simple rule for such investors: "If it's not good enough to buy at this price – you should sell it at this price."
Just as important as timing, the experts say, is diversification. Smart investors know not only that their portfolio needs many different companies, but also different industries. Ruben warns about "putting all your eggs in one basket."
Any company or industry, no matter how well-managed, can run into hard times or even a full-bore catastrophe like the subprime lending crisis that ravaged Wall Street.
"Lack of diversification and absence of a well-executed and re-balanced asset allocation often cuts deeply into what otherwise would be above-average returns over the long term."
And, while it makes sense to have more stocks than fewer, it can be easy to get carried away. Every trade costs money and the amount they cost can quickly eat into any profit or equity.
"It's shocking how many simply don't know what they are really paying in trailer fees, commissions, administrative fees, etc.," Ruben said. "And how many erroneously regard their gross returns, rather than their net gains, as the performance of their portfolios."
Since any trade could have tax ramifications on the entire portfolio, every trade should be studied in great detail. Ruben warns investors not to "let the tax tail wag the investment decision dog" by investing willy-nilly as tax deadlines loom.
And many inexperienced investors get excited about something they've heard without realizing everyone else has already heard the same thing. Both Ruben and MacKenzie said they believed that doing one's homework is essential to any investor's success, but that keeping an eye on the big picture is necessary. Too many investors, MacKenzie said, fall into the trap of "liking a company and thinking it has a great product but not knowing about the competition or how this company stacks up with other companies with similar products."
So, while Nokia may make a really cool cellphone, keep in mind that Motorola does too.
And it doesn't make sense to invest at all if you are heavily in debt. A return of 10 per cent annually may look like free money, but if the investor has the same amount of credit-card debt with an 18 per cent interest rate, he or she would be farther ahead by paying off the outstanding debt. Of course, the biggest mistake many inexperienced investors make is in overestimating their own ability to understand the complex world of investing. In most cases, it makes sense to call upon a professional.
"In the stock market the competition consists largely of the professional trading desks of the large firms – these traders have PhDs, sophisticated analytical tools; they have discipline, experience and loads of money," said MacKenzie.
"If you accept the fact that you are unlikely to be able to beat Tiger Woods at golf you should accept the fact that you are unlikely to be able to consistently beat the professional traders at their own game."
David Hamilton, Financial Post
Published in The National Post Sat. Apr.19, 2008
Share The Wealth
Complex tax math can help couples save thousands ...
In anticipation of an extra $3,300 on their tax refund cheque, Morris and Adelle Greener indulged in a few luxuries.
"I went out and bought myself a performance hybrid," says Mr. Greener, 60, who retired three years ago to build their dream home in the countryside north of Toronto, after working at the Toronto Star for 32 years in circulation and home delivery.
"[My wife] is an artist. She does watercolour, so when we built our home we made a studio for her so that she's got lots of light, high ceilings, wall space and windows," says Mr. Greener.
Their newest indulgence is courtesy of pension-income splitting. As a retired couple living on Mr. Greener's pension, they are a textbook example of how Canadians are benefitting from the new pension-income-splitting rules.
Accountant Jonathan Ruben, who prepared the couple's taxes, says clients such as the Greeners can be saving thousands of dollars when they agree to split their pension income. "It's wonderful to see that clients are recognizing the benefits and optimizing their tax savings."
Optimizing savings is like balancing a scale -- one has to weigh the numbers to find the best savings formula. "The form itself is simple, but the results and implications are not necessarily intuitive," Mr. Ruben says.
"It's not like there's a lot of extra money kicking around," Mr. Greener says. "I've gone from a decent income to a very modest retirement income. This year I would have ended up paying the taxman all of that $3,300."
The Greeners are not the only ones benefitting from the new rules introduced for the 2007 returns.
After more than four decades working for mining company Cominco, Vulcan, Alta., resident Bill Smith, 67, retired two years ago. In all those years, he had always done his own taxes. The new pension-income splitting legislation finally made him seek professional help.
"I don't know how to do it. There's lots of jiggling figures around," Mr. Smith says. "I just don't have the patience or the time."
Mr. Smith and his wife of 46 years ended up saving about $3,000 more than they did last year. He figures there was a difference of about $2,500 between the tax form he filled in and his accountant's. The accountant's fees were a little more than $200.
Mr. Smith's accountant, Neel Roberts, says he has a number of clients who have been doing their own taxes but have found the new pension-splitting formulas confusing.
Other tax firms are also seeing more clients coming to them as a result of pension splitting. In retirement community Penticton, B.C., accounting firm Harvey, Lister and Webb has done more than 1,000 tax preparations using pension splitting. "Some have been as high as $4,800, and it can go even higher than that. But most people are saving in the range of $2,000 to $3,000 per year," says partner Bob Harvey.
Ottawa tax lawyer Adam Aptowitzer, with the firm Drache LLP, says while pension splitting can result in a larger refund for the couple, it underscores the fact that one partner is making more money than the other. "What happens is that there is a power imbalance between the spouses," Mr. Aptowitzer says, noting both spouses have to agree to the income split.
Inside Finance By Barry Critchley; Money Box;
Verify Your Capital Gains Values
If you claimed the capital gains exemption on your 1994 return it may pay to verify the Feb. 22, 1994, security values you used. That advice comes from Jonathan Ruben, a chartered accountant in Toronto. His firm took Feb. 22 valuation statements clients got from financial institutions and investment dealers and compared them with newspaper stock and mutual fund tables. In one client's case, a discount brokerage statement difered from published closing prices on four out of five stocks and undervalued the portfolio by $855. Ruben said his firm found gaps as wide as 12%, adding that undervaluation could prevent the taxpayer from making full use of his or her exemption. If you find discrepancies you can send your Revenue Canada district office a letter asking them to amend your return.
By Tony Van Alphen; Business Reporter
Athletes Have Got It All Wrong, Say Tax Advisors
Some multi-millionaire professional athletes from the United States say they don't want to play for a Canadian club because the taxation hits them a lot harder than south of the border.
But Canadian teams and tax experts argue that after they add it all up and the government takes a good chunk away, the difference between the two countries can be minor for those wealthy sports stars.
It's a matter of simply taking advantage of some basic provisions under the tax law, accountants and tax lawyers say.
"They can achieve a pretty level playing field," says dennis McMullin, a tax partner at Deloitte & Touche in Winnipeg. "You can get fairly close with advanced tax planning."
The tax bogeyman popped up again recently when trading speculation swirled around the Toronto Raptors basketball club.
Star Raptor point guard Damon Stoudamire cited it as a reason why he wanted to get out of town.
Houston Rockets centre Kevin Willis, who was almost traded to the Raptors told USA Today the differences in the structure were " a huge deal" and "pretty hard to swallow."
"They're not getting good advice," concludes Bill Johnston, an Ottawa tax lawyer who structures pro athlete contracts to minimize taxes.
In fact some accountants say a New York Knicks star can end up with paying more income tax than a rich Raptor.
Tax lawyers and chartered accountants acknowledge that income tax rates are higher in Canada than in the United States, but they say some U.S. agents and players exaggerate the gap.
In Ontario, the rate is 51.64% for anyone with taxable income of more than $63,500. In New York and California, it's about 50% on income of $278,000(U.S.). All major league athletes with U.S. clubs easily make more than that and face the full hit.
The rate on a pro baseball, hockey or basketball player in Ontario drops below 51% even before devising the first tax strategy.
That's because the effective tax rate for a U.S. pro athlete in Ontario declines every time he works south of the border in games and practices during the season.
He usually spends about 35% of his work time in the U.S. That automatically reduces the Canadian tax bite.
Structuring a contract with tax rules in mind can reduce the sting further, according to experts.
Jonathan Ruben, a Toronto chartered accountant, says higher-paid athletes can negotiate a "retirement compensation arrangement" that defers income and can help the club and player since they don't pay the taxes until after the contract expires. "It's essentially an unregistered retirement savings plan," says Ruben, who provides tax advice to wealthy people, including major league athletes in Toronto.
Under this arrangement, the team makes contributions to a "custodian" or trustee. Payments could be subject to a lower tax rate because they are spread over a longer period of time.
The player receives benefits after he quits, or the team fires him. Athletes can negotiate a similar arrangement, commonly known as an "employee benefit plan," under which the club also pays a good chunk of its income annually to a trustee for investment.
Revenue Canada can tax the investment earnings every year while the athlete plays but not the income that the club paid. The club doesn't get a tax deduction until the player starts drawing down the funds and paying taxes.
"Players can select investments to acquire growth prospects so there is little annual income," says McMullin.
"Growth appreciation is reflected in enhanced value of investment, which builds a pool of capital for retirement."
McMullin says there are no such tax provisions that benefit athletes in the United States. On the other hand, U.S. residents can write off mortgage interest and property taxes. Canada doesn't have those tax breaks.
Meanwhile, Johnston says some athletes can negotiate their contracts to minimize the tax hit without even setting up a retirement or benefit plan with a club. He says an athlete can negotiate a good portion of his contract in the form of a signing bonus. It's taxable here at a rate of 15% under the Canada-US tax treaty. That rule effectively allows the athlete to get full U.S. foreign tax credit against Canadian taxes, Johnston says.
"It means the player pays at the U.S. rate."
In addition to different ways of minimizing tax, experts say some U.S. athletes don't take into account the big bang they get from the American dollar in purchasing goods in Canada. All major pro stars playing here get their salaries in U.S. dollars, which is worth $1.42 (Canadian).
Ruben, a member of the New York and Illinois state societies for certified public accountants, and McMullin add that Canada offers those athletes safer cities, better schools and health care, fresher air and extensive cultural attractions.
The Raptors are currently working on an information package for agents and players who will be free to change teams this summer. It will emphasize the city's merits and lifestyle, clarify the financial benefits and offer assistance so players can reduce their exposure to income taxes.
"There are fears the taxes are much higher here, but it's not true," says John Lashway, vice-president of corporate and community development for the Raptors. "There has to be an education. We have to show players and their agents how thehow ththe hows work and all the advantages of living in Canada."
Some league insiders suspect a few agents are trying to portray Canada in negative terms to create perceptions of marketing limitations and cultural shock here so their clients stay away,
But Lashway says that although Toronto is not New York, Chicago or Los Angeles, few other cities offer the national and local marketing potential of Toronto or the quality of life.
"It's ludicrous some of the things we've been hearing about Totonto and the taxes."
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Our businesses, structured in corporations and trusts, as well as 4 generations of our family have been Jonathan's clients since the late 90's.
In addition to preparing all of the requisite statements and returns, Jonathan and his staff have always been incredibly responsive to any question or concern, clearly communicating advice on a variety of matters.
We value having a CA proactively plan on our behalf and recommend JRPC without hesitation.
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