Well, it’s been a messy few days around here. An emotional backlash to Muslim-friendly mortgages. Angst over two-million-buck houses. Hyperventilation about the orange guy. All unhealthy. More of this and the blog will have a stroke. It may already be on life support. BP off the chart.

So, let’s heal. Fortunately the Doc has just returned from a wellness session replete with 30-year-old scotch and Davidoff Nicaraguas. Who’s the first patient?

“I’ve been following your articles on the recent budget and the capitals gain tax moving to 66%,” says Al, “and I’m wondering how it might impact my kids’ who will be getting the house when I die.”

“I bought it for 400k 20 years ago and it’s now worth 2.4m. That seems like a large CGT bill for my kids when they sell the house. Neither will want to live in it. Wondering if I’m better off selling the house now and renting? I can then gift the cash to my kids in my will which won’t have any CGT attached to it. If that option makes sense I’d prefer to keep the wealth in the family. I know you hear this a lot but I’d like to personally thank you for all you do for your readers. Very much appreciated.”

Take a Valium, Al. It’s okay. There’s no capital gains tax on a principal residence transferred through an estate to your offspring as beneficiaries. However any gain in the value of the house between the day of your passing and the day the place is sold by your children is taxable. The first $250,000 will be at a 50% inclusion rate, and 66.6% above that. Maybe a bigger issue is ensuring the kids get along with each other and will be able to decide together (without conflict) on a time to sell, a realtor to handle the sale, the asking price, the closing date and a lawyer.

To avoid that, sell now and distribute the cash proceeds in your will. Or surprise everyone and spend it on yourself. They’ll be thrilled for you.

Well, here’s Valerie. She’s a newly-minted medical colleague (a real one) in the first year of practice and, like many, is earning money through a personal medical professional corp. She also wants to game to system, using a FHSA.

“What happens to my FHSA contributions and contribution room if I purchase a qualifying home, but choose not to make a qualifying withdrawal from my FHSA?” she asks.

“With the advent of the new capital gains tax on corporations, there has been a lot of discussion amongst physicians about how to maximize RRSP/FHSA/TFSA accounts to save for retirement. One suggestion that I came across is to not use the FHSA towards a qualifying home purchase. Instead, the suggestion is to maximize the FHSA contribution room ($40K) then transfer to RRSP, thus increasing RRSP contribution room. I reviewed the CRA FHSA guidelines and they don’t seem to address this issue, so it seems like a possible strategy. Interested in your thoughts.”

It’s true that the weird first-time home savings account can be used to goose RRSP room. The rules allow you to contribute up to $40,000, to leave the money in growth assets for 15 years then move the whole caboodle into an RRSP or RRIF. But pursuing this strategy while also assuming ownership of real estate means you’ve broken faith with a tenet of the account – that it’s only for the houseless. The rules are fuzzy and CRA interpretation bulletins so far are lacking, but it’s a good bet that, eventually, your FHSA-to-RRSP transfer would be deemed a taxable withdrawal. Is the risk worth it? Do you really need a audit?

By the way, Val, you and your doctor pals should be careful about taking income in the form of dividends instead of salary. It might seem like your tax load is lessened that way, but it’s an illusion. The combination of tax paid by your corp and by you on the dividends received is identical to the tax owed on an equivalent amount of salary. And you earn zero RRSP room. Plus – now – every dime of capital gains made by your corporation on its retained and invested earnings is subject to Chrystia’s Special 66% Guilt Tax.

The days of tax-smart doctoral tax deferral are terminal. RIP.

Finally, Curtis comes to the clinic today with a common complaint: MRA. Mortgage renewal anxiety. Like measles among the anti-vaxers, it’s spreading wildly.

“I love that the blog is still going! It has been so helpful to me over the past decade. Thanks for all you do. And I would say the blog has made me smart, until I wasn’t – and purchased a Regina house in September 2021,” she says.

“Should I be increasing my mortgage payments in anticipation of higher mortgage renewal rates, and to be mortgage free quicker, or take that extra cash for increased payments and invest? We’re early 40s, commonlaw, two kids, earn 240k together, teacher and Saskatchewan government worker. Mortgage is 710k @ 1.99%, weekly payments. What do you think?”

It may be a long time, maybe never, before people borrow house money again sub-2%. Savour it. And the weekly mortgage was a good idea. If it’s the right kind (not all are) you’re making the equivalent of one extra monthly payment per year, shaving a lot off the total interest bill. Meanwhile the low rate means a good whack of every payment is going towards principal.

Given this, take your extra cash and invest it in a B&D non-registered account (since you both have defined benefit pensions). You’ll surely earn far in excess of 1.99%, will diversify your wealth profile, and accumulate a pot of money than can be used to mitigate the impact of the coming renewal. Reduce the principal then, once the interest rate environment is known.

And Rejoice that you live in Regina. The rest of us are pooched.

About the picture: “Here is a pic of our 6 year old miniature poodle Suzie, the smartest dog we’ve ever had, write Don and Vicki on Vancouver Island. “She often crosses her paws, and has her own opinions. We are a bit older than you, and well remember you getting sacked back in the day for calling a spade a spade. Thanks for doing that. And thanks for continuing the tradition in your blog. Canada badly needs your dose of reality if we are to avoid the extremities of the left & the right.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.

In a Manhattan courtroom Donald Trump is currently on trial in a hush-money case the prosecution says amounts to election fraud and collusion.

The main players are sordid. A porn star. A man already convicted of fraud and sexual abuse facing three more criminal trials. His felon lawyer. The publisher of a sleazy supermarket tab.

What’s the best outcome for the economy, your house, mortgage, retirement and Canada?

That Trump be convicted, go to jail and never again set foot in the Oval Office.

This is the unmistakable conclusion of a new, detailed analysis by Jean-François Perrault, senior v-p and chief economist at Scotiabank, and his colleague Rene Lalonde. Released Tuesday, it details a dystopian aftermath of the coming US election between Joe Biden and his predecessor. Polls show it’s currently a toss-up between the two fossils. The bankers say a victory by either guy would be unfortunate. But a win by Trump would be a disaster. Especially for Canada.

With The Donald in power, and pursuing his agenda of tariffs, an assault on China, and mass deportations of US non-citizens, the outlook for the American economy would be dark. For us, it could trigger a widespread collapse, as forecast by the bank.

Canada would slump into a recession with a drop of 3.6% in national GDP. That compares with the 5% hit we took in 2020 because of the pandemic. But this time contraction would come with a major spike in inflation and explosion in interest rates – also when the federal government’s debt has doubled and service charges ballooned. In other words, the cupboard is bare this time. No CERB coming.

The bank says inflation, now 2.9%, would jump by 1.7% and the Bank of Canada would be forced to raise its policy rate, now 5%, by 1.9%. The prime at the chartered banks, currently 7.2%, would be 9.1%. HELOCs would jump past 10%, as would business and consumer loans. Mortgages would rise beyond 7% and the stress test move towards 10%.

In this scenario – recession, lower economic activity, swollen inflation, surging rates and higher unemployment – our real estate market would do well not to collapse. If a crumble did happen, the implications would be widespread including higher personal taxation to compensate for gutted public revenues over the four years of a Trump presidency. House prices might not drift lower, but instead plunge in such a scenario. The impact on the majority of Canadians with the bulk of their net worth in real estate could be profound.

Is this just Trump-bashing hate and panic coming from the woke towers on Bay Street?

Says the bank’s report:

“A Trump victory and follow-through on the policy side would likely see higher inflation than what could be expected in a Biden victory. Were Trump to implement the more controversial elements of his platform, namely the imposition of tariffs on all U.S. imports and the effective launch of a trade war, and the mass deportation of illegal immigrants, we would also expect substantial economic impacts in the United States and its trading partners. In that eventuality, large reductions in economic activity could be expected in the countries most dependent on U.S. trade (i.e., Canada and Mexico).”

Biden would raise taxes, the report clarifies, while Trump would cut them – especially for corporations. But the major economic impact would come from the launching of a trade tirade by 45. Says the bank: “Trump’s proposed 10% across-the-board increase in tariffs, with a special 60% carve-out for China, would effectively be the launch of a trade war, with damaging impacts on the United States and the rest of the world.” The US economy would shrink by more than 2%, inflation swell fast and the Fed would have to add 2% to rates. In response, the stock market would likely tank, and the 401k retirement funds of millions of equity-holding Americans be crushed.

“Given Canada’s greater reliance on trade,” adds Perrault, “the imposition of tariffs on all exports to the United States would lead to even greater economic harm north of the border.”

Look at this chart of the impact on Canada. There is little chance the current price of homes and condos, or the value of the TSX, your portfolio or the government’s ability to keep shovelling money out the door, would survive a Trump presidency intact.

And it’s not just trade policy. The guy is igniting public passion and support by calling illegal migrants ‘animals’ and promising the expulsion of millions of souls. “The deportation of roughly 10 million illegal immigrant implies a gradual fall of around 3% of the U.S. labour supply,” says Scotia. “U.S. employment and real GDP would gradually fall by 3% permanently…The shock is negative for U.S. stock markets…”

Finally, this analysis does not factor in Putin and Ukraine, Gaza and Israel, “the potential for civil disruption (regardless of who wins)”, China’s current real estate crisis nor a deterioration in American finances in the wake of the election. But you should.

This report can be read here.

If you’re not rooting for the prosecution, you’re not paying attention.

About the picture: “Hi, Garth!  Here’s our 7 year old Cavi, Molly,” write Leslie and Sam. “She’s a serious Alpha girl.  We certainly know who’s boss!”

To be in touch or send a picture of your beast, email to ‘[email protected]’.