Entrepreneurial

Canada is leveling the playing field for VCs that want to do business north of the border, but a sudden influx of U.S. venture capital cash is not likely on the horizon.

Last week the Canadian government announced it will scrap Section 116, a law that withholds 25 percent of the returns from the sale of a Canadian company backed by a U.S. VC firm until each investor proved they were a foreign citizen.  This tedious process sometimes delayed the official sale many months, or years in some cases. There is no U.S. law similarly hampering Canadian VCs.

Dan Primack, the editor of Thomson Reuters’ publication PE Hub, told Reuters TV some U.S. VCs created Delaware corporations — companies registered in the state of Delaware, without having to be based there, to take advantage of more business-friendly tax laws — and kept their portfolio company’s “R & D” in a Canadian city to try to skirt the legislation, but this measure could cost as much as $400,000, a significant chunk of change for most startups.

“A lot of VCs just threw up their hands and said we’re not going to invest in Canada,” said Primack, who interviewed Boston-based investment lawyer and lobbyist Stephen Hurwitz for a PE Hub article.

Primack said he didn’t expect the scrapping of Section 116 would create an immediate influx of U.S. VCs funding Canadian entrepreneurs, but added removing the impediment would likely lead to an increase going forward.

– Bob D. Scharin is a senior tax analyst for the Tax & Accounting business of Thomson Reuters. The views expressed are his own. —

With jobs and home loans hard to find, many individuals are making ends meet by tapping into their IRAs and 401(k) accounts long before reaching retirement age. Besides leaving less money for the retirement years, those withdrawals can produce a hefty tax bill. In general, distributions made before age 59½ are subject to regular income tax rates plus a 10% additional tax.

The tax law contains exceptions to the 10% additional tax, but the exceptions can be complicated and the rules can differ between IRAs and 401(k)s. With a bit of planning, however, you may be able to wipe out owing the additional tax. Here’s a look at some tax-saving exceptions:

– William E. Massey is a senior tax analyst from the Tax & Accounting business of Thomson Reuters. The views expressed are his own. —

Tax scams are prolific especially in these tough economic times. On the plus side, the IRS has been very good at keeping the public informed about the numerous scams it has uncovered. Each year, it issues a “Dirty Dozen” list of the most notorious scams. In addition, it posts detailed information on tax scams on its Internet site www.irs.gov. Here are five tips for avoiding being victimized by tax scammers.

Tip #1

Someone has promoted a way to for me to save taxes. It sounds good but sounds somewhat fishy at the same time. What should I do?