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Please your spouse: Put gold in her purse for Valentine's Day

My wedding ring cost, oh, about $250. Unlike my wife Carolyn's, which cost me four months' income, one arm, one leg and a free tax consultation. I start to sweat when I contemplate the idea of buying Carolyn another ring -- which I know she wants for Valentine's Day.

Still, I made the trek to the mall this week.

"Don't you have any cheaper rings?" I asked the woman behind the counter.

"Sure" she replied. "You'll find cheaper rings two aisles that way." she pointed.

"What, next to the bath towels?" I questioned.

"That's right sir. The rings you're looking for -- they're holding up the shower curtains in aisle No. 4."

That's it. I decided that if I'm going to buy gold, I'm going to make it tax deductible. Forget the ring. I'm getting Carolyn gold bullion bars for Valentine's Day. Tax deductible? You bet -- as long as she allows me to buy it inside her registered retirement savings plan and doesn't try to wear them.

You might recall that the 2005 federal budget announced that gold and silver legal tender bullion coins, gold and silver bullion bars, ingots, wafers, or certificates representing claims to these things, purchased on or after Feb. 23, 2005, became eligible investments for your RRSP and other registered plans.

Now, studies have shown that, over the long term, in spite of price fluctuations, gold has proven to maintain its purchasing power. In addition, gold has been a safe refuge against extreme movements in traditional asset classes in tough economic times. According to Global Insight, an economic research firm, a look at the past 30 years shows that the correlation between gold and the Dow Jones industrial average actually declined during the worst 30 months of the index. This indicates that investors in gold found the protection they were looking for when they needed it the most.

Hey, if gold bullion bars and the like are eligible investments for your RRSP, then contributing sufficient cash to your plan to acquire these assets, if you've got the contribution room, and then purchasing those assets inside the plan, will give rise to an RRSP tax deduction.

Voilà -- my wife's Valentine's Day gift will give rise to a tax deduction. Okay, so it lacks a little romance. I'm guessing she'll thank me later when her RRSP is worth many times what it is today.

But keep the following things in mind.

Don't plan on keeping your gold or silver at home in a shoebox or safe. The Canada Revenue Agency expects a custodial trustee to hold those assets as evidence that your plan truly owns the assets.

Any gold legal tender coins and bullion bars must be at least 99.5-per-cent pure, and silver coins and bars must be 99.9-per-cent pure.

Any legal tender bullion coins must be produced by the Royal Canadian Mint and cannot have a value that is more than 110 per cent of the market value of the coin's gold or silver content. So, valuable rare coins may not be eligible.

Any bullion bars, ingots, and wafers must be produced by an eligible metal refiner, bear the hallmark of the refiner, and have a stamp indicating its fineness and weight.

The gold or silver must be acquired by your plan directly from the Royal Canadian Mint (for coins), the metal refiner that produced it (for bullion bars, ingots and wafers), or from an eligible Canadian financial institution. So, it seems that a gift in-kind of gold or silver you already own is not going to cut it.

Tim Cestnick is a principal with WaterStreet Group Inc. and author of Winning the Tax Game among other titles.

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