Dividends from Canadian companies can offer big breaks for income-oriented investors, and they’re getting a lot of hype these days in the press, but they’re not always as tax-friendly as people believe. “Dividend stocks are still good,” says Steve Cummings, president of Cambridge Financial Services in Halifax, “but are they always the best from a tax perspective? The answer is no.” The problem is that dividends can artificially inflate your income, potentially triggering a clawback of Old Age Security (OAS) payments.

Confused? You’re not alone. It’s far from intuitive, but on your tax return, you have to “gross-up” your dividends by 44% and declare that amount as income. Then you can claim a tax credit (18% in 2010) on the higher amount. So if you collect $100 in Canadian dividends, you must report it as if you received $144 as income.

Normally, that doesn’t matter, you still pay less in tax than you would on employment income, for instance. But the gross-up can push you over the OAS clawback line, which can create complications for seniors. For instance, the feds claw back Old Age Security benefits when a retiree’s income is higher than $66,733. A senior who earns $55,000 from pensions and another $10,000 in dividends may think she comes in under the limit, but be pushed over by the gross-up.

Investors near these thresholds might be better off holding dividend-paying stocks inside their RRSP, according to Mike Macdonald of Weigh House Investor Services in Toronto. Another strategy is to invest for capital gains: while $100 in dividends must be reported as $144, a capital gain of the same amount increases your taxable income by just $50.

Dividends and capital gains are treated differently by the taxman. This example shows how a dividend gross-up can mean an OAS clawback*.

But over the last three years, everything has changed. Samson, now 49, and Laura, 47, are finding their generous nature is tearing their comfortable life apart. In 2006, after attending some financial workshops, they made what they now realize was a terrible financial mistake, agreeing to put their life savings—more than $200,000—into four limited partnerships that invest in commercial and residential property. All of the partnerships ran into trouble and are now frozen. One is in bankruptcy, and another is being investigated for fraud by the provincial securities commission. “These investments may be worthless,” says Samson. “I knew they would be fairly illiquid—but we never imagined that we wouldn’t be able to sell them at all. How do you plan for that?”

Then, when they were at their most financially vulnerable, the Vaezes (whose names and other details we’ve changed to protect their privacy) were suddenly faced with a terrible decision. Like many other members of the sandwich generation, they were being squeezed hard by the simultaneous demands of looking after both their parents and their kids.

In addition to the regular costs of paying the mortgage and buying the groceries, the Vaezes have to take special care of their oldest son, Jacob, 16, who has suffered from an immune disease most of his life. Lately the cost of his weekly therapy treatments had been getting higher and higher. On top of that, the couple is supporting Samson’s 74-year-old mother, Jan, who lives nearby on just $9,000 a year in Canada Pension Plan and Old Age Security payments. The Vaezes pitch in with $3,000 a year to help her make ends meet, and that money also indirectly helps Samson’s older brother Michael, 51, who lives with his mother in the old family home and helps to take care of her.

“We want to keep her in her own home as long as possible,” says Samson. “My brother works for a cleaning company and doesn’t make much money. My other two brothers are either in bankruptcy or in debt up to their eyeballs so they can’t help. We feel we have to do what’s right.”

Providing support for so many family members, plus donating $10,000 a year to charity, was already stretching them thin, but the final straw came earlier this year, when Samson’s mother slipped and fell on the stairs. She sustained serious hip and knee injuries that made it impossible for her to get to the second floor of her home, so Samson and Laura had to suddenly spend more than $6,000 to put a new bathroom on the ground floor. “Wherever we turn there’s another expense facing us,” says Laura. “And these are expenses that will be with us a long time.”

At some point she begins to talk about her childhood and she gives examples about hand-me-downs and cabbage for dinner every night, and then I get started and talk about my siblings and I bathing in the same water in a small metal tub, youngest to oldest, or the fact that I didn’t eat in a restaurant until I was 9 years old… though I desperately wanted this. And then the stories become bigger and more apocryphal and eventually we just out and out lie. “We used to grind up the chicken bones really fine and use it as butter.” “We didn’t have zippers on our pants or jackets because the metal was melted down and sold.” And so on.

My favourite story to tell my children, eliciting awe, is the popcorn tale. At the age of 6 I was invited to Larry Geddert’s birthday party. My mother, face flushed and hands full of bread dough, explained that there was no money for a gift; we would have to make something. She suggested a bag of popcorn. I was mortified. Even more so when I arrived at the party and handed the greasy bag to Larry, said happy birthday, and he took it and set it aside. How do you rip open a present like that? Where’s the surprise? Still, I take perverse pleasure in telling that story. It’s got pathos and conflict and a character (me) that evokes empathy.

Another story: my father, one late winter night when I was 5, put on his coat and as he stepped out the door he said that he was going to see a man about a horse. I was ecstatic. A horse. I loved horses. We didn’t have a car that heated, we didn’t have hot water, but we were getting a horse. My excitement was short lived. And on that night I learned what metaphor and euphemism was. I also learned that there are very imaginative ways to say, “I’m going to the outhouse.”

These days I’m re-reading War and Peace. Napoleon has conquered Moscow, the looting has taken place, the city has burned. The French army begins its retreat as winter sets in. The soldiers pile carts and caleches full of valuables—dressers, oak tables, chairs, gold, trunks full of jewelry. Halfway back to France the valuables are being used for firewood, soldiers are dying from hunger and disease, the carts with their valuables are being abandoned, and horses are dying because they can’t eat jewelry. It’s a fine lesson in greed that, “bears within itself the chemical conditions of decomposition.”

Here’s another Russian story. My grandfather was a farmer in the Ukraine back in the early 1900s. Every spring, before planting, the grain to be used for seed was soaked in formaldehyde, to make it hardier. One spring, my grandfather soaked it too long. He planted it anyway, not expecting anything to grow. It so happened that a drought fell upon the land and where every other farmer’s crop was ruined, my grandfather’s grew because it was tardy growing in the first place and when a slight rain finally fell, his farm was one of the few to produce wheat.

A famine ensued, people were poor and hungry, and one day in autumn a soldier showed up at the farm asking for a little wheat. He’d heard that my grandfather had grain. The soldier was given a sack of wheat and he was told that there was no need to pay.

A year later, when conscription took place, my grandfather went to sign up with a heavy heart. He stood in line for a day and when it was finally his turn he approached the soldier behind the small wooden desk. The soldier studied him and said that he recognized him. Wasn’t he the man who a year earlier had given him a sack of wheat? Indeed he was. And the soldier told my grandfather to turn on his heel and return home. “Your generosity has been rewarded,” he said.

These two stories, Tolstoy’s and my grandfather’s, are ‘true’ in a factual way, but also true in the deepest way, in the sense that I take something from them and lay their resonance over my own life and ask the questions: How should I live? How much do I need? Who is my neighbour?

Tolstoy writes that “man is created for happiness, that happiness is within him, in the satisfying of natural human needs, and that all unhappiness comes not from lack, but from superfluity.” Tricky that—what is superfluous, what isn’t? Or perhaps not so tricky, when we begin to understand that richness is best experienced in love, family and munificence. And, on the best of days, the horse one has always dreamed of.

David Bergen has written six novels an a book of short stories. He won the Scotiabank Giller Prize for the The Time In Between in 2005, and his most recent novel, The Matter With Morris, was shortlisted for the same prize this year.

If you lived in California, like Dan Edmunds, director of vehicle testing at Edmunds.com, he’d tell you after-market rust protection is a waste of time. But you don’t. You live in Canada, where ice, snow, salt and dramatic climate fluctuations, combined with thousands of kilometres of gravel roads, can chip away your car’s built-in protection in no time. Because of that, Edmunds believes that even drivers in temperate areas of Canada would benefit from rust protection.

Much of the damage to your car’s existing rust coating is caused by driving on unpaved roadways, like those found in cot­tage country or at national parks and campgrounds across Canada. “The stones fly up and grind and chip and work at the surfaces on the undercarriage of the car,” explains Edmunds. “This particular kind of damage­—repetitive surface damage—can leave exposed areas that be­come susceptible to corrosion.”

If you update your ride every couple of years, getting a spray-on rust coating isn’t worth it. But if you plan on driving your car into the ground, it can lengthen your car’s life. “The additional protection and cost only makes sense if you plan on keeping your car over the long term,” says Edmunds.

After-market protection costs roughly $150 for 12 to 18 months of protection, says Kirk Robinson, owner of Robinson Auto­motive in Mississauga, Ont. He says rust-proofing can prevent a variety of repairs, such as fuel line corrosion—which can cost $1,000 to fix.

So which type of rust-proof­ing should you go for? That’s easy, says Robinson. “About two years ago the Canadian army tested every rust-proofing brand on the market.” The top pick was Corrosion FREE’s Formula 3000, with an 83% success rate. Other brands rated as low as 28%.

Robinson’s final advice? Wash your car’s undercarriage before taking it in, and stay away from sprays that are thick or waxy. “Those promote air pockets,” he says, “and that’s where you get rust.”

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But when they got to the resort, the group found that the hotel was under construction, the pool was closed, and that paint fumes would be an unwelcome addition to their dinner each night.

So Petraglia did what she’s best at: she returned the vacation for a full refund. By doing so, she proved that you can return just about anything—if you do it the right way.

I’ve pulled off my own share of unlikely returns, so I know it can be done. I remember the time I ripped a brand new dress from Banana Republic on New Year’s Eve, for instance. The next day I took it back to the store and handed back the dress, along with removed tags and receipt. I walked out, cash-in-hand, thanks to the pride major retailers have regarding holiday season returns.

Returning merchandise is usually straightforward if you have a receipt and you’re following store policy—but what if the receipt is long gone? If that’s the case, follow these proven tips from Petraglia, founder of a personal shopping business StyledClosets, and you’ll get your money back nearly every time.

Go straight to the top
Petraglia says the key to getting her vacation refund was to leap-frog over the customer service department and write a note directly to the head of the resort company. “I looked up the property owner and found the CEO,” she explains. “Then I wrote a letter about our experience. It was well thought out. I wasn’t babbling. In the end I got the entire week free—I only had to pay the airfare.”

Petraglia says the letter should be polite, brief and stick to the facts. “Write the letter as a request, not a complaint, and be very straightforward about it.”

Use your credit card bill
Returns are easy if you have a receipt, but we all know how quickly those small slips of paper can get lost. Thankfully, proving a purchase without one is not impossible. When my blender broke, I returned it to Wal-Mart without a receipt, or even the original packaging. Instead, I demonstrated that the store carried the blender model by showing the sales associate that the same make and model of blender was currently stocked. I then handed over my Mastercard statement showing a charge for the exact same price as the units on the shelf, plus applicable provincial taxes.

If you can’t find a line on your credit card statement to prove your purchase, another option is to use a loyalty or membership card. Popular points collector cards, such as Aeroplan and Air Miles, and in-store loyalty cards will often keep your purchases stored in your account database. Membership stores, such as Costco and Mountain Equipment Co-op, can search your purchases using your client number. Other stores, such as Home Depot and Best Buy can search for purchases using your credit card number (as long as you made your purchase using your credit card, of course).

Play nice, go further
Finally, even if you’re frustrated, remember that you’ll get much further by being polite (but firm), than you will by having a meltdown. If you feel your concerns are not being addressed or you’re denied a refund, then find out who to turn to further up the chain of command and escalate your case. But don’t lose your temper. “I’ve been at the other end,” says Petraglia, “and believe me, it pays to be nice.”

1. Apple iPad
Considerably heftier than its competitors and sporting a super glossy 9.7-inch screen, the iPad is finding a home both on campuses and in boardrooms. “The iPad is definitely large, but the real advantage that it has, besides its stable and graceful operating system, is that it boasts more than 300,000 apps right out of the box,” says Saltzman. All iPads offer WiFi connectivity, but you can also opt for models that access the Internet over cellphone networks, if you sign up for a data plan and SIM card from the big carriers.

2. Samsung Galaxy Tab
Released just in time for the holidays, Samsung’s Android-based Tab runs close to $700 without a data plan. It’s cheaper, though, if you buy it with a one- or three-year contract. At about half the weight of an iPad and featuring a smaller seven-inch screen, Saltzman says the Tab is more comfortable to carry around and easier to write with if you’re used to thumb typing on a smartphone. The Tab also boasts cameras on the front and back for video conferencing, as well as expandable memory via an SD card slot. It accesses the Internet over WiFi or 3G, and even works as a phone.

3. BlackBerry PlayBook
(Anticipated release: Feb 2011)
RIM’s entry into the tablet market also features a seven-inch screen and two cameras, but the PlayBook takes a different route for connectivity. It does offer WiFi, but it can only access the Internet via cellphone service when tethered to a BlackBerry phone. “The advantage to that is you don’t need another data plan just for the tablet, but if you want to connect outside of a WiFi zone you have to carry around a second device and it has to be a BlackBerry,” says Saltzman. Also, if you frequently use the PlayBook with your BlackBerry phone, you may need to upgrade your phone plan. The PlayBook will run on RIM’s own operating system and will cost roughly $500.

4. Dell Streak
This tiny tablet is the smallest of our picks with a screen just one-inch bigger than many touchscreen cell phones. The Streak also features two cameras, expandable memory and Google’s Android operating system.

Verdict:

The PlayBook’s lack of a standalone 3G connection could be a deal breaker for many consumers. And the diminutive size of the Dell Streak makes it more like an oversized cell phone than a personal computer. That leaves the iPad or Samsung Galaxy Tab as the main contenders. If video teleconferencing is key, then the Tab squeaks ahead of the iPad. But if you can put off buying a tablet until the spring, the next generation iPad will likely add that and more.

“We haven’t had cable for 12 years now,” says the nuclear medicine specialist. “There are only a handful of stations and shows we would actually watch and the cost is excessive.”

Leung represents a wave of media consumers eschewing traditional TV services and turning to the web to access shows, movies and other content. While some viewers, like Leung, prefer to download programs and watch them later, a number of alternative services now give people the ability to stream video content directly from the Internet to their TV sets.

So should you kick your cable box to the curb? The answer depends on the sort of media consumer you are. If you’re looking to save money, then consider doing away with traditional TV services. However, be prepared for a software and hardware configuration maze.

The gaming solution
One option is to use a gaming console, such as Microsoft’s Xbox or Sony’s PlayStation. For people who already own one of these devices, it’s relatively easy to transform it into an Internet-video-playing media centre. But if you’re in the market for a gaming console with the added advantage of media centre, bear in mind that the Xbox has a DVD player, while the PS3 has a higher-quality Blu-ray drive.

A dedicated laptop
For people who don’t have gaming consoles, one surefire hardware option is the laptop computer. With a set of audio-visual (AV) cables to connect the computer to the television set, it doesn’t take much to stream from the web to the TV. Use the laptop to find videos on services such as iTunes and Netflix; watch the content in the comfort of your living room.

It’s worth shelling out for a high-end laptop with a good video card or a Mac Mini to get the best picture. To connect to the Internet, a direct Ethernet link between the modem and the computer is ideal; it provides the highest data through-put for top-notch video and sound.

When it isn’t feasible to use Ethernet, consider a wireless local area network. For the best wireless connection, get a wireless router that runs the 802.11n networking protocol. It’s very fast, so you’ll get a better web stream, with high-quality pictures and sound.
With a Blu-ray player on the computer you’ll have a fully-fledged media centre for watching not only web content, but Blu-ray movies too.

Apple TV and Boxee Box
If you don’t want to use a computer, you might want to consider a dedicated media device, such as Apple TV or D-Link’s Boxee Box. They let you stream movies from services like Netflix to the TV. Apple TV is less expensive than Boxee Box, but the Boxee’s creators claim that it connects to more online sources than Apple TV does.

Either way, keep in mind that these devices are somewhat limited for now. For example, in Canada, Apple TV doesn’t actually let you access TV shows—it links to video services such as Netflix and YouTube instead.

Now, what to watch?
Once you have the hardware set up, it’s time to find something to watch. There are a few places you can go hunting for shows, each with its pros and cons.

If you want to download movies and TV shows to your hard drive, you can search for online content via a peer-to-peer service, such as BitTorrent, which lets people share movies and shows online for free. While the selection is top-notch, be careful: you risk viruses and running afoul of copyright laws by down­loading movies and TV shows without paying for them.

To ensure you stay on the right side of the law, it’s simpler to pay for your shows using services like Netflix—which started serving Canada for only $96 per year (or $8 per month for unlimited viewing). But avid movie and TV watchers could be disappointed with Netflix’s limited selection for Canadian subscribers.

For better selection try a paid download service, such as iTunes. But watch the cost. You can end up paying $2 per TV episode, $5 to rent movies, and a whopping $20 to buy—making this option good only for occasional viewing. But check back in a year. New options are hitting the market at a rapid pace, and prices are bound to come down soon.

With our dollar currently flirting with 70 cents against the Euro, this is the perfect time to visit the seaside Catalonian capital. And if you’re clever about where you stay and dine, your trip of a lifetime into the hedonistic heartland of Mediterranean Europe doesn’t have to leave your budget as flat as a day-old glass of cava.

Air Transat’s direct Barcelona service (from $850 return), is offered summer-only, so if you’re travelling over the next few months—when temperatures will be 10 to 15° C—you’ll be scouring www.expedia.ca and www.travelocity.ca for winter deals on Delta, Lufthansa, Air Canada et al. Flights from Toronto aren’t direct during the winter—they often change over in London, Newark or Frankfurt—with mid-January fares starting at about $785 return (including taxes). Unless you like longer-than-necessary hauls, avoid the routings with two stop-overs.

Next, hunt down your accommodation. Good value Barcelona mid-rangers include Hotel Inglaterra (rates from $125), with its contemporary rooms and friendly staff, plus the stylish Hotel Europark (from $120), which has a great terrace pool. Euro chain Ibis (from $90) offers mod, functional rooms at several locations, while self-catering apartments (typically from $125, see www.lodgingbarcelona.com) can save on dine-out costs. Bargain-wise (basic rooms from $85) consider El Jardí Hotel, overlooking a medieval square.

When you hit the town, start with Barcelona’s main thoroughfare, La Rambla, a boisterous tree-lined street permanently studded with buskers and vendors—try the $11 tour of the Gran Teatre del Liceu opera house for a calming respite. Return to the madding crowds in the labyrinthine Barri Gòtic district, home of Antoni Gaudí’s masterful La Sagrada Família cathedral, but watch out for citywide pickpockets: it’s one thing to blow your budget shopping at Zara or Mango but quite another to lose it to a moped-riding scammer.

Protect your pocketbook further with a Barcelona Card (two to five days; $38 to $62). It includes free transit and up to 50% off the price of admission to dozens of attractions. Even better is Articket Barcelona: for $31, it covers entry to seven world-leading galleries, including the Museu Picasso and Museu Nacional d’Art de Catalunya. Buy either from the official tourism website, www.barcelonaturisme.com, and the price of the passes is reduced by up to 10%.

If soccer is more your idea of art in action, catch a match at FC Barcelona’s legendary Camp Nou stadium. Despite a cavernous capacity of 100,000, tickets for top games—think Champions League—are hard to come by and the tough-as-nails scalpers outside will rip you off given the opportunity. Instead, aim for a regular Spanish League match (buy direct from the club at www.fcbarcelona.com).

By this stage, you’ll be ready for some serious Spanish noshing. While this can be a pricey fine dining city, it’s also teeming with good value treats. Gorging at midday instead of dinner triggers considerable savings with many restaurants serving bargain three-course set lunches—called menu del dia—for $14 to $28. My favourites include the stylish La Rita in the shop-lined L’Eixample district and La Fonda, just off La Rambla.

While many La Rambla eateries are tourist traps, it’s well worth visiting the area’s bustling La Boqueria market for a smorgasbord of produce and deli temptations. Consider dining here: at the back of the market, you’ll find chatty, bar-style eateries serving hearty Catalan dishes like seafood paella and rustic sausages.

Finally, loosen your belt for an evening of citywide tapas bar crawling—small plates typically start under $5. Recommended pit stops include Señorita Monium in the once-gritty El Raval district and the bustling Cervecería Catalana in the L’Eixample area.
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