Principal Residence Exemption – Overview Canadian residents who dispose of their family home and realize a gain may claim an exemption when computing the tax on that gain. The exemption will eliminate all or part of the taxable capital gain, depending on the circumstances. This is the “principal residence exemption” (PRE). To qualify for the PRE, an individual …
The Canada Revenue Agency’s (CRA) audit powers in section 231 to 231.5 in the Income Tax Act[1] (and mirror provisions in the Excise Tax Act[2]) provide the CRA with broad powers to compel information from taxpayers. The CRA’s powers to compel information under section 231.4 are perhaps the broadest of all their powers to compel information. Subsection 231.4(1) …
In February 2019, the Canada Revenue Agency (CRA) published Audit Communique AD-19-01 “Audit Agreement and Waiver of Objection Rights.”[1] The purpose of the document is to provide guidance on negotiating an audit agreement with taxpayers and obtaining a waiver of objection rights. Audit Agreements According to the document an audit agreement is “an agreement between the CRA and …
Subsection 152(7) of the Income Tax Act[1] provides that the Canada Revenue Agency (CRA) is not bound by a tax return provided by a taxpayer in making an assessment and notwithstanding whether a tax return has been provided the CRA may raise an assessment. This provision permits the CRA to assess a taxpayer for any amount at any time (subject …
Many taxpayers experience delay in having their tax return processed as a result of the Canada Revenue Agency (CRA) conducting a “pre-assessment review.” Practically, a pre-assessment review is not much different than a mini audit. In some cases, the CRA reviews a return before processing it and issuing an assessment. Unusual refunds, donations, medical expenses, professional fees, and substantial interest …
The tax system in Canada is a self-reporting system. Taxpayers are expected to calculate their taxes and pay as necessary and the Canada Revenue Agency’s (CRA) role is to administer Canada’s tax laws. Lately, taxpayers have achieved some success in the civil courts holding the CRA liable for abusive audits and tax collection practices. The (limited) success ought to serve …
The Canada Revenue Agency (“CRA”) often applies penalties when a taxpayer has failed to comply with their obligations under the Income Tax Act, Excise Tax Act and other acts which the CRA administers.[1] The CRA can apply penalties for late-filing returns, repeatedly late-filing returns, failing to report income, deficiencies in foreign reporting obligations, for being grossly negligent, etc. Interest (currently, …
As a result of the new income splitting legislation released on December 13, 2017 , 2017 is the last year for many taxpayers in which dividends could be “sprinkled” to adult family members without attracting tax on split income (“TOSI”). As a result of the new rules, income sprinkling using dividends will likely attract more attention from the Canada Revenue Agency’s (“CRA”) …
With the real estate markets in Toronto and Vancouver growing robustly with prices reaching historical highs, speculators have pounced on the opportunity to realize quick returns on buying and selling condos and other real estate. The Canada Revenue Agency (“CRA”) has taken notice of this activity and is aggressively looking into whether these sales are being reported and, if they are, whether they are being …
Notable Tax Court and Federal Court (tax related) decisions released in 2017. Tax Court Hurd Dentistry v HMQ, 2017 TCC 142 – This case concerned the tax treatment of orthodontic supplies under the Excise Tax Act. Specifically, whether there is one supply of orthodontic treatment to a dental patient or two supplies—the orthodontic appliance and the orthodontic service. …
