Reportable Transactions

Bill C-47 received Royal Assent on June 22, 2023, bringing into effect the new expanded reportable transaction rules. A failure to report as required by the new rules could result in substantial penalties for both taxpayers and their advisors.   The reportable transaction rules require certain persons to file information returns with the Canada Revenue Agency (“CRA”) in respect of …

Anti-Flipping Deeming Rule

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 …

Section 231.4 and its Implications for Taxpayers

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) …

Enhanced Disclosure Required For Family Trusts Beginning in 2021

In February 2018, the federal government tabled its annual budget, which contained proposals to require certain trusts to file T3 Trust Income Tax and Information Returns (T3 returns) and to provide certain information with respect to the trust’s settlor(s), trustees, beneficiaries and protectors.  On July 27, 2018, draft legislation was released which would give effect to this proposal. The changes …

Gekas v. Canada – CRA Is Forced to Overturn TFSA Over-Contribution Penalties

Section 207.02[1] imposes a tax on over-contributions to an individual’s tax-free savings account (TFSA) of 1 percent each month of the individual’s highest excess TFSA amount that month.  Section 207.03 imposes a similar tax on contributions by non-residents.   Section 207.06(1) provides the Canada Revenue Agency (CRA) with the discretion to waive or cancel the taxes imposed under sections 207.02 …

Director Liability Under the Income Tax Act

The Income Tax Act[1] provides liability for the directors of a corporation where there has been:   Failure to collect and remit source deductions under the Canada Pension Plan Act,[2] the Employment Insurance Act[3] and the income Tax Act; and Failure to collect and remit HST under the Excise Tax Act.[4]   In order for the Canada Revenue Agency (CRA) …

Audit Agreements

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 …

Net Worth Audits

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 …

Solicitor Client Privilege

­Solicitor-Client Privilege Generally   Solicitor-client privilege (also known as “legal advice privilege”) operates to protect communication between a lawyer and his/her client from disclosure to third parties.  The privilege belongs to the client and can only be waived by the client.  Solicitor-client privilege is not time sensitive and does not expire.   Communication is subject to solicitor-client privilege when three …

The CRA’s Civil Liability

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 …