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 prescribed rate of interest will increase from 2% to 3% on October 1, 2022. A prescribed rate loan strategy allows high-income earners to income split with their family members (spouses, children, grandchildren, etc.) who earn income taxed at a lower marginal tax rate or earn no income at all. The strategy requires the high-income individual …
With a top personal tax rate in Ontario of 53.53%, the tax spread between dividend income and capital gains is significant. As a result, planning has evolved over the last number of years whereby a taxpayer creates a capital gain as a means of extracting corporate funds in lieu of or in combination with paying themselves a dividend/salary, which would …
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) …
Canada levies tax on the basis of an individual’s residency. Generally, an individual is subject to Canadian tax on his/her worldwide income if he/she is a resident of Canada. The residency status of an individual is a question of fact to be determined by taking into account all of the circumstances of the individual. The most important factor in determining …
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 …
The Federal budget for 2020-2021 was initially scheduled to be presented in the House of Commons on March 30, 2020. This was of course delayed as a result of Covid-19. Fast forward to January 2021, and a lot has changed with Canada’s economic situation. Are tax increases coming? Most likely. The Federal government has been very open that the typical “1%”, …
There are are at least 5 strategies that can be executed under existing tax legislation to use COVID-19 to generate tax relief. These strategies were originally posted by us 7 weeks ago on March 19th. In particular, strategy No. 5 discussed below anticipated a reduction in the prescribed interest rate to 1% from the current rate of 2%, which will now be …
The Estate Administration Tax The Estate Administration Tax (“EAT”) (formerly known as “probate fees”) is a tax charged on the total value of the deceased’s estate. The current EAT rates are: $5.00 for each $1,000 (there is no EAT payable if the value of the estate is $1,000 or less) of the first $50,000 of the value of …
What Happens on Death? For illustrative purposes, we will assume that a taxpayer dies (with no surviving spouse) owning shares of a private company with a $1M capital gain. On death, there is a capital gain of $1M on the deemed disposition of the shares owned by the deceased, half of which is taxable. This would result in approximately …
