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 …

Pre-Assessment Review? Consider Jumping Straight to Tax Court.

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 Meaning of “Voluntary” for Purposes of the Voluntary Disclosure Program

The Canada Revenue Agency’s (CRA) voluntary disclosure program (VDP) allows taxpayer to correct inaccurate or incomplete information or disclose unreported information for up to 10 previous years.  On March 1, 2018, the program was divided into two tracks: the general program and the limited program.  Taxpayer’s who fall under the general program will be granted interest relief, will not be …

Federal Budget 2019 – Will This Be The End of Capital Gains Planning

  As the personal tax rates have increased to 53.53%, the tax spread between dividend income and capital gains has widened significantly.  As a result, planning has evolved whereby a taxpayer creates a capital gain as a means of extracting corporate funds instead of paying themselves a dividend, which would be taxable at a higher rate.  For example, if an …

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 …

Donations Made By Graduated Rate Estates

In 2016, the Department of Finance introduced the “graduated rate estate” (GRE).  Since that time, any special relief in the Income Tax Act which applied to testamentary trusts now only applies to GREs.  There are various advantages to an estate which is designated a GRE.  One of the most significant benefits relates to testamentary donations.   What is a Graduated …

A Trustee’s Duty to Disclose

Family trusts are often used as part of tax and estate planning.  When a trust has been settled, the trustees should be aware of their duty to disclose.   Trustees owe a fiduciary duty to act in the best interests of the beneficiaries and there are practical reasons for why beneficiaries need information about the trust: to complete their tax …

Employee Stock Option Plans

Deemed Benefit and Tax under Section 7   Section 7 of the Income Tax Act[1] taxes an employee’s benefit derived from the exercise of rights under a legally binding agreement with an employer to sell or issue shares to the employee.  Section 7 applies where a corporation has agreed to sell or issues shares to the employee.  If there is …