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 …

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 …

Choosing a Business Vehicle

There are three common types of legal structures for a business: sole proprietorship, partnership, and corporation.  The advantages and disadvantages of each structure are explained below.   Sole Proprietorship   This structure is informal and easily created.  The business and the operator are the same to legal and tax authorities.  The business’s profits, debts and responsibilities are those of the …

Minimizing the Estate Administration Tax (also known as “Probate”)

Applying for Probate   Applying for probate is the process of registering the deceased’s Will with the Ontario Superior Court of Justice and applying for a “Certificate of Appointment of the Estate Trustee” (the executor).  Probate also requires the payment of the estate administration tax.   A Will must be probated in order to formally pass assets from the deceased …

Multiple Wills

In Ontario, a deceased’s Will is registered with the Ontario Superior Court of Justice and an application is made for a “Certificate of Appointment of the Estate Trustee with a Will.”  This process is referred to as probate.  Probate also requires the payment of the estate administration tax (“EAT”) (formerly referred to as “probate fees”).  The EAT is approximately 1.5 …

Tax Planning – Before It’s Too Late

Over the past 4 years or so, we have experienced an unprecedented increase in the complexity of private company taxation.  With another Liberal government recently elected, which is supported by the NDP and Green Party, we can certainly expect further tax changes which will more likely than not include increasing tax rates.  Of particular concern is the rumor that both …

Effective Dating Vs. Backdating

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”) …

Don’t Assume When Assuming Liabilities

The assumption of a vendor’s liability by a purchaser may constitute part of the sale price and, therefore, part of the vendor’s proceeds of disposition.  The tax consequences to the vendor and the purchaser will vary depending on whether a liability is embedded or separable from the property acquired.  The types and amounts of liabilities ought to be identified at …