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 …

How To Claim Losses With Bad Debts and Bankrupt Corporations?

Section 50 allows taxpayers to elect to claim a capital loss in two situations: when a debt owing to the taxpayer is established by the taxpayer to have become a bad debt (50(1)(a)) and when the taxpayer owns shares in a bankrupt/insolvent corporation (50(1)(b)).   Section 50(1)(a) – Bad Debt   In order to claim a capital loss on a …

Budget 2018 Update – Not a Complete Disaster

On February 27, 2018, the Federal government tabled its annual budget: “Equality and Growth for a Strong Middle Class” (the “Budget”).  In the July 18, 2017 private corporation tax proposals , the government proposed changes to the taxation of passive investment income earned by Canadian controlled private corporations (“CCPCs”).  The Budget includes a new regime for the taxation of CCPCs …

Income Splitting Post-Morneau’s Tax Proposals (Part I)

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 to make a loan directly (or indirectly through a trust) to one or more family members.  Commonly, a family …