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 …

What is Probate and How Can the Fees be Reduced?

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 …

10 Consequences to Dying Without a Will

Regardless of age or personal wealth, there are many Canadians who do not have a Will.  Although the thought of preparing a Will may seem to be premature or too burdensome for some, the consequences of dying without a Will can be severe.   If you die without a Will (this is referred to as dying “intestate”), the following complications/challenges …

Update on the July 18th Tax Proposals

On July 18, 2017, Finance Minister Morneau announced changes to the Canadian tax system.  The announced changes were marketed at being aimed at improving fairness in the tax system.  The announcement targeted the following:   Income (dividend) sprinkling and multiplying the lifetime capital gains exemption (LCGE); Converting dividend income into capital gains (known as “surplus stripping); and Passive investment income …

Valuing an Interest in a Discretionary Trust

  A trust is not a legal entity or person.  A trust does not hold title to property and cannot hold title to property.  The trustee(s) hold legal title for the benefit of the trust’s beneficiaries.[1]  Traditional trust law principles hold that a beneficiary of a discretionary trust does not have a property interest in the trust.  Such a beneficiary …

Condo Flippers Beware

With the real estate markets in Toronto and Vancouver growing robustly with prices reaching historical highs, speculators have pounced on the opportunity to realize quick returns on buying and selling condos and other real estate.  The Canada Revenue Agency (“CRA”) has taken notice of this activity and is aggressively looking into whether these sales are being reported and, if they are, whether they are being …

Spectrum’s Selection of Tax/Federal Court Decisions in 2017

Notable Tax Court and Federal Court (tax related) decisions released in 2017.   Tax Court   Hurd Dentistry v HMQ, 2017 TCC 142 – This case concerned the tax treatment of orthodontic supplies under the Excise Tax Act.  Specifically, whether there is one supply of orthodontic treatment to a dental patient or two supplies—the orthodontic appliance and the orthodontic service.  …

Active Business Income (ABI)

Characterizing the different types of income that your business earns will have an impact on the rate of tax applied to the income earned. For instance, Canadian controlled private corporations (CCPCs) are granted a tax reduction on active business income, known as the small business dedution. Federally, in 2017, the first $500,000 of a CCPCs ABI is taxed at 10.5%, …