Canadian Tax Podcast for the week of December 14, 2021. This week we cover:

• CRA website down (again);
• US Electric Vehicle subsidy drama;
• CEWS audits resume;
• Moneysense tax tips released;
• Expense vs. Capital improvements for rental suite;
• US LLC troubles;
• Capital gain vs business income on investment trades;

“This is the Canadian Tax Podcast, Episode # 028, hosted by me, Cameron Ware. Good morning”

1. “Happy Tuesday, it is the week of December 14, 2021. We’ll start with the news.

• The CRA has taken down their website after a potential global security threat
• CRA was not alone in this, as many organizations around the world were vulnerable
• Log4Shell exploit.
• There has been no indication that any tax payer information was stolen.
• It is still early, but as of now there is limited information available.
• https://www.canada.ca/en/revenue-agency/services/e-services/updates.html
• https://www.theverge.com/2021/12/10/22828303/log4j-library-vulnerability-log4shell-zero-day-exploit
•  

• Canada has now made a more aggressive stance, threatening to impose new tariffs.
• EV Bill has passed through Congress, now on to Senate.
• The EV tax credit could cause severe harm to Canada’s automotive sector. Trade Minister Mary Ng says the EV credit amounts to a 34% precent tariff on Canadian-produced electric vehicles, and violates the US-Mexico-Canada trade agreement.
• My guess: targeted tariffs like we did with the aluminum issue when Trump was in. ie. Kentucky Bourbon
• https://globalnews.ca/news/8443831/us-ev-tax-credit-canada-threats-explainer/
•  

• CRA has announced it is resuming its CEWS post-payment audit program as of Fall 2021.
• Stakeholder email sent out Dec 7th.
• This is the wage subsidy program used by employers.
• CRA is going to contact claimants, and request relevant docs to verify revenues and payroll. Link to CRA’s FAQ where they detail specifics about what paperwork is needed.
•  https://www.cpacanada.ca/en/business-and-accounting-resources/taxation/canadian-tax-news
• https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-frequently-asked-questions.html#q33
•  

• MoneySense has released their tax tips for Canadians in 2021.
• Decent resource covering personal tax tips.
• 2022 the $400 flat rate home office deduction is still in place. Dividends vs salary in terms of claiming childcare.
• https://www.moneysense.ca/save/taxes/2021-tax-season-best-tax-tips-canada/

LISTENER QUESTIONS

• Tax deduction on work done to legalize basement rental.
  • [Question]
  • Usual: It depends.
  • Capital additions vs expense.
  • Trap: Principal residence deduction. Capitalize and take CCA = lose portion of principal residence. Don’t take CCA on rentals.
• What is the most effective way to receive dividends from US LLC as a Canadian?
  • [Question]
  • Trick question: There isn’t. Double tax.
  • US flow-through, pay US personal tax. Canada says that’s corporate tax, not personal tax, so you don’t get a foreign tax credit. US draws/payments treated as foreign dividend.
  • If you’re Canadian: Don’t own a US LLC.
• Capital Gain or Income
  • [Question]
  • Usual: active trading vs sitting on asset.
  • Case by case basis. Casual trades here and there, capital gain. Day-trading with options etc, arguably business income.
  • Always irony here: When you make money, everyone wants capital gains (50% taxable). Losses, everyone wants business (deductable against other income.)
  • 
    
    

That will wrap things up for today. Like always, if you have any questions, send them to [email protected], or find us on twitter: https://twitter.com/cdntaxpodcast  

This is Canadian Tax Podcast, thanks for listening.