Canadian Tax Podcast

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. 

Canadian Tax Podcast for the week of November 30, 2021. This week we cover:

• Bill C-2;
• Remote Work;
• CRA’s Cryptocurrency guide;
• Digital Service Tax;
• Deducting medical dues from multiple Provinces;
• Application of non-capital losses;
• Adding a spouse to house title;

“This is the Canadian Tax Podcast, Episode # 026, hosted by me, Cameron Ware. Good morning”

1. “Happy Tuesday, it is the week of November 30, 2021. We’ll start with the news.

• The liberal government has tabled bill C-2, giving more support to businesses recovering Covid.
• Bill C-2 aims to deliver targeted support to workers and businesses
• The government recently phased out other pandemic era benefits (CEWS and CERS)
• Cdn Hiring Recovery Program (wage subsidy) extended to May/22. (10% loss in revenue when compared to prior periods)
• Canada Worker Lockdown Benefit – $300/wk for affected workers
• https://globalnews.ca/news/8398662/canada-covid-benefit-update-chrystia-freeland/
• https://www.parl.ca/DocumentViewer/en/44-1/bill/C-2/first-reading
•  

• Working remotely big thing lately.
• Nearly 2/3 of Canadian employers were hire or open to hire remote employees across Canada, and 1/3 even said they would be open to hiring international employee.
• Issue here is tax reporting. Report by PWC says the tax reporting complexity is stalling hiring.
• One suggestion was to nix the T2200 form;
• Another was aligning Province of Employment with Province of Residence, and not where the employer is located.
• https://www.advisor.ca/news/economic/to-be-competitive-canada-must-address-payroll-barriers-to-remote-work
•  

• Are earnings made from crypto considered business income or capital gains?
• The CRA has treated cryptocurrencies as commodities and not currencies.
• When crypto is used to pay for goods, the CRA considers it to be a barter transaction.
• The treatment of crypto from tax perspective is an evolving situation.
• It depends a lot on holder’s behaviour. Very generally, at present it appears that if they are long term holds, it is treated as a capital asset, but short term is business inventory or business earnings.
• https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/digital-currency/cryptocurrency-guide.html
•  

• Liberals are moving ahead with a digital services tax targeting tech giants.
• Potentially bringing in 3.4 billion over 5 years.
• BUT: Remember the OECD “minimum tax” agreement? = Might make the proposed Netflix Tax irrelevant.
• At present: Canada says they won’t phase in the OECD minimum tax til 2024, but it will be retroactive to 2022. In interim, Digital Services tax has go-ahead from Ottawa.
• US is grumpy about the Digital Services tax.
• https://nationalpost.com/news/politics/liberals-to-proceed-with-digital-services-tax-on-tech-giants
•  

VIEWER QUESTIONS

• Out of Province membership dues question
  • [Question]
  • Physician living in Ontario but travels to BC each month to practice. Would membership fees be deductible?
  • Short answer: Yes
• Non-capital loss balance
  • [Question]
  • How do use non-capital loss and how long can it be carried?
  • Back 3 years/Forward 20 years
• Adding a spouse on house title
  • [Question]
  • When refinancing a rental property to include spouse, will it trigger capital gains?
  • SS 73(1) assumed tsf’d at cost. Trap: Attribution.

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. 

Canadian Tax Podcast for the week of 23 November 2021. This week we cover:

• US electric vehicle subsidy;
• GST filing extension for the E-Commerce Framework (AKA: Netflix Tax reporting);
• 2022 TFSA limits announced;
• Transferring intangibles from proprietorship to corp;
• Home office: part-time vs full-time use of space;
• Informal expense reimbursements;

“This is the Canadian Tax Podcast, Episode # 025, hosted by me, Cameron Ware. Good morning”

1. “Happy Tuesday, it is the week of November 23, 2021. We’ll start with the news.

• We’ve discussed over the last few weeks the new US EV tax credit
• CBC covered what Canada might do if they deal were to go through, even though US officials have noted Canada’s displeasure with the proposal
• Quick summary: the US is subsidizing up to $12,500 if consumers buy an electric vehicle. The catch is the subsidy only applies to US-made vehicles. This makes Cdn manufacturers grumpy. 
• One option Cdn govt could use: Cdn mines are a reliable source for the electric batteries. Why does the taxpayer care: Because regardless of the politics involved, tariffs are taxes. Canada applies tariffs somewhere, US does the same, = taxes go up
• https://www.cbc.ca/news/business/electric-car-retaliation-column-don-pittis-1.6255204

• The CRA announced new rules for GST/HST for digital economy businesses earlier this year.
• These are the rules for “Foreign suppliers” of digital goods. AKA the “Netflix tax”.
• Supposed to kick in on July 1.
• The CRA has deferred the GST return filing requirement for the first calendar year information return.
• However, suppliers still need to notify/register with CRA if the supplier provides specified services. (Storage/fulfillment warehousing, Digital platform operators)
• https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/digital-economy-gsthst/notification-information-reporting.html

• New TFSA limit was announced for 2022
• The new limit is $6000, matching previous amounts from 2019-2021
• If you’re able, definitely max these each year if you can. Tax-free returns are always a good thing.
• All the other usual limits can be found at the link below. RRSP.
• https://www.canada.ca/en/revenue-agency/services/tax/registered-plans-administrators/pspa/mp-rrsp-dpsp-tfsa-limits-ympe.html

LISTENER QUESTIONS

• Sole proprietor artist wanting to transfer assets
  • [Question]
  • This is like any property transfer. Proprietorship, Sec 85 over to corp.
  • Watch: Passive income trap.
• Home office deduction in studio apartment
  • [Question]
  • If I’m understanding correctly, listener filed one way, wants to change to “Dedicated” space.
  • Need T2200 if for employment. Or T2125 if self-employed. Pro-rated on basis of sq/ft for business vs. sq/ft for home.
• How can business partner deduct expenses if they are paid on one card?
  • [Question]
  • One party is purchasing Facebook and Instagram ads, but the expenses are actually 50/50.

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. 

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

• The ProPublica tax leak;
• CRA releases details on new tax scam;
• More detail on G7 worldwide corporate tax proposal;
• Bill C-208;
• What to do with a TFSA if you move to the US;
• Canadian resident doing contract work for US client;
• Inter-corporate loans;

“This is the Canadian Tax Podcast, Episode # 014,  hosted by me, Cameron Ware. Good morning”

• “Happy Monday, it is the week of  June 14th, 2021. We’ll start with the news.

• Last week the US outfit ProPublica released an analysis contrasting the wealthiest Americans against the tax they paid;
• Simple calculation: Take the person’s tax paid, and compare it to their net worth as stated in Forbes Magazine.
• Received the tax information via a leak.
• This is a complicated issue, and it ultimately hinges on the technical difference between earned income vs. unrealized gains
• [explain unrealized gains.]
• I don’t know what the right answer is here. I certainly have opinions, and agree that the system only works insofar as citizens believe that everyone is paying their own fair share. However, taxing wealth is very difficult.
• https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax

• CRA has put out an advisory related to a TFSA scheme
• Specifically the scheme involves the creation of a mortgage investment company, that then issues two classes of shares: one that pays low rate dividends, and one that pays high rate
• The participants buys the low rate shares via their RRSP’s, and the high rate’s via TFSA.
• The mortgage corp then lends the money from the share purchase back to the participant (interest deduction) and the participant then invests the proceeds with the promoter, and earns investment income
• Participant then makes annual RRSP/RRIF withdrawals, and claims the interest deduction against the tax that the RRSP draw triggers.
• Over time, the participant can supposedly shift their entire RRSP over to their TFSA, without ever actually paying tax.
• Confused? I am. Main thing here is CRA says this whole thing is nonsense. (And it is.) You’re essentially loaning money to yourself at inflated interest rates. Sham.
• https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2021/warning-watch-out-for-tfsa-maximizer-schemes.html

• G7 tax proposals (discussed last week.) This is the proposed 15% tax on the profits it earns inside of a country
• Pay this tax in every jurisdiction it operates in.
• However, this is assessed on the basis that the corp isn’t paying tax
• “Ottawa will get 15 per cent of profits net of foreign corporate and withholding taxes paid to that country. If other countries already take 15 per cent or more, Ottawa gets nothing.”
• To put this a less confusing way (steal another quote): “A Canadian firm paying 12.5 per cent on its profits in a more lightly taxed country will have to pay another 2.5 per cent to Ottawa to get up to 15 per cent.”
• This type of thing attracts problems. Tax is never “absorbed” – It’s passed on to consumers. Second, in practice the net effect is zero. Charge 15% tax, but then give rebates/incentives that create a lower effective tax rate net of the credits…
• Conclusion: these things are hard. No one-size fits all solution
• https://financialpost.com/opinion/jack-m-mintz-biden-tax-cartel-isnt-good-for-canada

• New Bill C-208 is out (well was out in May) but it’s up for the 3rd reading.
• This bill is supposed to streamline the sale of a family business to another family member.
• Right now the sale of a small business to a family member is not eligible for the QSBC capital gains exemption.
• Specifically 84.1 triggers a deemed dividend – Instead of capital gain/gains exemption
• Good news: this has bi-partisan support, so let’s hope it gets through and isn’t stalled going into parliament’s summer recess.
• Good legislation (generally).
• https://parl.ca/DocumentViewer/en/43-2/bill/C-208/third-reading

• TN Visa + Move + TFSA
  • Question
  • Easy answer: get rid of your TFSA prior to the move.
  • For those who don’t know: US treats TFSA as foreign trust (Form 3520 disclosures). Expensive
  • Second, no tax deferral.
  •  
• Contractor doing work for US Client
  • Question
  • You’re a Canadian, in Canada, rendering the work on-site in Canada
  • Based on this, you don’t have US tax exposure.
  • However, fill out a W8-BEN (or BEN-E) and this eliminates any requirement for withholding on the part of your US client.
• Inter-corporate loans
  • [quote]
  • What you’ve described here is a standard inter-corporate loan (sorry, no loophole)
  • You see this frequently with opco/holdco arrangements. Strip assets out of opco for creditor-proofing, leads to big interco AR/AP
  • Pro-tip: paper these things correctly, especially with interest-free loans. Don’t give CRA any wiggle-room to get their fingers into things.
  •  

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. 

Canadian Tax Podcast for the week of 07 June 2021. This week we cover:

• TI 2020-086579 CEWS/Shareholder problem;
• CRA is “outgunned”
• CRA decreases volume of public company audits;
• G7 agrees to global minimum tax;
• Listener question: Taking a contract job vs staying employee;
• Listener question: Sale of US real estate;
• Listener question: T1135 and cost basis to use;

“This is the Canadian Tax Podcast, Episode # 013,  hosted by me, Cameron Ware. Good morning”

• “Happy Monday, it is the week of  June 7th, 2021. We’ll start with the news.

• Question was posed to CRA about whether or not certain employee wages qualify for CEWS
• TI 2020-086579
• CRA says “it depends” – In other words, no.
• Stated that if it’s just a retroactive journal entry posted to the shareholder loan (Dr salary, cr SH loan), they aren’t a fan.
• This is a mess for all sorts of technical reasons.
• Upload to TI here.

• CRA says they are understaffed when it comes to “tax cheats”
• Debi Daviau says that “Their job is to go after individuals and entities that, in effect, have unlimited resources and can aggressively exploit legal and international grey areas for their own gain”
• Unlimited resources? CRA was just awarded another $300million in the 2021 budget. Total budget of $5.1 billion
• Maybe they should stop with the Poor Me routine, and actually do their jobs. Bullying average taxpayers with fishing expeditions and unreasonable paperwork requests (“sham” tactics anyone?) is not a decent way forward.
• https://www-cbc-ca.cdn.ampproject.org/c/s/www.cbc.ca/amp/1.6017316

• To listeners of podcast here, this is no surprise.
• Audits of large companies dropped from 6,281 in 2017, to 4,257.
• CRA says they are doing focused, targeted audits to bring in “Big Fish”
• These take longer, but bring in more revenue
• Counterpoint is that CRA has discovered that when you go after smart, sophisticated entities that have resources, you need to have your stuff squared away first. (Ties to above)
• Why bother with that, when you can chase small businesses instead…
• https://nationalpost.com/news/politics/cras-new-audits-on-large-corporations-dropped-significantly-in-years-leading-up-to-covid-19-pandemic

• G7 has announced agreement on minimum global corporate tax
• Push to tax multinationals (transfer pricing / Big Tech)
• Supposed to end race-to-bottom in corp tax world
• 20% tax on profits of at least 10%
• ““The timing remains to be worked out, exactly, but there is broad agreement that these two things go hand in hand,” Yellen told reporters
• So, this is not a thing, but gives an idea of the direction that governments are going in the new Biden era.
• https://www-washingtonpost-com.cdn.ampproject.org/c/s/www.washingtonpost.com/us-policy/2021/06/05/g7-tax-us-yellen/?outputType=amp

• Contractor vs Employee offer
  • Question
  • $45/hr employee vs $50/hr contract basis
  • Issue 1 is PSB vs actual contractor, but deal with that elsewhere
  • Issue 2 is money. Short answer is you’re now stuck with CPP, lose EI, and have to pay accountants and lawyers, and headache.
  • My experience on this is you need to be making at least 30% more to consider it. (Closer to 50%)
• Cross-Border US Real Estate
  • Question
  • Okay break this down:
  • When you left US to enter Canada 9 yrs ago, FMV is your new basis for Cdn purposes
  • US purposes is original ACB.
  • You’ve been filing US tax returns for rental property, right? Depreciation and basis additions for US purposes.
  • Under US $250k, no capital gain.
  • Canada-side, maybe gain, also watch gain on forex.
• T1135 Cost Basis
  • [quote]
  • So the issue here is math being used.
  • Cost Base means what you bought the asset for. Full stop. If over $100k, have to report.
  • It’s not based on profits/cash flow, but the actual cost of the asset.
  •  

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. 

Canadian Tax Podcast for the week of May 10th, 2021. This week we cover:

• No post-tax season filing extensions;
• Represent A Client broke;
• Covid benefits tied to 2020 T1 filing;
• Personal Services Business (PSB) myths;
• Contractors: How to fill out the W8-BEN-E form;
• Dual Citzen (US/CAN) filings;

“This is the Canadian Tax Podcast, Episode # 012,  hosted by me, Cameron Ware. Good morning”

• “Happy Monday, it is the week of May 10, 2021. For all the accountants out there, I hope you all got to enjoy a bit of a post tax-season break. Everyone at my office was away last week on our usual post-tax season break, but CTP is back at it like usual this week. We’ll start with the news.

• No extensions formally granted by CRA.
• Rev QC did grant indirect relief.
• Why care? Many, many firms and people will just file incomplete as-is stuff, and then amend after the fact.
• Bureaucratic processing nightmare.
• https://www.ctvnews.ca/health/coronavirus/accountants-politicians-call-on-canada-revenue-agency-to-delay-income-tax-deadline-1.5405056

• Once again CRA experiences technical glitches
• Speaking with colleagues, efile and Rep A Client were down on both the 29th and 30th.
• No extensions given.
• https://globalnews.ca/news/7821924/cra-website-down-tax-filing/

• CRA released another one of their “helpful” blog releases.
• Usual fluff, but do cover a major point that your Covid benefits are tied to your tax filings.
• Not tied to your service Canada / EI system.
• https://www.canada.ca/en/revenue-agency/news/2021/05/three-good-reasons-to-file-your-tax-return–even-though-the-deadline-has-already-passed.html

• PSB Query
  • Not sure why the internet is so awful at answering this, but get it together people.
  • Standard answer:
  • Ref 1392644 Ontario
  • https://www.canlii.org/en/ca/fca/doc/2013/2013fca85/2013fca85.html
• W-8BEN-E Query
  • Client needed to file a “W8-BEN-E” and was wondering what it is.
  • IRS disclosure form for payments made to non-residents.
  • How to fill it out:
• Dual Citizen (US/CAN) filings
  • [quote]
  • Your question actually misses things completely.
  • You’re American. The US “is the centre of the world”, therefore play by US rules.
  • You need to file US returns every year.
  • If you’re Canadian resident, need to file Canadian stuff too.
  •  

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. 

Canadian Tax Podcast for the week of April 19, 2021. This week we cover:

• Revenue Quebec filing extension;
• Federal Budget Day;
• CRA Filing deadline unchanged;
• CPA Canada PACT guide;
• What to do with an incentive reimbursement or credit card cash back payment;
• Mechanics of the Climate Action Incentive;
• Double-tax on US-source income;

“This is the Canadian Tax Podcast, Episode # 008,  hosted by me, Cameron Ware. Good morning”

• “Happy Monday, it is the week of April 19, 2021. We’ll start with the news.

• Last week Revenue Quebec extended the personal tax filing deadline.
• Dates still stay the same, but they won’t implement late filing fees if you file after April 30th, but before May 31st..
• Interesting to see what CRA does.
• CPA Canada continues to push for extension
• https://www.revenuquebec.ca/en/coronavirus-disease-covid-19/faq-for-individuals/summary-table/
• https://www.cpacanada.ca/en/business-and-accounting-resources/taxation/canadian-tax-news

• Today April 19th is budget day.
• First budget released in two years.
• CBC leak says that it will cover a national daycare strategy, along with some luxury tax items.
• Supposedly staying away from capital gains tax changes.
• https://www.cbc.ca/news/politics/federal-budget-child-care-deficit-1.5992631

• CRA, in one of their “Tax Tips” has stressed that it’s important to file your taxes prior to April 30th.
• If you want to apply for financial aid for May 1st and forward, you need to have filed your tax returns in order to be eligible.
• Specific programs that could have proglems are the Canada Recovery Benefit (CRB), the Canada Recovery Caregiving Benefit (CRCB) or the Canada Recovery Sickness Benefit (CRSB)
• https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2021/still-time-file-taxes-by-april-30-2021.html

• So venting a little bit here.
• For those of you who aren’t accounting nerds, CPA is phasing in new standards for Compilation engagements. So in normal-speak, if you’re a client, your accountant now HAS to do a bunch of extra stuff on your file, or go to jail.
• So here’s the rub: CPA Canada changes the rules, saying you NEED to do this, or else.
• Then, helpfully provide a new guide called “Practice management, advisory, compilations and tax” guide. PACT.
• Yours for only $395.
• So, governing body changes the rules. Then, in order for members to get guidance on how to comply with the new rules, CPA Canada charges you extra.
• When is CPA Canada going to actually support smaller members? (ie. Meaning the outfits who don’t audit public companies…)
• Law Society of Canada and provinces provide tons of support to their respective members. FREE support. Here’s AB. https://www.lawsociety.ab.ca/resource-centre/key-resources/practice-management/law-firm-start-up-kit/
• https://www.cpacanada.ca/en/business-and-accounting-resources/audit-and-assurance/standards-other-than-cas/publications/pact?utm_source=aprilemail&utm_medium=email&utm_campaign=PACT2021

• Where to report incentives?
  • [quote]
  • Typically this goes to offset bank charges/interest.
  • Misc revenue or expense recoveries is the alternative if you want.
• Climate Action Incentive: How Do I Get The Money?
  • [quote]
  • So the CAI is processed right on your tax return.
  • Added as an “extra refund”.
  • Amount depends on spouse, kids, outside urban area, etc.
• Double-Tax on US income
  • [quote]
  • Cross-border stuff is tricky. I won’t get into the weeds here. Simplest answer is you’re likely missing the foreign tax credit claim on your Cdn tax return.
  • Functionally: You get paid from US outfit, pay US tax.
  • You show the full amount of income from your US job on your Cdn tax return.
  • DOUBLE-TAX right now.
  • However, claim foreign tax credit. Eliminates double tax.
  • Pro-tip: File US 1040NR return, get back all of the US tax.
  • Also, watch forex.
  •  

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. 

Canadian Tax Podcast for the week of April 12, 2021. This week we cover:

• Tax consulting fees capped;
• Court case: Capital Expenditure vs. Repairs and Maintenance;
• Principal residence exemption – more tweaking?
• SK to hit electric vehicle owners with a fee;
• GME capital gains;
• Incorrectly-filed T5 and what to do;
• Dealing with foreign income on a T2;

“This is the Canadian Tax Podcast, Episode # 007,  hosted by me, Cameron Ware. Good morning”

• “Happy Monday, it is the week of April 12, 2021. We’ll start with the news.

• Bill C-462 Proposal to cap certain tax consulting fees at $100.
• This could affect firms that handle Disability Tax Credit applications etc.
• “The House unanimously passed my private member’s bill to limit the amount that tax credit promoters could charge,” Conservative MP Cheryl Gallant
• Details published April 14th
• https://www.blacklocks.ca/feds-cap-tax-consultant-fees/

• New tax case out of Vancouver (Dicaita)
• Help to detail what is Capital Improvement vs What is Repairs.
• “If something is created that did not exist before, the expense will tend to be a capital expenditure.”
• “…the work done to the interior of the unit was meant to restore the unit to its original condition and not to create a new asset. The work was meant to replace existing items that were worn out and had reached the end of their useful life. The repairs described by the Appellant appear to be a lot but they were done for less than $24,000; not a large amount of money considering the work done. The repairs did not require building permits or create any building code issues. The work did not involve any redesign of the unit and did not change, alter or increase the size, layout or functionality of the unit. Materials and items purchased were “like for like” products and involved no upgrades to better quality products or materials than what was there originally. The intention of the taxpayer was to keep the unit in a rentable condition; in other words make it suitable for its normal use.”
• https://www.canlii.org/en/ca/tcc/doc/2021/2021tcc5/2021tcc5.html

• Like I discussed last week, there is more commentary about messing with the Principal Residence Exemption
• Here is Allan Lanthier, a regular tax columnist, discussing the policy.
• Point here is that the 1966 Carter Commission said that a principal residence exemption should exist, but capped  at $25,000. Because of politics, it was never capped.
• https://financialpost.com/opinion/allan-lanthier-yes-we-should-tax-capital-gains-on-principal-residences

• Interesting one out of Saskatchewan
• Fuel tax pays for road repairs. Because electric vehicles don’t pay the fuel tax (at the pump) the Sask govt levied a fee on electric vehicles.
• https://saskatoon.ctvnews.ca/environmental-economist-says-sask-s-new-electric-vehicle-fee-is-mind-boggling-1.5376627

• GME Capital gains
  • “I earlier in 2021 I made some money selling Game Stop. How do I report this for next year?”
  • Was it capital gains? Or business income?
  • Annoying part is that CRA doesn’t really define this. I won’t get into details, look it up yourself. But the gist of it is did you make money on account of capital, or because of a business?
  • Use discretion. If you planned to buy it and make money off dividends etc, that’s one thing. If you bought it to knowingly flip it, tough to argue that it’s capital.
• Dividend Gross Up error
  • [quote]
  • Gross-up rate for inelig divs in 2020 is 15%, not 17%
  • So the textbook answer here would be amend the one you filed. (Or ask the accountant to fix the one the firm drafted)
  • Shortcut would be just file your T1 with the correct amounts, as the error won’t matter for Corporate T2 purposes. CRA will likely force things to be correct anyway.
• T2 Foreign Income
  • [quote]
  • Sch 3 T2 is for dividends, but for Canadian dividends only.
  • Foreign dividends are handled on the Sch 7. Important to go here, as this is where foreign tax credit calcs pull numbers from and populate the rest of the return.
  • Part III, Line 019.
  • https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t2sch7/t2sch7-19e.pdf
  •  

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. 

Canadian Tax Podcast for the week of April 05, 2021. This week we cover:

• Principal Residence Exemption to be taxed?
• Joe Biden’s proposed corporate tax rate changes;
• Quebec lowers corporate taxes on small businesses;
• CRA’s “Before You Call” List;
• How to approach filing 11 years of late corporate and personal tax returns;
• What happens with late-paid instalments for self-employed people;
• Reporting joint venture income;

“This is the Canadian Tax Podcast, Episode # 006,  hosted by me, Cameron Ware. Good morning”

• “Happy Monday, it is the week of April 05, 2021. We’ll start with the news.

• Financial Post article talking about messing with the Principal Residence Exemption / capital gains exemption
• The fact that this is being talked about at all is concerning.
• Maybe a system like the US: $250k / $500k married;
• https://financialpost.com/real-estate/why-tinkering-with-the-capital-gains-exemption-is-the-nuclear-option-for-housing-market-intervention

• Joe Biden thinking of messing with corporate tax rate
• Generally increase from 21% to 28% (Then you have State tax on top of that.)
• Also wants to mess with GILTI rates (IRC ss 951A(a)), from 10.5% to 21%
• US shareholder of Canadian corp (Controlled Foreign Corp) = Problem
• https://www.cnbc.com/2021/03/31/biden-infrastructure-bill-companies-split-on-whether-to-fight-corporate-tax-hike.html

• Quebec budget released details that they will drop the Provincial SBD rates from 4% to 3.2%.
• Small businesses there will pay 12.2% combined Fed and Prov.
• https://www.advisor.ca/tax/tax-news/quebec-extends-tax-for-financial-institutions-drops-small-biz-tax-rate/

• CRA released their version of a “FAQ” for help prior to getting on the phone to call them
• Brilliant tips like: Check “Canada.ca”, or “Check Wait Times”;
• https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2021/before-call-how-to-get-answers-need-during-2021-tax-filing-season.html?utm_source=mediaroom&utm_medium=eml

• Hasn’t filed Returns In 11 Years
  • [quote]
  • Don’t feel badly. This is why I started the podcast: to help situations like this. I can’t answer everything, but hope to give a starting point.
  • #1: 11 years. Do you still have a corp? Wasn’t struck from the registry? (Hope that it was.)
  • If it was, just file a T2125 going forward.
  • If not, you technically have 11 years of T2’s, GST rtns, t-slips, and T1 returns.
  • Might be worth doing a Voluntary Disclosure Program application;
• Self-Employed: Instalments
  • [quote]
  • You’ve missed the window to do instalments. So that ship has sailed.
  • So if you have over $3k in taxes payable, CRA wants you to do instalments for the year.
  • SUGGESTION, but with teeth.
  • If you choose not to do the instalments, you get charged interest.
  • Sometimes a penalty ($1,000, or 25% of the instalment interest charged) /2
  • Rates are 5% right now
  • Just pay it now. One less thing hanging over your head.
  • https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html
  • https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/making-payments-individuals/paying-your-income-tax-instalments/instalment-interest-penalty-charges.html
• Joint Venture
  • [quote]
  • Joint Venture is a non-entity entity. It exists for a specific project or task
  • In this case, intention is that you are 50/50 venturers. (You do have a JV agreement, riiiight?)
  • Only difference is that co-venturer put up mortgage cash. Means her equity interest in the JV is higher (by whatever down payment.
  • Secondly, you need to report not “cash flow”, but your full portion of the JV income/expenses. 50% of income/expenses show up on your filings.
  • Fun fact: Usually will see 2 S125’s: one for your corp’s operations, and one detailing the 50% JV operation.
  • Few other things: Fixed assets are dealt with at the venturer level, meaning rarely (if ever) see depreciation taken at the JV level. (If you do, problem)
  • Stub period. Corp owners have different fiscal years to JV = need to do 12mo reporting for that specific period (Killed back in Nov/11).
  • https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p-171r/distinguishing-between-a-joint-venture-a-partnership-purposes-section-273-joint-venture-election.html
  • https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/partnerships-deferral-corporation-tax/joint-ventures-elimination-fiscal-period.html

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. 

Canadian Tax Podcast for the week of March 29, 2021. This week we cover:

• Coinsquare account info release;
• Carbon tax;
• Federal Budget announced;
• Ontario Budget released;
• Expense/deduction planning for the newly self-employed;
• T1135 reporting re. personal use property and foreign currency;
• Sale of property in a corporation, triggering capital gains;

“This is the Canadian Tax Podcast, Episode # 005,  hosted by me, Cameron Ware. Good morning”

• “Happy Monday, it is the week of March 29, 2021. We’ll start with the news.

• Federal judge ordered Coinsquare to hand over client info;
• Threshold for reporting was accounts holding over $20,000;
• Goes back to Jan 01/13;
• Uses CRA tool called “Unnamed Persons Requirement”
• From CRA’s site: “enables the CRA to obtain information from an individual or a company about third parties. After the CRA gets this information, it can verify if the unnamed person correctly reported  income and sales tax…”
• https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/real-estate-sector/unnamed-persons-requirements.html
• https://nationalpost.com/news/canada/major-canadian-cryptocurrency-marketplace-must-fork-over-details-of-thousands-of-clients-to-cra-court-rules

• Supreme Court ruled 6-3 in favour of Feds pushing a carbon tax.
• Alberta/West unhappy.
• https://www.cbc.ca/news/canada/calgary/kenney-jonathan-wilkinson-west-centre-kathleen-petty-1.5967214

• Last week Freeland announced new Budget.
• Date set for April 19th 2021.
• Freeland Quote during question period: “Canada entered this global pandemic in a strong fiscal position, which allows our government to provide unprecedented support to Canadians. We will continue to do whatever it takes to support Canadians and Canadian businesses, and we have a plan for jobs, and robust growth,”
• I hope so. End of March/19 deficit was $19.7bil. At the end of 2020, at about $381bil.
• https://www.canada.ca/en/department-finance/news/2021/03/government-of-canada-announces-date-of-budget-2021.html

• March 24, Ontario budget released;
• Run a $33bil deficit;
• On track to balance in 2029/20
• https://budget.ontario.ca/2021/contents.html

• Newly self-employed.
  • [quote]
  • Yes, use an tax calculator and plug/play numbers;
  • Buy some tax software and model;
  • Pro-tip: Use Excel;
  • Best bet: get an accountant to model;
  • https://www.wealthsimple.com/en-ca/tool/tax-calculator/
  • https://www.taxtips.ca/calculators.htm
• Personal Use Property/T1135
  • [quote]
  • Does not need to be reported. “Specified” foreign property.
  • “a personal-use property as defined in section 54 of the Act.”
  • Good rule: Not income-producing.
  • Report on Schedule 3
  • Question about foreign currency from sale. If it’s held in a US bank account, sits in a US bank account, earns interest in a US bank account, yes. Sitting in a lawyer trust account waiting to transfer to CDN account? Beneficial ownership, maybe not.
  • Thing about T1135 is it doesn’t hurt to file anyway. It’s a disclosure form.
  • https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t1135/t1135-19e.pdf
• Sale of Land
  • [quote]
  • Tax at corp level, tax at personal level;
  • Corp: $550/2 = $275k CDA, $275k pay corp tax.
  • Artificially-high tax “Refundable tax”, until you pay out a dividend = trigger refund of RDTOH.
  • CDA = T2054 CDA election
  • https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t2054/t2054-20e.pdf
  • Date things correctly, pay out the balance.
  • Personal portion: Pay out dividends over time, keep in low tax rate.

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.