GST/HST Input Tax Credits: Reasonable Expectation of Profit

A July 28, 2022 Tax Court of Canada case considered whether input tax credits (ITCs) in respect of a farming operation’s expenditures were available. The farming activity consisted of breeding and racing various horses and involved at least four full-time employees at one point. Over a nine-year period (2007-2015), the operations never experienced positive net earnings and more than $4 million in losses were accumulated. The owner partially financed operations with earnings from his law…

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Director Liability: Is Asking About Source Deductions Enough?
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Director Liability: Is Asking About Source Deductions Enough?

Directors can be personally liable for payroll source deductions (CPP, EI and income tax withholdings) and GST/HST unless they exercise due diligence to prevent the corporation from failing to remit these amounts on a timely basis. An August 31, 2022 Tax Court of Canada case found that the director was not duly diligent and therefore was personally liable for the corporation’s unremitted payroll deductions, interest and penalties of $78,121 from January 2011 to April 2012.…

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  • Post category:Tax Planning

Trusts: New and Expanded Disclosure Requirements

Legislation has been proposed for trusts (including estates) with years ending on December 31, 2022 and onwards that would significantly expand the reporting rules. More trusts would be required to file tax returns, and more information would be required to be disclosed in these returns. In addition, sizable penalties would be introduced for non-compliance. More trusts and estates required to file: Under the existing rules, trusts are exempt from filing a T3 tax return if…

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Crowdfunding: Taxable or Not?

A June 2, 2022 Technical Interpretation discussed the taxability of funds received through crowdfunding campaigns. CRA first noted that amounts received through a crowdfunding arrangement could represent loans, capital contributions, gifts, income or a combination of two or more of these. This means that the funds received could be taxable (such as business income) or not (such as a windfall, gift or voluntary payment). As the terms and conditions for each campaign vary greatly, the…

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Shared Custody Arrangements: Impact of School Closures

In an April 21, 2022 Tax Court of Canada case, the Court reviewed whether the taxpayer and her former spouse were shared-custody parents of their three children for the period from January 2019 to June 2021 for the purpose of the Canada child benefit (CCB). In shared-custody arrangements, each individual will get half of the payment they would have received had the child lived with them full time. While the Minister initially fully paid the…

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CPP Disability Benefit: Following the Doctor’s Advice

In a June 6, 2022 Federal Court of Appeal case, the Court addressed an application for judicial review of the Social Security Tribunal’s decision to deny the taxpayer’s CPP disability benefits claim on the basis that he did not have a severe and prolonged disability. The General Division of the Social Security Tribunal stated that while the taxpayer had significant impairments (chronic back pain and osteoarthritis in both knees), he had not made reasonable efforts…

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  • Post category:Tax Planning

TFSA Overcontribution: Relying on Information in Your CRA Online Account

One challenge when relying on CRA-provided information online in respect of TFSA contribution room is that the information is not updated on a real-time basis due to the delay in receiving information from TFSA issuers. Although CRA has many disclaimers surrounding this issue, some individuals may be unaware or misinterpret their comments. A July 14, 2022 Financial Post article (Taxpayer relying on CRA website info gets hit with penalty for contributing too much to TFSA,…

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Personal Services Business (PSB): CRA Education Initiatives

In some industries it is common for employers to require their workers to provide services through their own corporation rather than directly as employees. In general, a PSB exists where an individual would be considered the employee of the hiring entity if it were not for the existence the worker's corporation. In a recently released 15-minute video, CRA stated that PSBs are more common in trucking, IT consulting, accounting, construction and catering. If considered a…

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Principal Residence Exemption: Land in Excess of One-half Hectare

The definition of a principal residence limits the amount of land that qualifies for the principal residence exemption to half a hectare unless the taxpayer establishes that the excess land was necessary for the use and enjoyment of the housing unit as a residence. In referencing Folio S1-F3-C2, Principal Residence, CRA stated that using excess land in connection with a particular recreation or lifestyle (such as keeping pets or country living) does not mean the…

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Required Travel: Between Home and Work

A June 21, 2022 Tax Court of Canada case considered whether motor vehicle costs of $1,642 associated with a construction foreman’s travel between home and various job sites were deductible against employment income. The taxpayer worked on many of his employer’s 50 projects, located at numerous construction sites. The taxpayer was responsible for ensuring that the workers were in place each morning and were ready to work with properly functioning tools, materials and equipment. This…

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