Childcare Costs: Art, Sport, and Education

A September 11, 2018 Tax Court of Canada case examined the eligibility of a number of child care costs with a recreational and educational component. The taxpayer and his spouse worked full time and had two children, aged 10 and 12. The Court acknowledged two separate lines of cases related to eligibility of child care expenses (all informal and, therefore, not binding on CRA).  The first set, argues that the definition of a “child care…

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Benefits Paid to Shareholder Employees: Are They Taxable?

The CRA is aware that owner-managers have an incentive to receive benefits deductible by their corporation which are non-taxable to the owner. In essence, this can be perceived as a method to extract profits out of a corporation without paying tax on it. As such, CRA is particularly vigilant to ensure that these benefits comply with the Income Tax Act and do not confer unfair advantages on owners. To start off, it must be established…

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Taxpayer Relief: Financial Hardship

CRA may grant relief from penalties and interest in cases where the timely satisfaction of a tax obligation was not completed due to: extraordinary circumstances;actions of the CRA; orinability to pay or financial hardship. In a March 31, 2016 Federal Court Judicial Review, the taxpayer appealed a decision by CRA to refuse relief on penalties and interest. In this case, the taxpayer argued that the CRA agent did not reasonably appreciate the taxpayer's financial difficulties.…

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  • Post Category:Tax Planning

Documents Required to Claim a US Foreign Tax Credit

Prior to the summer of 2015, CRA often accepted copies of the U.S. tax returns, as support to claim a U.S. Foreign Tax Credit (FTC). The "Federal Account Transcript" was selected as alternative evidence the return provided to CRA was filed and assessed as filed. Some practitioners report that obtaining "transcripts" from the Federal Government, and State Governments in particular, can be onerous, often requiring a request from the client rather than a representative. Form…

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2018 Tax Planning: Renumeration

Higher levels of personal income are taxed at higher personal rates, while lower levels are taxed at lower rates. Therefore, individuals may want to, where possible, adjust income out of high income years and into low income years. This is particularly useful if the taxpayer is expecting a large fluctuation in income, due to, for example, an impending maternity/paternity leave; large bonus/dividend; or sale of a company or investment assets. In addition to increases in…

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Active Business vs. Property Income: Music Royalties

A private corporation’s income from a specified investment business (SIB) is not eligible for the active business tax rates (varying from 10% to 31%, depending on a number of factors, including the total earnings from operations and the province or territory in which it is located). Rather, a corporate investment tax rate of around 50% is levied (again, it varies by jurisdiction). In a July 10, 2018 Tax Court of Canada case, at issue was…

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Tax on Split Income (TOSI): Can I Take a Salary Instead of a Dividend?

Dividends received by individuals from private corporations as of January 1, 2018 may be subject to taxation at top marginal tax rates (due to the new TOSI rules) if, in general, they are determined to be unreasonable. Salaries, however, are not specifically subject to these rules. As such, some may consider replacing potentially unreasonable dividends with large salaries or bonuses. This article considers some implications and risks when deciding to pay a salary instead of…

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