Unreported Real Estate Dispositions: Multiple Issues

A September 12, 2022 Tax Court of Canada case reviewed the gain on a residential property purchased in 2007 and disposed of in 2011. The property was substantially rebuilt during the ownership period. The proceeds, cost and gain were all determined by CRA as the sale was unreported. These amounts were largely unchallenged by the taxpayer and accepted by the Court. The Court noted that the taxpayer’s tumultuous relations with her ex-husband, whom she divorced…

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Year-end Tax Planning

See below for a list of tax planning considerations. Please contact us for further details or to discuss whether these may apply to your tax situation. SOME 2022 YEAR-END TAX PLANNING TIPS INCLUDE: 1) Certain expenditures made by individuals by December 31, 2022 will be eligible for 2022 tax deductions or credits, including digital news subscriptions, moving expenses, labour mobility tax credit expenditures (NEW), child care expenses, charitable donations, political contributions, registered journalism organization contributions,…

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Tips Collected Electronically: Withholding Requirements

Where tips are “paid” by an employer, they are pensionable and insurable. In such cases, the employer must also withhold income tax and report the amounts on the employee’s T4. CRA’s current administrative policy is that if the tip is controlled by the employer (controlled tips) and then transferred to the employee, it is considered to be paid by the employer. In contrast, direct tips are considered to have been paid directly by the customer…

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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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Executor: Whether to Accept This Role

Individuals may be asked to take on various roles in respect of loved ones, friends, clients or others. One role that is particularly riddled with challenges is that of an estate executor. While an individual may carry out their duties in an appropriate manner, it is important to consider the risks of unhappy beneficiaries and any other undesirable outcomes, including litigation and/or strained relationships. A March 4, 2022 Tax Court of Canada case reviewed whether…

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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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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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