by Marc Weisman of Torkin Manes LLP
When a taxpayer dies, tax laws dictate that the taxpayer is deemed to have disposed of all his/her capital property at fair market value. This will trigger capital gains (and recaptured depreciation), which are subject to income tax. (Capital property includes shares of private and public companies and real estate.)
However, if the taxpayer leaves the capital property to a spouse (which includes a common-law partner) or a “qualifying spousal trust” in a Will, any accrued capital gains (and recaptured depreciation) on the property will be realized on the death of the surviving spouse or when the spousal trust sells the property. This might provide a significant tax deferral.
What is a “qualifying spousal trust”?
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By Bull, Housser and Tupper LLP
With this one simple mistake, an employer can lose even the most airtight case
It’s a familiar theme of police television dramas: everyone knows the bad guy committed the crime, but the police don’t do everything by the book and the villain gets away on a “technicality.” The police force winds up looking foolish, the prosecutor chews out the detectives involved, and our heroes have to find another way to bag their criminal.
In much the same way, an employer will lose an arbitration if it is found that it breached the employee’s right to
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By Cary Heller of Collins Barrow Toronto LLP
On Wednesday, March 16, 2011, the Department of Finance released proposed income tax legislation designed to address three decisions of the Federal Court of Appeal.
Contingent Amounts and Limits on Expenses
In Collins v. The Queen, 2010, FCA 12, the issue was deductibility of interest. In brief, the taxpayers deducted accrued but unpaid interest at the full amount even though they had an existing right to discharge their obligations by electing to pay a significantly lower amount of interest. The Federal Court of Appeal (“FCA”) ruled that it was not the original obligation to pay the interest that was contingent, but that it was each taxpayer’s subsequent decision to exercise the option to pay the lower amount which was contingent. As such, the decision allowed interest payable under the original obligation to be deducted in computing income even though both taxpayers had a right to elect to pay a lower amount.
The draft legislation provides that
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by Diane Kazarian, Ryan Leopold, George Sheen and John MacKinlay of PricewaterhouseCoopers
In a time of accelerating change, Canadian banks have done far more than what’s necessary to survive over the past year. As many global banks struggled to regain their pre-crisis position, Canada’s Big Six banks leveraged their well managed, well regulated and well capitalized standing to actively pursue their growth strategies. And the effort paid off: the 2010 combined net income of the Big Six was $20.4 billion, exceeding 2009 net income by more than $6 billion and eclipsing the previous record of $19.5 billion set in 2007.
With the events of the past year in mind, we spoke with a number of Canadian analysts and portfolio managers to understand their opinion on what the future holds for Canadian banks. Overall, managing complexity, pursuing growth strategies and transforming through innovation were the overriding considerations to stay competitive. As is often the case, the real challenge going forward is how to execute while many pervasive risks remain.
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By Wayne D. Gray of McMillan LLP
On June 23, 2009, Bill C-4, the Canada Not-for-profit Corporations Act received Royal Assent. The new Act is important governance legislation in its own right but will doubtless exert an influence far beyond those corporations that will incorporate or continue under it. Just as the CBCA exerted a powerful influence on the shape of provincial and territorial laws governing business corporations in the years immediately following its implementation in 1975, this new federal Act is bound to exert an equally strong (if not more profound) influence on provincial and territorial not-for-profit corporate law reform in the years ahead.
This article reviews the types of not-for-profit corporations to which the new Act will apply, summarizes the rules differentiating soliciting and non-soliciting corporations, describes some of the new governance provisions, analyzes possible problem areas and suggests workaround solutions to these problems, draws implications from the implicit governance regime imported into the new Act and outlines the process for continuing to the new Act.
Download the full article here.
Michael Friedman and Ashley Palmer of McMillan LLP
Canada’s income tax system requires taxpayers to self-assess and report their income tax liabilities in respect of each taxation year. Where a taxpayer has previously provided incorrect or incomplete information, or has failed to disclose required information entirely, to the Canada Revenue Agency (CRA), the taxpayer may, under certain circumstances, be permitted to come forward and voluntarily disclose past reporting errors or omissions in exchange for potential penalty (and, in limited circumstances, interest) relief by making an application to the CRA under the federal “Voluntary Disclosures Program” (VDP). This article provides a general overview of the conditions that a taxpayer must satisfy in order to be eligible to make a valid voluntary disclosure.
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by Mark McElheran of Stikeman Elliott LLP
It remains to be seen whether the reform fever that is presently sweeping through the US securitization market will continue unabated across the 49th parallel but there is no question that these monumental reforms have given rise to a considerable amount of discussion and debate over the appropriateness of similar reforms in Canada. This was perhaps inevitable given the degree of economic integration between the two countries and the fact that both have recently suffered through significant ABS-induced crises (albeit on entirely different scales).
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Tags: bank, bankruptcy, bubbles, Canada, debt, Economics, finance, insolvency, lender, securitization, trend
In Spring our hearts are turned toward love,
Unless we are Accountants.
Our clients’ slips are pouring in
Like coins into a fountain.
Now some old slips we bring back out
From where they were put by.
We sort them out, new slips we add,
and the oldest we then shred.
But these vision, dental, and drug receipts
bring a mix of hope and dread,
For each slip calls a silent cry:
“Line 332 is a cruel place!
A vacant space where all clients face
a question that may horrify:
‘When a year of us is added up,
were you sick enough to qualify?’”
But there is a stream of smiling clients
Who bypass round the Line.
They’re self-employed or a business owner
With a Private Health Services Plan.
It softens the sting of the harsh taxman
And leaves Line 332 to founder.
All health receipts – one hundred percent –
Are a deductible business expense.
Each one of these can
Set up their own Plan
By calling Aquilian!
Click here for a tool that will tell you whether an Aquilian plan will reduce taxes or not: http://bit.ly/PHSP_Tool_Ont
www.aquilian.ca
(647) 333-7229
[Ed. note: Line 332 of Schedule 1 of Canada's personal income tax return provides a very small non-refundable credit only against taxes otherwise owing. For 2010 the first $2,024 of medical expenses are not eligible (so many people aren't "sick enough to qualify") and the credit given for anything over that amount is usually much lower than the taxes on the income used to pay for those medical expenses in the first place. An Aquilian Plan for corporations or the self-employed turns 100% of medical expenses into fully-deductible business expenses.]
by Lidiya Nychyk and Maureen De Lisser, Ernst & Young LLP, Toronto
In two recent technical interpretations, the Canada Revenue Agency (CRA) provided administrative guidance on certain tax aspects of gifts by will, including how to report and value a delayed gift. While the positions expressed may not come as a surprise to tax practitioners, they do provide useful guidance to executors and tax advisors on how to report and claim the charitable donation tax credit on certain gifts made by will.
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A recent discussion with colleagues revealed that many are unaware of the issues that may arise when advising clients whether to declare corporate dividends, including in the case where there exist negative retained earnings.
From the viewpoint of an insolvency practitioner, the picture is quite clear.
A trustee of a bankrupt corporation is permitted to make an application in court to recover against the directors where the corporation has, within the year prior to bankruptcy, redeemed or
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by Stevan Novoselac, John Sorensen and Michelle McBride of Gowling Lafleur Henderson LLP
In a recent decision of the Ontario Superior Court, Lemberg v. Perris,1 Eric and Valerie Lemberg successfully sued their loyal accountant, Michael Perris (“Perris“), for breach of fiduciary duty. Over the course of their almost twenty-year relationship, Perris provided tax and accounting advice to the Lembergs and performed their tax compliance work.
Perris advised the Lembergs to engage in a so-called “art-flip” tax reduction scheme. The Lembergs accepted Perris’ advice and enjoyed their large tax savings. However, they were reassessed by the Canada Revenue Agency (“CRA“) to disallow all of the benefits they received. Subsequently, the Lembergs learned that Perris had received a “secret commission”
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by Douglas J. Powrie and Stephanie Wong of Borden Ladner Gervais LLP
The Canadian courts have recently considered appeals of several cases in which the Crown has invoked the general anti-avoidance rule (GAAR) to challenge tax avoidance transactions. In Lehigh Cement, the Crown was unable to apply the GAAR because it could not meet its burden of establishing the taxpayer’s abusive tax avoidance in the context of planning that had interest paid (free of withholding tax) to an arms-length bank in respect of principal owed to an affiliated corporation. In Collins & Aikman, the Crown was similarly unable to meet its burden in seeking to apply the GAAR to
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Statistics Canada today released the 2009 Accounting Services Price Indexes for Canada as a whole. We have been tracking these indexes for Ontario, but these, along with other regional figures, are no longer available due to a redistribution of wealth within the Federal Government.
Here are the indexes for Canada graphed from their inception:
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by Bryan C. Haynes of Bennett Jones LLP
Previously published in the Canadian Lawyer magazine
Most jurisdictions in Canada require the unanimous consent of all shareholders, including nonvoting shareholders, in order for a nondistributing corporation to dispense with an audit. The requirement is absolute and mandatory — there are no other exemptions or qualifications. The public policy rationale behind the rule is laudable; however, the implementation in practice can be austere. It is time to revisit the universal audit requirement as it applies to nondistributing corporations.
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By Pierre Alary of Gowling Lafleur Henderson LLP
I. Introduction
Sometimes, two is better than one. A company in dire straits can potentially attain success by dividing itself into two separate entities. Whether the issues plaguing the company are financial or philosophical in nature, a separation of the business should be considered by corporations and practitioners alike. In addition to making good business sense, a divisive reorganization, or “corporate divorce”, can be structured to benefit both parties from a tax perspective. In other words, a corporate divorce does not need to be a painful experience. This article will conduct a brief overview of the well-known butterfly transactions, but will primarily focus on an alternative method, the “McMullen Method”, which was approved by the Tax Court of Canada in recent years.
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