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December 12, 2017

Year-End Tax Planning

Tax planning for year-end may save you money. Recognize capital losses by selling stock in companies whose stock price has decreased.  A bad stock pick can be sold, and the capital loss reported. It can offset any capital gains. The loss may be carried back three years (i.e. used to reduce taxes on capital gains in those years) or carried forward for twenty. While capital gains are taxed on only 50% of the gain, this capital loss ‘tax-loss selling’ helps even more. Remember the settlement date is the official sale for tax purposes, so initiate your sale by close Dec27. […]
February 23, 2017

Big Changes for Small Business (Part 4 of 4)

On December 15th, 2016, Royal Assent was given to C-29, a budget implementation bill. C-29 means big changes for companies using the Small Business Deduction. Previously, I discussed the Small Business Deduction, who uses it, and what C-29 changed. Here,  I will briefly discuss the effects on small businesses. As always, consult a tax accountant to review your situation and for tax planning.   It used to be the biggest issue was Association: if two companies had 25% or more ownership in common, they were Associated, and had to share the $500,000 Small Business Deduction. Now, Specified Corporate Income goes […]
February 20, 2017

Big Changes for Small Business (Part 3 of 4)

As of December 2016, Bill C-29 is poised to make major changes to Small Business. In previous blogs, I discussed what the Small Business Deduction is, and what companies can use the Small Business Deduction. In this blog I’ll review the changes, and in the next blog I’ll discuss C-29’s impact. As always, talk to a tax accountant to review your particular situation and to get involved in tax planning. There is a new definition of Specified Corporate Income (new Section 125(7) of the Act). If two companies held by related owners do business with each other, that income won’t […]
January 2, 2017

Big Tax Changes for Small Business (Part 2 of 4)

Canada’s Bill C-29 has been passed. There will be big effects for those who use the Small Business Deduction. In my last blog, the Small Business Deduction was defined: basically 17% lower tax rate for the first $500,000 of active business income. In this blog I will discuss what companies can use the Small Business Deduction. In future blogs I will discuss the changes Bill C-29 will make and the outcome for Small Businesses.   The main users of the Small Business Deduction are Canadian-Controlled Private Corporations (CCPCs). Obviously, the name implies the corporations must be ‘controlled’ by Canadians. Majority […]
December 22, 2016

Big Tax Changes for Small Business (1 of 4)

The current Canadian government’s proposed C-29 will surprise a lot of small businesses. There will be big changes to what income is eligible for the Small Business Deduction. To be fair, some taxpayers were pushing the limits of the law. That being said, the government’s solution puts so much of a burden on small business that it threatens use of the Small Business Deduction. Over four blogs, I will explain what the Small Business Deduction is, who is eligible for the Deduction, describe the changes and why they are being made, and the outcome for small business. The Small Business […]
November 27, 2016

How Bartering is Treated by Tax Law

In the normal course of business, bartering occurs. It is important to carefully approach this as the tax laws are strict. Basically, one should include the regular normal income as revenue and the cost of the barter as an expense. For example, let’s say John rents a basement apartment for $600 a month to Stuart. John and Stuart agree to cut the rent by $100 a month for snow removal, and lawn maintenance. It is a net of $500 income for John. The CRA wants to see the $600 and $100 figures in the income and expense areas, respectively. For […]
November 2, 2016

JTWROS – Part 2

Previously, I discussed Joint Tenancy, and focused on JTWROS. I discussed how JTWROS led to capital gains issues. For that post, click here. Focusing on inheritance, Joint Tenancy with Right of Succession (JTWROS) is in part about Succession. If one person dies, the other often succeeds them in full title (100% ownership) of the asset. Sounds simple, and there is no problem if two people are involved. It is based on the Common-Law Presumption of Advancement, which basically means a property transferred to a spouse or child is presumed to be a gift and owned by the spouse or child. […]
October 30, 2016

Joint Tenancy: Be Careful!

Joint Tenancy With Rights of Succession (JTWROS) and Joint Tenancy-in-Common are becoming more and more popular. On the surface, they offer a fast-track of inheritance, avoidance of probate, and opportunity to provide asset management help. The fact is they are complex. JTWROS, for example, has complex tax and inheritance issues that require careful attention. As the population ages, succession to and inheritance of assets is becoming a more important issue. As Estates take a long time to clear for distribution, and as probate fees may be high, a quick alternative fix may seem attractive. JTWROS offers that, as well as […]
March 17, 2016

How Tax Accountants Save You Money

I recently worked with a client who wants to sell a rental property (house). The client lived in the house until a few years ago. If they choose that house as a ‘Principle Residence’ and use the ‘Principle Residence Exemption’ for the years they lived in the house, the years they occupied the house has no capital gains payable when sold. Now, the years when they used the house as a rental leads to rental income and also capital gains (if the house increased in value over the rental years). They thought it would be straightforward capital gains on the […]
March 12, 2016

CRA’s AutoFill Return (AFR)

The CRA started a new AutoFill Return (AFR) service. Basically, the data the CRA has is downloaded into tax software. If one hires a tax preparer, make sure they have level 2 of the online access as it is required ( T1013 form). Is it faster? yes. However, there is no guarantee as to the quality of the information. For example, when I first used AFR for a client’s file I downloaded all the CRA information. All the data that had income (i.e. T4s, T5s) was downloaded. Good! However, a few deductions were missing. I guess the CRA missed those […]