A rogue convinces you to “invest” in a “business” and you lose the money you invest because the business really consists of stealing your money. Will you be entitled to a deduction in respect of the money you have lost? The Federal Court of Appeal, in Hammill v. The Queen, 2005 FCA 252, said no.
A Nasty Surprise for Charities
On July 18, 2005, the Department of Finance released over 300 pages of draft legislation amending the Income Tax Act (Canada) (the “Act”). For the most part, the legislation merely reintroduces previously-announced proposals, but Finance slipped in a new measure that imposes new burdens on charities. If the proposal is enacted, a charity that issues a receipt with an eligible amount in excess of $5,000 will be required first to make “reasonable inquiry” about whether the amount should be reduced under any one of a number of complex provisions of the Act relating to gifts.
Arguing with the CRA While the Clock Ticks
You file an income tax return for your client, and later the CRA issues an assessment or a reassessment that does not agree with the return as filed. Your natural instinct is to try to solve the problem by discussing it with the auditor or the person who issued the assessment. The communication is quicker and more direct. The person is already familiar with the issue in dispute. Remember, however, that while you are dealing with this person the clock is ticking away and your time for filing an objection is running out.
CRA Demands for Third-Party Information
Section 231.2 of the Income Tax Act (Canada) (the “Act”) authorizes the CRA to demand information from any person for any purpose related to the enforcement of the Act. What do you need to know about a demand for information about an unnamed third party, if the CRA comes knocking at your door with one in hand?
The Perils of Large Corporation Appeals
When drafting a notice of objection for a large corporation, it is essential to ensure that you cover all of the issues in dispute between your client and the CRA. If you fail to cover all of the issues, your client’s ability to contest them at the Tax Court could be curtailed. Newmont Canada Limited v. The Queen, 2005 TCC 143, is a harsh reminder of this possibility.
Safe Income and Partial Rollovers, Again
At the end of our article on 729658 Alberta Ltd. v. The Queen, 2004 TCC 474, we speculated that the case might create new opportunities for taxpayers. A CRA technical interpretation dated February 5, 2005, suggests that the Agency disagrees.
Safe Income and Partial Rollovers
For many years, the CRA has maintained that the partial realization of a gain on shares in the capital of a corporation would reduce the “safe income” attributable to those shares pro rata. As a result, a vendor of shares was often required to choose between claiming the $500,000 capital exemption and using safe income to reduce taxes on the sale of shares. 729658 Alberta Ltd. v. The Queen, 2004 TCC 474, suggests that the CRA position might be wrong and that a vendor might be able to have his exemption cake and eat it too.