US federal and state estate taxes are eligible for a tax credit in Canada only because of the Canada-United State Income Tax Convention (1980). The treaty, however, does not bind Canada’s provinces. Ontario and BC, unlike other provinces, have not…
Payroll deductions are special
How are payroll source deductions different from an ordinary income tax debt? 1. The CRA can commence collection action as soon as source deduction are overdue. An objection does not stay collection action. 2. Some limitation periods (assuming no negligent…
SBD grind avoided
Suppose that Holdco owns all of the shares of both Realco and Opco. All three corporations have the same year-end. In year 1, Realco sells real property and realizes a large gain that generates passive income in excess of $150,000.…
Avoiding late-filing penalties
The Court in Chen v Canada (Attorney General), 2019 FC 1435, seemed to accept that a taxpayer, to avoid late-filing penalties, could have filed a T1135 with estimates in it before the deadline and then filed an amended return later.…
Non-arm’s length interest
The shareholders of Opco loaned it money to permit it to acquire inventory. The loans were unsecured and bore interest at 10% yearly. The Court of Quebec, in light of the Quebec equivalent of section 67 of the ITA, denied…
Partnerships and being a relative
How does the presence of a partnership in a structure affect the analysis of whether persons are related under section 251 of the Income Tax Act (Canada)? A partnership is not a person for the purposes of section 251 Where…
Trusts need to watch out
The federal government has allocated significant additional funds to the CRA to permit it to enforce better compliance. The CRA has targeted family trusts (among other things). The CRA’s audit process for a trust involves accumulating documentation and information about…
Capital gains and excluded shares
The CRA believes that taxable capital gains are “income” for the purposes of paragraph (c) of the “excluded shares” definition in the TOSI rules. The CRA also states that the gains in question should be computed on a gross basis,…
Audit success
Automobile benefits are fish in a smaller barrel for CRA auditors. If all else fails, the auditor can recover something for his or her time by reassessing them. (My experience on the subject is probably not representative. Nevertheless, it’s the…
Due diligence reverses penalty
In Moore v R, 2019 TCC 141 (informal procedure), the taxpayer, in filing his 2016 return, realized that he needed to file a T1135 for shares he owned of a US corporation that he had acquired under an employee stock…