You need to purify a corporation of its bad assets so that the corporation’s shares will be qualified small business corporation shares for the purposes of the $750,000 capital gains exemption. Let’s assume that you are confident about the values of the assets involved, so that you can leave bad assets with a value equal to exactly 10% of the total gross value of all assets of the corporation. How do you calculate the amount to remove, given that what you remove reduces both the gross value of the bad assets and the gross value of all of the assets of the corporation? The following formula seems to work:
Interest deductibility
A wife pays interest under a line of credit that her husband used to buy shares in a business. Can the wife deduct the interest? Not according to Bernacchi v. The Queen, 2010 TCC 306, unsurprisingly: All in all, I…
Form of notice
In Suffolk v. The Queen, 2010 TCC 295 (an informal procedure case), the Court undertook an interesting review of the caselaw relating to the validity of notices of assessment that contain errors and the form required for a valid notice…
File this under “Yikes!”
Accountants who recommended tax shelters and earned commissions for doing so that weren’t disclosed to their clients need to think twice about their bank account balances. In Lemberg v. Perris, 2010 ONSC 3690, the Ontario Superior Court ordered an Oakville…
Budget bill
The 2010 federal budget was enacted as law yesterday as S.C. 2010, c. 12. Chapter 12 includes the new rules respecting section 116 of the Income Tax Act.
White collar revisited
A few months ago, I wrote a post complaining about how the CRA tends to go after the taxpayers who get the caught in the middle of tax schemes rather than the schemers themselves. Karen Cooper has written an interesting…
DIY Prescribed Rate
The Income Tax Act in numerous places requires interest to be paid, either by the taxpayer or the Minister, on certain overdue amounts. The rate applicable is computed by reference to the “prescribed rate”. The Act also provides for calculating certain kinds of benefits by reference to that same rate. The rate fluctuates each calendar quarter. Usually, the CRA publishes the rate on its website well in advance of each quarter. For some reason, however, the CRA has still not published the rate for 2010 Q3. What is a poor tax adviser to do?
Exida.com Appeal Dismissed
In Exida.Com Limited Liability Company v. The Queen, 2010 FCA 159, the Federal Court of Appeal dismissed the appeal of the taxpayer from the decision of Justice Woods (see “Contradiction“). The Federal Court of Appeal’s reasoning is surprising and, perhaps, disturbing.
Current cases
Joe Monaco presented “Current Tax Cases” at the CRA’s Tax Practitioner’s Consultation Group meeting at the Royal Botanical Gardens this morning.
Retiring allowance exception
In Rae v. The Queen, 2010 TCC 130, the taxpayer left his position as the controller of one corporation and joined another. Soon after he started his new employment, he discovered what he thought were serious improprieties in the financial statements and accounting practices of his new employer. He resigned his position but then negotiated a settlement under which he received a large payment for negligent misrepresentation and as damages for retaliation. The CRA took the position that the entire amount received was a retiring allowance. The taxpayer appealed; the Tax Court agreed with him in part.