10/6/2017 Jasper Forum 2017: October 22, 2017 Tax Update Whats - - PDF document

10/6/2017 1

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 Tax Update – What’s New? Jasper Small Practitioners Forum

October 22, 2017 Hugh Neilson FCPA FCA TEP

Kingston Ross Pasnak LLP Video Tax News

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – Other Than That…

…Mrs. Lincoln, how was the play?

CCPC Consultation Paper

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Tax Rates

• 2016 Rates unchanged
• Other than indexing
• Alberta Changes
• Small Business Rate down 1%
• Dividend tax rate up to compensate

10/6/2017 2

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Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Tax Planning – Where Are We Now?

• State of Integration
• SBD 35.5%
• 0.63% cost
• High rate ABI 21% deferral
• 2.24%
• Defer, defer, defer

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Tax Planning – Where Are We Now?

• State of Integration
• SIBI 2.67% prepayment
• 5.03% cost
• Blend GRIP and RDTOH?
• Pull it all out?
• Watch out for foreign income

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Tax Planning – Where Are We Now?

• State of Integration
• Dividends no deferral, no ultimate cost
• Recover RDTOH immediately?
• Maybe not – if non-eligible

10/6/2017 3

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Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

2017 Federal Budget

• What Wasn’t There? No changes to
• Capital gains rates and exemption
• Small Business Deduction
• Principal Residence Exemption
• Private Health Services Plans

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

2017 Federal Budget

• What Went Away?
• Public transit credit (after June/17)*
• Tax-free allowances for MLAs/Municipal

Officers (after 2018)*

• Home Relocation Loan (after 2017)*
• Child Care Spaces Invest Tax Credit

(immediate)*

* In the first Budget bill Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

2017 Federal Budget

• What Else Changes?
• First-time donors’ SuperCredit (no extension)
• Infirm, Caregiver, Family Caregiver credits *
• Consolidated in 2017
• Generally same or better credit
• No credit for non-infirm dependents (parents 65+)

* In the first Budget bill

10/6/2017 4

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Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

2017 Federal Budget

• What Else Changes?
• T2201 signed by nurse practitioners*
• Medical expenses for fertility treatment *
• (back 10 years)
• Tuition credit for occupational skills broadened *

* In the first Budget bill Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

2017 Federal Budget

• Anti-avoidance measures
• RESP and RDSP investments
• De Facto Control
• Straddle Transactions (derivatives)

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

2017 Federal Budget

• The Big One – Billed Basis Acctg
• aka the Work in Progress deferral
• Accountants, Lawyers
• Doctors, Dentists, Veterinarians, Chiropractors

10/6/2017 5

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

2017 Federal Budget - WIP

• Phase in Period
• Fiscal years commencing after March 22, 2017
• Budget phased in over two years
• Draft legislation increases to five years
• Lower of cost and FMV

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

2017 Federal Budget - WIP

• Cost of WIP?
• Staff time? Benefits? Overheads? Owner time?
• FMV of WIP?
• CRA FAQ suggests contingency fees have nil value
• Consistent with the law?

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

2017 Federal Budget

• Sales and Excise Tax
• Ride sharing a taxi service July 1/17
• Tobacco and alcohol taxes increased

10/6/2017 6

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Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

2017 Federal Budget

• Consultations
• Cash Purchase Tickets
• CCPC Tax Strategies

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• Non-Arm’s Length Share Sales
• Are Unrelated Parties Arm’s Length?
• Déjà vu?

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• The Half Loaf (Gervais Case)
• GAAR Applies
• Déjà vu?
• Fifteen years and counting!

10/6/2017 7

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Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• Trusts
• 21 Year Rule
• Avoidance challenged under GAAR

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• Trusts
• Reversionary Trusts
• Holdco is a Trust beneficiary
• Holdco gives money to Trust
• Trust acquires Opco with Holdco funds
• S 75(2) attributes income to Holdco

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• Trusts
• Reversionary Trusts – Tax Court
• GAAR applies
• Dividend taxed in Trust
• Not delayed until paid to beneficiary

10/6/2017 8

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Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• Trusts
• Gains Paid or Payable
• Trust sells CCPC shares
• Trust distributes gains to 7 beneficiaries
• Beneficiaries gift funds to CCPC principal
• After claiming capital gains deduction

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• Trusts
• Gains Paid or Payable
• Court upheld gains added to principal’s

income

• “Secret agreement” between parties
• Reassessed after three year limit

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• PUC Creation
• Individual rolls shares to Holdco
• Opco rolls assets to Holdco
• PUC of shares averaged
• RESULT: $595,154 more PUC for

individual

10/6/2017 9

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Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• PUC Creation
• CRA reduced Individual’s PUC to $110
• Court agreed – GAAR applied
• PUC averaging abused

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• Valuation
• Estate freeze - $2 million valuation
• July 1, 2011 valuation
• Sold common shares to spouse & kids
• Corporation sold for $4.5 million
• Dec 15/11 agreement; Jan 13/12 sale

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• Valuation
• Actual sale proceeds = FMV
• Result: $2.2 million of gains taxed

twice

• Gross negligence penalties reversed

10/6/2017 10

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• Shareholders’ Toys
• $310,000 recreational vehicle
• Personal use charged $2,000/week

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive Tax Planning

• Shareholders’ Toys
• FMV rental $4,500 to $5,000/week
• Personal use 70%+
• Input tax credit denied

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Aggressive (?) Tax Planning

• Prescribed Rate Loans
• Subject to GAAR?

10/6/2017 11

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Old “Friends”

• Small Business Deduction Changes
• Principal Residence Exemption
• Section 55

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Small Business Deduction Changes
• Specified Cooperative Income
• Farming/fishing co-ops exempted
• Strict criteria

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Small Business Deduction Changes
• Issues of Concern
• “All or substantially all” tracking burden
• Non-arm’s length – factual determination
• Multiple entity groups multiply issues
• No de minimis criteria

10/6/2017 12

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Small Business Deduction Changes
• Issues of Concern
• Is “income” gross or net?
• Allocating expenses
• “Direct or indirect” interest – very broad
• Debts? Contracts?
• Traces through intermediaries

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Small Business Deduction Changes
• Direction of compensation?
• Maybe – TCC suggests
• Just don’t claim it?
• How does 40% corporate tax sound?

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Principal Residence Exemption
• Schedule 3 or T2091?
• “All years designated?
• 1+ rule
• CRA Guidance

10/6/2017 13

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Principal Residence Exemption
• Parking spot with a condo
• Probably OK
• House destroyed
• Farm House
• CAUTION with corporate land ownership

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Principal Residence Exemption
• Partial income earning use
• Entire property remains PR if
• Income earning use ancillary
• No structural change
• No CCA claims

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Section 55 – Yes, still!
• Purpose Test
• Question of fact – no bright lines
• “Why” we want to reduce share value?
• Share repurchase/redemption
• Related party exception
• CRA may assert GAAR
• Purification?

10/6/2017 14

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Section 55 – Yes, still!
• Part IV Tax – Circular Issue
• Timing of deemed capital gain
• Discretionary dividend shares
• Value? No safe income?
• CRA study

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Section 55 – Yes, still!
• Safe Income (SI)
• If S 55 applies, no reduction to SI of other

shares

• Allocation between share classes
• Calculation methodology
• Can’t stream safe income

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Section 55 – Yes, still!
• Stock Dividends
• It’s Not Fair!
• No, it’s tax law…

10/6/2017 15

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Corporate Tax
• De Facto Control
• Economic dependence
• Three Year Refund Deadline
• When should I sue?
• What if the company is broke?
• Again, who said tax was fair?

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Corporate Tax
• Must file within 3 years of YE or
• No refunds can be paid
• No dividend refund available
• RDTOH is not reduced in such cases
• Sue the Accountant?

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Corporate Tax – Limited Reviews
• SBD review – 40% Adjustment Rate
• Investment Income
• More coming?

10/6/2017 16

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Corporate Tax – Limited Reviews
• Professional Fees
• 30% reassessment rate
• Wide array of reasons
• More coming?

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Corporate Tax – Limited Reviews
• Travel
• Significant number of enquiries
• Short-term projects

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Business Income
• Independent Contractors - CAUTION
• Spousal Salaries – DANGER
• Legal Fees – Costs Awards
• Electric Vehicles
• Workspace in the home

10/6/2017 17

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Business Income
• Private Health Services Plans
• Reasonableness of Expenses
• CPP: post-retirement partnership

income

• Farm Partnerships – T5013?
• Travel Allowances – non-employees

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Personal Tax
• Employee Benefits
• Moving costs
• Tax Advisory Services
• Payroll Advances

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Personal Tax
• Employment Expenses
• Professional Discipline
• Defense – Criminal Charges
• Cell Phone
• Reasonable Allowances
• Employer Certification

10/6/2017 18

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Personal Tax
• Marital Breakdown
• Shared Custody – Claiming the Kids
• Two support obligations key
• Still under the same roof
• Evidence required

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Personal Tax
• Investment Fees
• Segregated funds are not “securities”
• RRSP, TFSA etc. Issue
• Advantage Tax – 100%
• Commencing in 2018 2019

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Estates and Trusts
• Corporate Beneficiaries
• Connected Status
• Sale of Opco

10/6/2017 19

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

Holdco

Beneficiary Trust

Opco

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Estates and Trusts
• Phantom Income
• Can it be paid or payable?
• Beneficiary Rights
• What if the beneficiary was not entitled?

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Estates and Trusts
• Retaining income in the Estate
• Executor’s Year
• Offsetting losses
• Intestacy – CRA Forms
• 21 Year Rule - DANGER

10/6/2017 20

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Estates and Trusts
• Non-Resident beneficiaries
• Disclosures – capital distributions
• NR4 – all distributions
• Part XII.2 tax
• Rental or business income
• Non-resident beneficiary
• 40% tax rate

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Registered Accounts
• TFSA – Survivor Benefits
• RRSP – Death and Divorce
• T1 OVP – statute barred?

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Capital Gains and Losses
• Loans advanced to earn income
• Securities – income or capital?
• Foreign Exchange issues
• Capital Gains Deduction

10/6/2017 21

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Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Do It Online
• Personal Tax Programs
• Pre-authorized debit
• ReFile
• Express Notice of Assessment

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Do It Online
• Account Alerts
• Service Canada Access
• Prefer Canada Post?
• You can pay your tax there too!

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Do It Online
• T Slips
• CRA Turnaround
• Sending slips to employees

10/6/2017 22

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Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• Do It Online
• Represent a Client
• Prefer telephone service?
• Latest report card
• Tax Preparer phone service
• Not in Alberta yet

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• CRA Activity
• Appeals
• protocol for new info
• Voluntary Disclosure
• Changes coming(?)
• Registration of Tax Preparers Program

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• CRA Activity
• GST Letters
• Rental Loss Project?
• Sharing Economy
• CRA Information Projects
• Audit Feedback
• Fraud

10/6/2017 23

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Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• First Nations
• Metis and non-status Indians
• Bands Tax-Exempt

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New?

• International
• T1135
• Real Estate Purchased from

Nonresidents

• U.S. Persons
• CRA collection assistance
• IRS Reviewing Canadian Businesses

Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News

Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? PLEASE DON’T SHOOT THE MESSENGER QUESTIONS? ENJOY THE REST OF THE FORUM!