BEKKEN, BICKFORD & ASSOCIATES INC.

Transcription

1 BEKKEN, BICKFORD & ASSOCIATES INC. CHARTERED ACCOUNTANTS Downtown Vancouver Office Wet Vancouver Office Suite 780, PO BOX Suite Marine Drive 650 Wet Georgia Street Wet Vancouver, BC V7V 1L1 Vancouver, BC V6B 4N8 Telephone: Telephone: Fax: Fax: PERSONAL TAX 86(1) HUMAN RIGHTS CODE AWARD In a 2008 Advance Income Tax Ruling, CRA noted that amount paid by an employer to an employee puruant to an arbitration award for breach of the employee right under the Human Right Code are not taxable. MEDICAL EXPENSES - NURSING HOME In a January 16, 2009 External Technical Interpretation, CRA note that care in a nuring home normally qualifie a a medical expene. If a facility doe not qualify a a nuring home, amount paid to the facility that relate to remuneration for tenant care or uperviion alo qualify a a medical expene. The receipt hould differentiate between attendant care or uperviion and non-eligible cot, uch a lodging cot. Since the term nuring home i not defined in the Income Tax Act, CRA relie on it ordinary meaning. Generally, thi i an etablihment that provide full-time maintenance or nuring care for peron (example, the aged or chronically ill) who are unable to care for themelve. MEDICAL EXPENSES - TRAVEL In a February 2, 2009 External Technical Interpretation, CRA note that an individual may claim tranportation and travel a medical expene provided: (i) ubtantially equivalent medical ervice were not available in the individual locality, (ii) a reaonably direct travelling route wa taken by the individual, and (iii) the individual travelled to the particular place to obtain medical ervice and it i reaonable to have travelled to that place for medical ervice. In another Technical Interpretation, CRA note that if the patient ha been certified by a medical practitioner a being incapable of travelling alone, the meal and accommodation of an accompanying peron will qualify a medical expene. MOVING EXPENSES - NO TIME RESTRICTION The definition of moving expene IN THIS ISSUE PERSONAL TAX EMPLOYMENT INCOME BUSINESS/PROPERTY INCOME OWNER-MANAGER REMUNERATION 2009 FEDERAL BUDGET ESTATE PLANNING FARMING GST/HST DID YOU KNOW... and eligible relocation in the Income Tax Act do not refer to a time retriction. For example, in a June 25, 2004 Tax Court of Canada cae, the taxpayer incurred moving expene in 1997 but, did not have any income at the new work location until Taxpayer win! The Court concluded that moving expene may be deducted in the year of the move, or any ubequent year (in thi cae 1999), to the extent that the taxpayer ha employment or buine income at the new work location. Alo,

2 the Court noted that the phrae the new work location i to be interpreted with flexibility. Alo, in a February 4, 2005 Tax Court of Canada cae, the taxpayer employer relocated from Nanaimo to Courtenay, Britih Columbia in The taxpayer commuted to Courtenay from hi Nanaimo home for even year. In November, 2003 the taxpayer old hi home and relocated to a home cloer to Courtenay. Even though the move occurred even year after the change of employment location, the Court permitted the moving expene on the bai that the delay in moving wa caued by buine problem and a lien regitered againt the Nanaimo property. MOVING EXPENSES In a February 19, 2009 Tax Court of Canada cae, the taxpayer wa employed on a part-time bai in the Ohawa hopital on the eventh floor. She wa offered a new full-time poition in the hopital on the ixth floor. Therefore, he moved from her old reidence, which wa 62 kilometer from the hopital, to a new reidence which wa only a few kilometer from the hopital. Taxpayer Win! The Court noted that the move wa related to a change in work tatu from part-time to full-time and from the eventh to the ixth floor, even though the location wa the ame. The requirement for moving expene were technically met. EMPLOYMENT INCOME 86(2) PARKING PASSES In a December 18, 2008 Tax Court of Canada cae, the Court concluded that the parking pa provided to Mr. S by Telu Corporation wa a taxable benefit becaue it wa not given primarily for buine reaon. Mr. S did not ue the vehicle to any great extent for buine purpoe. It wa imply ued to travel to and from work. However, Mr. J wa found not to have a taxable benefit on hi Telu parking pa becaue he needed the vehicle in the coure of hi dutie. On February 4, 2009, CRA introduced an interactive quetionnaire to help employer determine whether the parking they provide to employee i conidered a taxable benefit. To acce the quetionnaire, go to and elect P from the drop-down menu for parking. SPECIAL WORKSITE In a November 3, 2008 External Technical Interpretation, CRA note that the Income Tax Act exclude from income an allowance for board and lodging at a pecial workite. CRA note that a pecial workite may be any place in the world, including a large metropolitan city uch a Toronto, New York, or New Delhi, where the dutie are of a temporary nature and at another location the employee ha a principal reidence, at another location, to which the employee could not reaonably return daily. Alo, in a December 9, 2008 External Technical Interpretation, CRA note that free or ubidized tranportation between the employee principal place of reidence and the pecial workite i non-taxable. EMPLOYER-PAID SOCIAL EVENTS In a January 14, 2009 External Technical Interpretation, CRA note that they will generally not ae a taxable benefit to an employee for attending an employer-provided ocial event which i generally available to all employee at an employer particular place of buine. Thi could mean a branch or diviion depending on the circumtance. However, the cot per employee mut be reaonable - not more than $100 per peron. REASONABLE AUTOMOBILE ALLOWANCES In a February 23, 2009 Internal Technical Interpretation, CRA note that a per kilometre reaonable allowance received by an employee for the ue of hi/her peronal motor vehicle in connection with employment dutie may be excluded from employment income. BUSINESS/PROPERTY INCOME Alo, an online eligibility aement tool ha been releaed. 86(3) SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT (SR&ED) Some new SR&ED development include: December 30, Some new releae in CRA SR&ED Small Buine Action Plan include Guide RC4467, 4472, T4088 and a CD-ROM. The SR&ED home page on the CRA webite ( provide an overview of the filing requirement, a ection for potential and firt-time claimant, a web verion of a new SR&ED Claim Form T661 and a ample of a completed Claim Form and a Complete Claim Checklit. elf- SOURCE DOCUMENTS FOR DEPRECIABLE ASSETS Documentation relating to long-term tranaction uch a invetment and other capital and depreciable property hould be maintained

3 until ix year after the year in which uch a tranaction could enter into any calculation for income tax purpoe. With repect to depreciable aet and eligible capital property, it i important that the ource document be kept becaue capital cot allowance (CCA) and eligible capital expenditure (ECE) are claimed continuouly on the aet. We undertand that CRA ha diallowed CCA and ECE where the client cannot produce the invoice for aet purchaed many year prior. Alo ee CRA Guide RC Keeping Record. OWNER-MANAGER REMUNERATION 86(4) DUE CARE AND DILIGENCE In a June 13, 2008 Tax Court of Canada cae, the taxpayer/director wa held not to be liable for the unremitted GST on the bai that he exercied due care and diligence becaue he had lot de facto control when the company wa put in the hand of the National Bank. The Court believed the Appellant when he aid that even if he had required that the GST owing be paid, the Bank would not have honoured the cheque. Alo, in a July 11, 2008 Tax Court of Canada cae, the taxpayer/director wa found not to be liable for the unremitted GST a he wa effectively removed from the normal operation of a director a a reult of the refinancing. UNPAID WAGES An article in Law Time noted that director of two bankrupt Ontario contruction companie were liable for more than $40,000 for unpaid wage and benefit in an Ontario Labour Relation Board deciion FEDERAL BUDGET 86(5) On January 27, 2009 the Honourable Jim Flaherty, Miniter of Finance, pre- Tax Credit ented hi fourth Budget to the Houe of Common. Some 2009 Budget propoal include: 1. Home Renovation (HRTC) Individual will be able to claim a 15-per-cent nonrefundable tax credit. The HRTC will apply to expenditure made after January 27, 2009 and before February 1, 2010 in exce of $1,000, but not more than $10,000, reulting in a maxi- mum federal credit of $1,350 ($9,000 x 15%). The HRTC will not be reduced by any other tax credit or grant. Family member will be ubject to a ingle limit baed on their pooled ex- dwelling will each be penditure. Two or more familie that hare ownerhip of an eligible eligible for their own credit. In general, a houing unit i conidered to be eligible if it i an individual prin- cipal reidence. Expenditure will qualify for the HRTC if they are incurred in relation to a reno- and maintenance, vation or alteration of an eligible dwelling (including land that form part of the eligible dwelling). Expenditure not eligible for the credit include routine repair appliance and audio-viual electronic, financing cot aociated with a renovation. Some example of eligible expenditure include renovating a kitchen, bathroom or baement; new carpet or hardwood floor; building an addition, deck or fence; a new furnace or water heater; a new or reurfaced driveway; and painting of interior or exterior of a houe. 2. Home Buyer Plan (HBP) The HBP-RRSP withdrawal limit will be increaed to $25,000 from $20,000 after January 27, Firt-Time Home Buyer` Tax Credit Introduce a new non-refundable tax credit baed on $5,000 (@15% = $750) for firt-time home buyer who acquire a qualifying home after January 27, An individual will be conidered a firttime home buyer if neither the individual nor the individual poue or commonlaw partner owned and lived in another home in the calendar year of the home purchae or in any of the four preceding calendar year. 4. Small Buine Limit The annual amount of active buine income eligible for the reduced tax rate generally referred to a the mall buine limit will be increaed a of January 1, 2009 to $500,000 from $400, Computer: Accelerated CCA In general, eligible computer acquired after March 18, 2007, are included in Cla 50 and are eligible for a 55-percent declining-balance CCA rate. Budget 2009 propoe a temporary 100- per-cent CCA rate for eligible com- been ued, or acquired for puter and oftware, currently decribed in Cla 50, acquired after January 27, 2009 and before February Thi include general-purpoe electronic data proceing equipment, with ome exception. Eligible computer and ytem oftware mut not have ue, for any purpoe before acquired by the taxpayer for ue in Canada.

4 6. Wage Earner Protection Program (WEPP) Propoe to extend the WEPP to cover unpaid everance and termination pay to eligible worker of bankrupt employer after January 27, 2009 to a maximum of four week of inurable earning (currently $3,254). ESTATE PLANNING 86(6) CHARITIES - HELPFUL HINTS In the CRA Regitered Charitie Newletter ( No Winter 2008), CRA provided helpful hint including: if a charity made an error on the Form T3010, it hould complete Form T1240, Regitered Charity Adjutment Requet; a charity hould advie the Charitie Directorate of CRA by letter of change to director, trutee or other authorized repreentative; and way in which charitie may avoid delay in CRA proceing of their Form T3010. REGISTERED DISABILITY SAVINGS PLAN (RDSP) See CRA Guide 4460 for detail and example on the RDSP including: 1. An RDSP i a long-term aving plan intended to help parent and other ave for the long-term financial ecurity of a peron who i eligible for the Diability Tax Credit Contribution to an RDSP are not tax deductible and are nontaxable when withdrawn and can be made until the end of the year in which the beneficiary turn 59 year of age. Canada Diability Saving 4. A peron may be a beneficiary of an RDSP if eligible for the Diability Tax Credit, ha a valid Social Inurance Number, i a reident of Canada, and i under the age of Grant (maximum $70,000) and Bond (maximum $20,000) are available. There i no annual limit on amount that can be contributed to an RDSP, however, the overall lifetime limit i $200, If any of the following triggering event occur, all Grant and Bond paid into the Plan during the preceding ten year mut be repaid: (i) the RDSP i terminated, (ii) the Plan i deregitered, (iii) a payment i made from the RDSP, (iv) the beneficiary ceae to be eligible for the diability amount, or (v) the beneficiary die. 7. The RDSP mut be terminated if the beneficiary no longer ha a evere and prolonged impairment or die. CREDITOR PROOFING Creditor protection i a common term ued in etate planning. Are there way to creditor protect one aet? A recent deciion of the Supreme Court of Britih Columbia appear to call into quetion the ability of a peron to creditor protect their aet in certain circumtance. A corporation owned approximately $19 million of aet on September 30, 2005, the day it became a general partner of a high rik car leaing partnerhip. The corporation wa advied by legal counel to remove it $19 million of aet for creditor protection purpoe. Approximately one month later, the corporation entered into a erie of tranaction for the purpoe of creditor protection. A erie of tranaction were implemented whereby the corporation declared and paid a $19 million dividend to another corporation. The reult wa a conveyance of the $19 million of aet to the other corporation. 19 month later, in May, 2007, the cor- the creditor could poration filed for bankruptcy with $20 million of debt. Thee debt were a reult of loe incurred from the car leaing buine. The court found that acce the $19 million. What can you take from thi cae? You may wih to think twice before attempting to creditor protect aet from future creditor by imply conveying aet to hareholder by way of a dividend. Note that the cae i apparently under appeal and i cheduled to be heard in the fall of Legal advice i n eeded. CLEARANCE CERTIFICATE In a March 3, 2009 CRA Releae, CRA note that a legal repreentative can be held liable for tax amount that the deceaed peron owe unle a Clearance Certificate i obtained before ditributing property. The legal repreentative may make a Clearance Certificate requet on Form TX19. FARMING 86(7) PROCEEDS FROM EASEMENT ON LAND In a December 17, 2008 External Technical Interpretation, CRA note that generally the granting of an Eaement, or a public right of way, i conidered a dipoition of property and could reult in a taxable capital gain.

5 However, CRA will accept an amount equal to the proceed from uch a dipoition a being the reaonable portion of the adjuted cot bae provided that the property expropriated i not more than 20% of the area of the total property and the compenation received i not more than 20% of the adjuted cot bae of the property. LAND PARTITION In a January 21, 2009 External Technical Interpretation, note thatc RA two parcel of farmland, which each have the name of two brother on title, can be partitioned o that only one name will remain on each parcel without any tax conequence. However, the ubdiviion mut occur in the coure of a partition and each parcel ha the ame value. GST/HST 86(8) CHARITIES CRA Guide RC4082 provide GST/HST information for charitie. NON-PROFIT ORGANIZATIONS CRA Guide RC4081 provide GST/HST Information for Non-Profit Organization. RESIDENTIAL CARE FACILITY CRA Guide GI-050 explain the new election that can be filed uing Form GST119 a it relate to builder-operator of reidential care facilitie. NEW RESIDENTIAL RENTAL PROPERTY REBATE CRA Guide RC4231 provide information on claiming the GST/HST New Reidential Rental Property Rebate. The Guide provide information for landlord of new reidential rental propertie on the rebate and how to complete the Form FEDERAL BUDGET, DIRECT SELLERS On January 27, 2009, the Federal Budget propoed meaure to implify the operation of GST/HST for peron in the direct elling indutry (i.e., network eller) who ell their product directly to conumer through a network of commiioned-baed ale repreentative. Thee propoed meaure will apply in repect of fical year that begin on or after January 1, DID YOU KNOW... 86(9) RECORDS OF IMPORTERS Canada Border Service Agency Memorandum D provide information concerning the record that mut be maintained by importer. The Releae dicue imaged and microfilm record, electronic data proce record, and having record available for inpection and delivery. IMPORTATION OF VEHICLES Memorandum D provide information on the importation of a vehicle. ECO ENERGY RETROFIT PROGRAM Effective January 1, 2008, you may be able to retrofit a home and qualify for a grant (including mobile home on a foundation and low-rie multi-unit reidential building (MURB)). For detail, do a Google earch on Eco Energy. BANKRUPTCY, INSOLVENCY, FINANCIAL DIFFICULTY A financially ditreed corporation may iue ditre preferred hare in exchange for exiting debt uch that the payment on the hare are in the form of dividend, which are not deductible to the payor and are not taxable to the financial intitution. Therefore, the interet rate i exchanged for a lower non-taxable/deductible dividend rate. The preceding information i for educational purpoe only. A it i impoible to include all ituation, circumtance and exception in a commentary uch a thi, a further review hould be done. Every effort ha been made to enure the accuracy of the information contained in thi commentary. However, becaue of the nature of the ubject, no peron or firm involved in the ditribution or preparation of thi commentary accept any liability for it content or ue.