Barrett Tax Law successfully litigated what could be a first in Canada. Using the defence of battered women’s syndrome to show L (shortened for privacy of client) never had the opportunity to file her taxes and exercised due diligence. In the case of R v. L. a woman was charged with five counts of Failure to File under s. 238(1) of the Income Tax Act. The alleged offence is a strict liability offence with the only available defence being one of due diligence. These cases are thus very seldom found in favour of the defendant. Maximum penalty: $25,000 plus 12 months in prison. It was admitted that she was properly served by the Canada Revenue Agency and that she had never filed her taxes. The question at trial is whether the accused took all reasonable steps and was diligent in trying to file her taxes. Facts: L owned a beauty

When a vehicle is used for both personal and business purposes, it is necessary to keep a log to record the business use of the vehicle. Please see our article on keeping a vehicle log found here:   Unincorporated Business An unincorporated business may write off (deduct) all reasonable motor vehicle expenses which are on account of the business use of the vehicle. If your trip log indicates that your use of the vehicle was 30% personal, and 70% business then you will be able to deduct 70% of the vehicles expenses.   Incorporated Business An incorporated business may also write off all reasonable motor vehicle expenses. If the business provides a company vehicle to a shareholder, or employee for personal purposes, a taxable benefit will be added to their income. Contact Barrett Tax Law Today.   Expenses Allowed Motor vehicle expenses include interest on loans to purchase automobiles, capital

Income Tax Act Subsection 160 (http://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-160.html) Excise Tax Act Subsection 325 (http://laws-lois.justice.gc.ca/eng/acts/E-15/section-325.html) Subsection 160 and subsection 325 assessments are the most powerful collection tools that the Canada Revenue Agency (“CRA”) has in their bag. If someone has a tax debt, and that person transfers money, or other property, directly or indirectly to: Their spouse, common-law partner; A person under 18 years of age; or A person with whom they are not dealing at arm’s length Then the CRA will go after the person in receipt of the transfer. The CRA can, and will, assess the person who received the transfer the lesser of the tax debt owed by the person making the transfer, or the fair market value of the property that was transferred. If the person receiving the property paid an amount for it, then that goes against the amount that the CRA can assess. The usual scenario where

Income Tax Act Subsection 247 Transfer prices are the prices at which services, tangible property, and intangible property are traded across international borders between related parties. Canada’s transfer pricing legislation requires, for tax purposes, terms and conditions between related parties in their commercial or financial relations to be those that would have been expected had the parties not been related (i.e. acting at arm’s length). Example: Microsoft Canada licenses software from Microsoft US; These are related companies; and The terms and conditions of the license agreement must be similar to non-related parties. If transfer pricing legislation did not exist, then companies could use tax havens to shelter all profits made in Canada, and companies would have little to no taxes owing here in Canada. Canadian legislation requires that companies keep contemporaneous documentation related to the transfer pricing transaction. What this means is that companies must keep daily documentation about their

Income Tax Act Subsection 250(1) Canada allows its citizens to be residents of Canada for tax purposes, and non-residents of Canada for tax purposes. This is an important distinction as a non-resident of Canada for tax purposes will only be subject to Canadian taxation on Canadian sourced income. So income from sources outside of Canada is not subject to tax debit here. This is different from the United States where taxes are sought on worldwide income no matter where you reside. Tax residency is wholly separate from your status as a citizen, or a permanent resident. To determine tax residency, the Canada Revenue Agency will look at significant residential ties, and secondary ties. Significant residential ties to Canada include: A home in Canada; A spouse or common-law partner in Canada; and Dependents in Canada. Secondary residential ties that may be relevant include: Personal property in Canada, such as a car

Excise Tax Act s. 148 A small supplier is a supplier whose worldwide annual GST/HST taxable solutions are less than $30,000, or less than $50,000 for public service bodies. The supplies include zero-rated supplies, and includes the supplies of all associates. An important piece to note is that the calculation of annual revenue is not done on a calendar year basis. Rather it is done at the end of each calendar quarter. So total gross revenue for the past 4 consecutive quarters should be totaled. If this total exceeds $30,000, then the supplier must register for GST/HST.   Mandatory Registration A small supplier must register for GST/HST if they carry on a tax business in accordance with subsection 240(1.1) of the Excise Tax Act of Canada. Subsection 240(2) requires anyone who “enters Canada for the purpose of making taxable supplies of admissions in respect of a place of amusement, a

Income Tax Act subsection 125 The small business deduction is available on active business income for a Canadian Controlled Private Corporation. It provides a reduction in the corporate tax rate up to the federal limit of $500,000. What the above means is if you are earning active business income as a CCPC then your first $500,000 of net income is taxed at a reduced rate. This makes it easier to amass funds in a corporation and is a large reason many Canadians incorporate their businesses. Description Income Tax Act 2016 2017 2018 2019 Part I Tax 123(1) 38% 38% 38% 38% Federal Tax Reduction 124(1) -10% -10% -10% -10% Small Business Deduction 125(1.1) -17% -17.5% -18.5% -19% Reduced Rate 10.5% 10% 9.5% 9%   CRA Resources IT-73R6 Small Business Deduction CLICK HERE TO BOOK A CONSULTATION WITH A TAX LAWYER

Income Tax Act Subsection 110.6(1) and 110.6(2.1) In order to claim the lifetime capital gains exemption on a share sale, the shares must meet certain conditions to qualify for the special treatment. If the shares qualify, then the seller would be able to use his or her LCGE, and receive $800,000 tax-free. The rules pertaining to the shares are two-fold. One regarding their ownership, and the other regarding the use of the assets of the corporation. The shares must have been owned by the individual selling them for 24 months prior to the sale, or a person or partnership related to that individual. Newly-issued shares may be used in certain circumstances, but this type of sale must be done in accordance with subsection 110.6(14)(f). In the 24 months of prior ownership, more than 50% of the fair market value of the assets of the corporation must have been used in

Income Tax Act Subsection 110.6(1), 110.6(1.2), and 110.6(2.2) In 2015, the amount increased that a taxpayer can claim for the lifetime capital gains exemption as it relates to qualified fishing property. The amount is now $1,000,000. The definition of qualified fishing property comes from Subsection 110.6(1) of the Income Tax Act. The fishing property must be owned by an individual, the partner (spouse or common law) of the individual, or a family fishing partnership. The fishing property could be any of the following: Real or immovable property or a fishing boat that was used to fish in Canada by the same individuals that must own the property (found above); Shares of a family fishing corporation; An interest in a family fishing partnership; or Capital property used by a person or partnership that was used to fish in Canada. The rules pertaining to the shares are two-fold. One regarding their ownership,

Income Tax Act s. 40(2)(b) The benefit of the principal residence exemption is obvious. The gain is not subject to tax if the property has been the individual’s principal residence for the entire time it has been owned by that individual. When you normally sell a property, you are subject to tax on the gain from the sale. The gain is typically the difference between the price you paid, any improvements made, and the sale price. If the principal residence exemption applies to the sale, it would eliminate the capital gain and eliminate the need to report the sale on a tax return. Taxpayers should keep in mind that the exemption may only remove a portion of the capital gain. If this is the case then the sale must be reported as there will be some taxes owing.   What is a Principal Residence? A principal residence is a property