Cash for gold not necessarily exempt from tax

October 31, 2009 by Dan White.

The government wants tax whereever possible. There is the never ending hunt for money by the  Canada Revenue Agency… As a result a lot of Canadians finding themselves with tax problems. To avoid being in trouble and need soltutions, be sure you know what is taxable and what is not.

If you are invited to a gold party, or you sell your gold at Cash Converters, be sure to be aware how to handle this in your bookeeping.

Cash for gold not necessarily exempt from tax

Here is another great article by amie Golombeck, writing for hte Gazette.

It is interesting that if you buy gold jewelery (excluding gold coins) and the adjusted tax base is less than $1,000 and you sell it for less than $1,000 then it is tax free.  However if either is over $1,000, then you have a capital gain or loss to claim on your tax return.

So… so long as you don’t make a business of buying and selling gold jewelery, and other listed personal property, it is a good way to come up with either tax free or low tax dollars.

Interesting,,, eh?

Dan White

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Jewellery sales can result in capital gains

By JAMIE G OLOMBEK, The GazetteOctober 31, 2009

It seems everywhere you look, there is someone lining up to buy all that unwanted gold you’ve been hoarding. It started last year with the pawn shops and jewellery stores, some of which have taken to running non-stop TV ads in local markets depicting smiling owners and customers excitingly waving stacks of cash.

No doubt the meteoric rise in the price of gold over the past year, which hit a record high this month, topping US$1,064 an ounce, has prompted people to consider turning their unworn gold jeweller y into cold hard cash.

Last week, I was invited to my first cash-for-gold party, to which partygoers are asked to bring their unwanted gold for a free no-obligation appraisal.

These “parties” are promoted as win-win-win: The buyer gets the gold, the seller gets cash and the host collects up to 10% of the total transaction value that night.

If this sounds tempt - ing, consider the tax consequences of selling your gold for cash. Here’s a quick review of the rules: While a coin dealer who purchases gold coins from an individual has an obligation to report the sale to the Canada Revenue Agency and issue a T5008 tax slip to the seller, there is no such reporting requirement for gold jewellery. The seller, on the other hand, may have an obligation to declare any gains from the sale of jewellery on her tax return since jewellery is considered “listed personal property” (LPP).

LPP is a special category of personal-use property, meaning items you own for your personal use and enjoyment, such as furniture, cars or boats.

While most personal-use property depreciates over time, LPP usually increases in value over time. Listed personal property includes jewellery, works of art, rare books, stamps and coins.

The sale of personal-use property, including LPP such as jewellery, can result in a capital gain, but it’s calc ulated based on special rules. Under these rules, if the amount you paid your adjusted cost base, or ACB) is less than $1,000, it’s deemed to be $1,000 for tax purposes.

Similarly, if the cash you receive for your jewellery is less than $1,000, your proceeds of disposition for tax purposes are considered to be $1,000.

The practical result of these rules is that if both the ACB and the cash you receive for your gold jewellery are less than $1,000, you don’t have to report any gain or loss.

A capital gain from the sale of jewellery must be reported on Schedule 3 of your personal tax return.

A capital loss, however, is considered to be an “LPP loss,” which can only be deducted against other LPP gains. Any unused LPP losses can be carried back three years or carried forward for seven years.

Financial Post Jamie.Golombek@cibc.com

Jamie Golombek, CA, CPA, CFP, CLU, TEP, is the managing director of tax and estate planning with CIBC Private Wealth Management in Toronto.

tax These ‘parties’ are promoted as win-win-win
© Copyright (c) The Montreal Gazette

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Tax Problems with CRA and Possible Solutions to GST Collections.

October 30, 2009 by Dan White.

Canada Court Says Sales Taxes Are Ordinary Claims in Bankruptcy

See COMMENTS below…

Oct. 30 The Supreme Court of Canada rulsed that Canada’s federal and provincial governments can’t skip ahead of other creditors in a bankruptcy to retrieve sales taxes the company had collected, Canada’s highest court ruled today.

The Canadian and Quebec governments argued the tax money was simply collected and held on their behalf, putting their claim ahead of other creditors in the bankruptcy, according to the ruling. Bankruptcy trustees said governments should be considered “unsecured creditors” and ranked accordingly.

The Supreme Court ruled unanimously, in a decision written by Judge Louis LeBel, that the country’s bankruptcy legislation calls for sales-tax trusts to disappear once companies become insolvent. As a result, sales taxes can’t be separated from other assets and governments have no priority over other creditors, the court said.

“When a supplier goes bankrupt, the tax authorities do not own Goods and Services Tax and Quebec Sales Tax amounts that have been collected but not remitted or are collectible at the time of the bankruptcy,” LeBel wrote. “Instead, they have an unsecured claim against the supplier.”

The case is Quebec (Revenue) v. Caisse populaire Desjardins de Montmagny, 32486, 32489, 32492, Supreme Court of Canada (Ottawa)

COMMENTS;
Well! does this ever bring up an issue regarding GST……. Considered a crown debt… as the money is held in trust for the crown. It makes me wonder if CRA really has the right to take this approach, when they take their normal position, that “before you can dispute the debt, you have to make arrangements to pay the debt…..hmmmmm…. we will have to ponder on this.

Dan White

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Get ready for 1,500 new HST tax collectors in 2010

October 30, 2009 by Dan White.

One third of Ontario Ministry of Revenue jobs in Oshawa to be affected by harmonized sales tax

So what we have here is a situation, where workers from Ontario Retail Sales Tax workers will migrate to HST. This will mean an increased assult on small business as the drive to collect more tax gains momentum.

If you think that you can avoid the tax problems that will need solutions, then you are putting your head in the sand. All small businesses must start doing audit ready bookkeeping. Dealing with CRA will become part of your regular business activities.

We are working hard to get our audit ready bookkeeping software to market and it is very close now. We have reinvented accounting and are proud of the solutions that we offer.

Dan White

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OSHAWA — Ontario’s revenue minister, John Wilkinson, right, spoke with Ron Bordessa, president of UOIT, October 14 during a talk with the Greater Oshawa Chamber of Commerce and business owners at the Holiday Inn in Oshawa. October 14, 2009

Ministry of Revenue offices in Ontario
Employees from 13 different locations will be affected by the sales harmonization tax:

Feds want ‘first crack’ at workers laid off by tax changes

Oct 30, 2009 - 04:30 AM

By Melissa Mancini of DurhamRegion.com

OSHAWA — Harmonizing the sales tax will affect about a third of the Ontario Ministry of Revenue positions in Oshawa.

But the Minister of Revenue said the Province is working closely with the two unions that represent affected workers.

And the good news is there is already an interested employer, Ontario Revenue Minister John Wilkinson said. The feds want “first crack” at the provincial workers affected by the policy change to work in Canadian Border Services Agency and the Canada Revenue Agency.

“The federal government is quite keen on our people because of their skill sets,” he said when he addressed the Greater Oshawa Chamber of Commerce on Wednesday.

There will be 1,271 full-time equivalent positions affected once the GST and PST become one federally administered tax. This is expected to affect 1,500 provincial employees in 13 revenue offices across the province.

The harmonized sales tax is set to be implemented on July 1, 2010.

News there might be fewer people working downtown is unfortunate but it’s hard to say whether it will affect small businesses in the downtown core, said Vivian Sled, office administrator, downtown Oshawa BIA.

“It’s too bad this is going to happen,” she said. “Downtown jobs are feet on the street and bums in the seats.”

But with the courthouse opening and a larger university presence possible, downtown restaurants will probably still have a busy lunch rush, she said.

And last time there were jobs taken out of the Ontario Ministry of Revenue’s downtown offices, Ms. Sled said the concern that it would mean fewer sales in retail shops and fewer patrons in coffee shops wasn’t warranted.

“We didn’t really see a drop,” she said. “There was a panic but it didn’t seem to affect us.”

In an interview, Oshawa Mayor John Gray said the possibility of job losses in the City “is wrong.

“Oshawa has seen its fair share of job losses. We don’t want to see any more job losses,” Mayor Gray said. “Here we are trying to revitalize our downtown.”

About 1,400 people work at the ministry office in Oshawa, he noted, and he doubted many of those who will be impacted would get jobs with the federal government.

“They probably won’t get jobs at the federal level and they’ll find themselves out on the street,” Mayor Gray stated.

Union officials could not be reached by press time.

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Audit Ready Bookkeeping is a requirement if you intend to sell a business.

October 29, 2009 by Dan White.

Audit Ready Bookkeeping is a requirement if you intend to sell a business.

If you are buying or selling a business, you need to consider audit ready accounting. There are a ton of tax problems requiring solutions that most small businesses are yet to become aware of.

To be a business in Canada today means that you better understand that not doing proper bookkeeping is not an option. You will learn to keep an audit ready set of books or you will pay a greater price for not doing it than what you thought you were saving by going on the cheap and lazy plan.

If you are a sloppy bookkeeper, sooner or later, you will find yourself with a tax audit problem and you will be in the audit emergency room. You will be deal with a CRA Panic Attack.  (CRAPA).

Times have changed and bookkeeping programs like QuickBooks and Simply Accounting can leave you vulnerable to an expensive version of an audit, instead of a slam dunk, non event. These types of accounting packages are not audit ready. That means that they are just not good enough for the current tactics of CRA.

The old generally accepted ways of doing things is no longer adequate. You need to understand that there are so many new laws that no reasonable business person could ever hope to be aware of them all. Ignorance of the law is no excuse for breaking it. What that means is that you have to get in the habit of practicing due diligence in everything you do in business.

You also need to understand that conventional accounting may not be the best way to do things.

If you hope to sell your business, having an audit ready set of books will increase the value of your business in direct relationship to the worst case tax liability risk.

Consider how important filing on time is in relationship to “Stature Barred” dates.

Statute barred, in Canada means that Canada Revenue Agency (”CRA”) cannot audit those years unless they find gross misrepresentation or fraud.  If they are unable to find this, then they cannot audit those years after they become statute barred.

Tax returns become statue barred three years from the date on the notice of assessment. Therefore a business owner is vulnerable for that time frame. This logically is a serious factor when someone buys an existing business.

If the business owner filed the returns late and CRA audits the years that were under the ownership of the old owner, this makes the new owner vulnerable to penalties and interest.  CRA will assess late filing penalties and also could assess you with penalties for wilful deceit and gross misrepresentation

GST is considered a Crown Debt and CRA shows no mercy when it comes to collections of GST. If there was money was not paid for GST owing or payroll taxes prior to your ownership, it is possible that CRA will seize your bank account to cover past debts that were generated prior to your ownership of the business.

CRA is at an unprecedented level of mean aggression, so small business needs to beware of this fact. A new business owner is a prime target for the past practices of the old business owner.

Because when a business is sold the prior years can be challenged, it means that the new buyer may want to think about whether he wants to buy the assets instead of the shares of the business.

In the buy sell agreement, it may say that the old owner is responsible for taxes but what about the penalties and interest and if they decide to challenge the assessment who covers this expense? For example if a business is assessed deemed income that was not reported, you can challenge the CRA position however if it is a GST debt then you must pay the tax first then make your objection later.  Don’t count on the previous owner easily agreeing to cough up doe…. They may be unwilling or unable to pay, a factor that leaves the new owner on the hook for the bill.

If the company for sale has a poor set of books or unfiled tax returns, a wise buyer will take tax liability into serious consideration. They should look at a hold back on final payment pending tax returns being statute barred.

Posted in Bookkeeping and Accounting, Tax Topics | Print | No Comments »

ebay sellers…. being hunted down by CRA…. they need a good strategy to avoid serious problems.

October 23, 2009 by Dan White.

 

Revenue Canada steps up hunt for eBay tax dodgers

This is bad news for people who thought that eBay income was tax free.
This is good news for Tax Audit Solutions, because they have a strategy to absolutely minimize the damages.

CRA is desperate for money, and are leaving no stones unturned.

(I have to insert a joke here….. A bunch of Terns… “seagulls” ate a whole bunch of marijuana seeds. There was no tern unstoned.!)

Anyway on a serious note. If you know anyone who is in some king of tax problems, let me know.

Best Regards

Dan White

and here is what CBC published on Wednesday Oct 21, 2009

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Revenue Canada steps up hunt for eBay tax dodgers

Last Updated: Wednesday, October 21, 2009 | 9:13 PM ET Comments213Recommend104

By James Fitz-Morris, CBC News

The Canada Revenue Agency is stepping up its efforts to track down eBay merchants who haven’t paid taxes on profits made from selling goods on the popular auction website.

To date, only 50 Canadian eBay merchants have come forward to pay their back taxes since July, when Revenue Minister Jean-Pierre Blackburn gave high-volume eBay sellers one last chance to pay their taxes without penalty.

Under Canadian tax law, profits on goods someone sells are considered income, no matter what the venue. A recent court decision forces eBay to hand over the names, addresses and sales records of its high-volume merchants to tax officials.

Citing privacy concerns, eBay wouldn’t reveal the number of merchant records it has sent to the CRA, but did confirm it’s in the thousands.

The company says it informed its users ahead of time that their records were being passed on to tax authorities.

The revenue agency told CBC News it received 9,939 files from eBay. So far, the federal agency says it has processed only nine of the proactive voluntary disclosures and that those nine represent about $275,000 in previously undeclared income.

Audits launched

The agency also says it has begun launching audits of merchants whose names were released by eBay but have not come forward.

High-volume sellers, according to the court order, are those who made at least $20,000 and had 24 sales in one year or who made more than $100,000 in a year, regardless of the number of transactions.

EBay Canada began providing the revenue agency with information and sales records last November.

The move followed a Court of Appeal decision in April 2008 that upheld a Federal Court judgment requiring eBay Canada to provide tax officials with full account information on sellers.

If an individual or business does not comply with Canadian tax laws, they may be forced to pay any outstanding taxes, plus interest, and could face fines and other sanctions.

Taxpayers who came forward under the voluntary disclosures program will not be penalized or prosecuted if they make a full disclosure before the revenue agency starts any audit or compliance action.

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GST/RST to HST is going to be a nightmare of bookkeeping.

October 21, 2009 by Dan White.

 Ontario announces HST transition rules

Well, Our government has done it again, they have taken a good thing and turned it into a problem for business. This change is going to be a nightmare for record keepers. There are going to be a lot of tax problems created.

Let’s take a look here. the transition is in the middle of the year. We are doing PST for a half year. We are doing RST for a half year and we are doing HST for a half year. We have two types of accounting; accrual and cash, both need to be adjusted to suit the change. The tax returns will be now much more complicated to do … all for one freaking year….. then it will get easier. So what we have is tax problems needing soluitons for just one year.

As you know we are soon to release our new LazyBooks accounting software. So in order to simplify our clients bookkeeping, we are building transition software into the program. The lofty goal is to have this so our clients don’t have to do much more than a few clicks of a mouse to make the transition. The software will need to have date sensitive logic, which will have the ability to activate the tracking process on January 1st 2010. It will have to track and adust for numerous anomolies.

Any business that uses the industry standard accounting packages is going to have some very interesting problems. And just try and do the tax returns for 2010! Ha! this will be a tax time fiasco.

This transition to HST should have just been a cut bait. Stop the clock on December 31 2009. Start 2010 collecting HST. Do a one time accrual adjustment and Bob’s your uncle.

Somehow we have a government that is completely out of touch with reality. Show me a small business and I will show you a business that does not have the time or resources to deal with this kind of tax complexity.

While I love the HST in principle, I really frown on how this is being implemented. Not to mention, that we should be having a HST rate of less tahn 13%, simply because the transiton to HST should not be used as a tax cash grab by the government.

When this is all over and we go into the year 2011 the transition will just be a bad memory of a government gone completely Tax wild.

Herein … following… is Osler Hoskin &Harcourt LLP’s version of the new transition rules.

 Dan White

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Osler Hoskin & Harcourt LLP

D’Arcy Schieman

Canada
October 15 2009
Osler Hoskin & Harcourt LLP logo

Today, the Ontario and British Columbia governments each released “General Transition Rules” for the Ontario and B.C. Harmonized Sales Tax (HST). We view this development as a positive step towards a truly national HST, with consistency between the provinces and a reduction in the potential for double tax and tax preferences that have historically plagued businesses operating in multiple provinces within Canada. We await similar commitments from Saskatchewan, Manitoba and Prince Edward Island, as well as Québec’s final move from the nearly-parallel Québec Sales Tax. We anticipate that all of this will occur, particularly with some financial encouragement from the federal government.

This Update focuses on the General Transition Rules released by the Ontario government (Ontario Rules). The General Transition Rules for B.C. largely parallel those for Ontario. A member of the Osler Commodity Tax team would be pleased to discuss particular differences between the rules for these two jurisdictions.

I. Introduction of Hst

As announced in the 2009 Ontario Budget, the new HST will generally apply to the provision of goods and services in the same manner as GST currently applies. That means that property and services that are currently subject to the 5% GST will now generally be subject to the 13% HST. For those businesses that are currently permitted to claim input tax credits in respect of GST paid on their expenses, the HST will represent a significant cost savings over the existing Retail Sales Tax (RST). No credit was available for RST paid on taxable goods and services, whereas a full input tax credit will now be available for HST paid on taxable goods and services.

As we noted in the Osler Update of April 1, 2009 which was released at the time of the Ontario Budget, many of the most important details that will affect businesses, such as transitional rules, were not announced in the Budget. Instead, the Ontario government stated at that time that the transitional rules would be introduced subsequently, after input from an Implementation Panel that would be established to assist with the transition to the HST. Those transition rules (i.e., Ontario Rules) were announced today The Ontario Rules relate to both transitional rules for the HST that will be proposed to be enacted in the federal Excise Tax Act (ETA) and provincial measures that will be proposed to be enacted to wind down the applicable provisions of the Ontario Retail Sales Tax Act (RSTA).

In particular, the transitional rules provide guidance in determining which tax - the existing RST or the Ontario component of the HST - will apply to transactions that straddle the July 1, 2010 implementation date for the HST.

The following dates are significant under the Ontario Rules:

* July 1, 2010 - Implementation date for the HST:
* May 1, 2010 - The HST will generally apply to consideration that becomes due, or is paid without having become due, on or after this date for supplies made on or after July 1, 2010;
* October 14, 2009 - The HST will not apply to consideration that becomes due, or is paid without having become due, on or before October 14, 2009. Certain businesses and public service bodies may be required to self-assess the Ontario component of the HST on consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010 for property and services provided on or after July 1, 2010;
* October 31, 2010 - Any outstanding RST will become payable by this date.

II. Introduction of transition rules under the ETA

The Ontario Rules contemplate triggering HST on goods, services, intangibles and leases by reference to both the date of the particular supply and the date on which consideration is due or paid.

Tangible Personal Property

Date of Delivery and Ownership

The HST will generally apply to a supply of goods by way of sale to the extent that the goods are delivered, and ownership of the goods is transferred, to the recipient of the supply on or after July 1, 2010.

Consideration Due or Paid On or After July 1, 2010

The HST will generally apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.

Consideration Due or Paid On or After May 1, 2010 and Before July 2010

The HST will generally apply to consideration that becomes due, or is paid without having become due, on or after May 1, 2010 and before July 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.

Consideration Due or Paid After October 14, 2009 and Before May 2010

Persons who are not consumers - such as businesses and public service bodies - may be required to self-assess the Ontario component of the HST on consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.

The requirement to self-assess HST will generally apply only to:

* selected listed financial institutions;
* non-consumers acquiring property or services for consumption, use or supply otherwise than exclusively in the course of their commercial activities;
* non-consumers acquiring property or services for consumption, use or supply exclusively in the course of their commercial activities but in circumstances where the property or services will be subject to an input tax credit restriction or recapture; and
* non-consumers that use simplified procedures available under the ETA for calculating their net tax (e.g., public service bodies).

A person who is required to self-assess in these circumstances (Self-Assessor) will be required to account for the tax either:

1. in its GST/HST return for the reporting period that includes July 1, 2010, if the due date for that return is before November 2010, or
2. in any other case, in prescribed form and before November 2010.

Services

The HST will generally apply to a supply of a service to the extent that the service is performed on or after July 1, 2010. The HST will generally not apply, however, to a supply of a service if all or substantially all (90% or more) of the service is performed before July 2010. The rules described above for tangible personal property, determining tax by reference to the date on which consideration is due or paid, will with appropriate modifications generally be applied to the provision of services. There are also specific transitional rules for funeral and cemetery services, passenger transportation services and freight transportation services, which we would be pleased to discuss with interested parties.

Leases and Licences

The HST will generally apply to a supply of property by way of lease, licence or similar arrangement (including commercial leases and non-residential rental property) for the part of a lease interval that occurs on or after July 1, 2010. The HST will not, however, apply to a supply of property by way of lease, licence or similar arrangement if the lease interval begins before July 2010 and ends before July 31, 2010. The rules described above for tangible personal property, determining tax by reference to the date on which consideration is due or paid will, with appropriate modifications, generally be applied to the provision of leases and licences.

Intangible Personal Property

The HST will generally apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for a supply of intangible personal property by way of sale. There are also specific transitional rules for memberships, admissions and passenger transportation passes. We would be pleased to discuss these rules with interested parties.

Real Property (Other than Residential Housing)

The HST will generally apply to a supply of real property (other than residential housing) by way of sale in Ontario if both ownership and possession of the property are transferred to the purchaser on or after July 1, 2010. Detailed rules regarding the transitional rules for new residential housing are described in the Ontario Government’s Information Notice No. 2, which was issued on June 18, 2009.

Property and Services Brought into Ontario from Other Provinces

The Ontario component of the HST will generally not apply to property and services that are brought into Ontario if they are acquired by a GST/HST registrant for consumption, use or supply exclusively in the course of its commercial activities.

If a person is not engaged in commercial activities, specific rules apply. The Ontario component of the HST will generally apply on a self-assessment basis to goods that are brought into Ontario on or after July 1, 2010, and to such property that is brought into Ontario before July 2010 by a carrier where the property is delivered in Ontario to a consignee on or after July 1, 2010.

The Ontario component of the HST will also generally apply to consideration that becomes due, or is paid without having become due, after October 14, 2009 for the part of a service performed on or after July 1, 2010 (unless 90% or more of the service is performed before July 2010), if the service is supplied in a non-participating province to a resident of Ontario who acquires the service for consumption, use or supply primarily in the participating provinces. Consideration that becomes due, or is paid without having become due, after October 14, 2009 and before July 2010 for a supply of such a service will be deemed to become due on, and not to have been paid before, July 1, 2010. For consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010, this rule will only apply to non-consumers.

The Ontario component of the HST will also generally apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for intangible personal property that is supplied by way of sale in a non-participating province to a resident of Ontario who acquires the property for consumption, use or supply primarily in the participating provinces.

The Ontario component of the HST will generally apply to consideration that becomes due, or is paid without having become due, after October 14, 2009 for the part of a lease interval that occurs on or after July 1, 2010 (unless the lease interval begins before July 2010 and ends before July 31, 2010), if the lease interval is with respect to intangible personal property supplied by way of lease, license or similar arrangement in a non-participating province to a resident of Ontario who acquires the property for consumption, use or supply primarily in the participating provinces. Consideration that becomes due, or is paid without having become due, after October 14, 2009 and before July 2010 for a supply of such a property will be deemed to become due on, and not to have been paid before, July 1, 2010. For consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010, this rule will only apply to non-consumers.

Imported Goods

The Ontario component of the HST will generally apply to commercial goods brought into Ontario from a place outside Canada on or after July 1, 2010; however, commercial goods that are brought into Ontario by a GST/HST registrant for consumption, use or supply exclusively in the course of commercial activities of the registrant will not be subject to tax.

The Ontario component of the HST will generally apply to non-commercial goods that are imported by a resident of Ontario on or after July 1, 2010.

Imported Taxable Supplies of Services and Intangibles

The Ontario component of the HST will generally apply to consideration for an imported taxable supply of a service made to a resident of Ontario who acquires the service for consumption, use or supply primarily in the participating provinces, to the extent that the consideration is for the part of the service that is performed on or after July 1, 2010.

The Ontario component of the HST will generally apply to consideration for an imported taxable supply of intangible personal property that is made by way of lease, licence or similar arrangement to a resident of Ontario who acquires the property for consumption, use or supply primarily in the participating provinces, to the extent that the consideration is for the part of the lease interval that occurs on or after July 1, 2010.

Other Supplies

The Ontario Rules provide specific rules for Direct Sellers, Continuous Supplies, Combined Supplies, Budget Payment Arrangements, and Progress Payments/Holdbacks. We would be pleased to discuss these rules with interested parties.

III. Elimination of RST

General RST Wind-down Rules

On July 1, 2010, the existing Ontario RST will generally cease to apply to:

* a sale of goods where the goods are delivered, and ownership of the goods is transferred, to the purchaser on or after July 1, 2010;
* a sale of services to the extent the services are performed on or after July 1, 2010 (however, the RST will apply where all or substantially all of the service is provided before July 1, 2010);
* a supply of property by way of lease, licence or similar arrangement for the part of the lease or licence interval that is on or after July 1, 2010 (however, the RST will apply if the lease interval begins before July 1, 2010 and ends before July 31, 2010);
* a sale of property or a service delivered or performed on a continuous basis by means of a wire, pipeline or similar conduit or satellite or other telecommunications facility to the extent the property or service is delivered, performed or made available on or after July 1, 2010;
* goods brought into Ontario or imported by a resident of Ontario on or after July 1, 2010; and
* a sale of an admission for entry to a place of amusement on or after July 1, 2010. Notwithstanding these general RST wind-down rules, the RSTA will apply where consideration for a sale of goods, services or admissions becomes due or is paid:
* on or before October 14, 2009; or
* after October 14, 2009 and before May 1, 2010, except with respect to:

1. goods, services or admissions purchased for use exclusively in the course of commercial activities; or
2. goods, services or admissions for which the self-assessment rules in respect of consideration due or paid after October 14, 2009 and before May 1, 2010 will apply.

Any applicable RST not otherwise payable on or before October 31, 2010 will become payable on October 31, 2010.

Final RST Returns

Final RST returns will generally be required to be filed with the Ontario Ministry of Revenue on or before July 23, 2010.

Where an amount is collected or becomes payable as (or on account of) RST after June 30, 2010, the vendor will be required to account for that amount in a supplemental RST return to be filed on or before the 23rd day of the following month. All supplemental RST returns will be required to be filed no later than November 23, 2010.

RST Refunds and Rebates

Generally, refunds and rebates of RST will remain available until the earlier of the expiration of the existing time limits or June 30, 2014. The following exception will be provided where a person purchases property that is subject to RST before July 1, 2010, but returns it on or after July 1, 2010 and before November 1, 2010:

* if the property is returned and a full refund is given, the RST will be refunded;
* if an exchange is made resulting in neither a refund nor an additional payment, there will be no RST refund and the Ontario component of the HST will not be payable;
* if an exchange is made resulting in a partial refund, the Ontario component of the HST will generally not be payable on the replacement property and the purchaser will be entitled to recover the RST applicable to the amount refunded; and
* if an exchange is made resulting in an additional payment, no RST will apply but the HST will apply to the additional payment.

If the RST did not apply to property that was purchased before July 1, 2010, and it is exchanged on or after July 1, 2010, the Ontario component of the HST will apply to the full consideration for the replacement property.

If property is returned on or after November 1, 2010, no RST adjustments will be available at the point of sale. However, the purchaser may make an application for a refund of RST for tax paid in error.

Assessments, Objections, Appeals and Enforcement

Assessment, objection, appeal and enforcement provisions under the RSTA will generally apply to past transactions where the applicable limitation periods have not expired.

Transitional RST Inventory Rebate for Residential Real Property Contracts

An RST rebate will be available to provide relief with respect to the RST embedded in construction materials used in residential real property contracts that are subject to the HST.

This rebate will be available to a real property contractor for the RST paid on construction materials that are purchased or produced for the contractor’s own use, held in inventory at the end of the day on June 30, 2010 and used in a residential real property contract to which the HST will apply. The rebate will not be available with respect to inventory for which the RST is otherwise recoverable by the contractor or any other party.

IV. Development of HST legislation and policy

Further specific transitional rules are expected to be announced over the coming months. Osler’s Commodity Tax team has significant experience working with provincial and federal officials in connection with the development of legislation and policy. We would be pleased to speak with interested parties about the further implementation of the HST.

Posted in HST Into, Tax Topics, Tax Tips | Print | No Comments »

CRA caught misinterpreting the law, again.

October 8, 2009 by Dan White.

The key point to understand is how CRA likes to interpret things in their favour.
The court here points out that more than 5 employees does not mean at least 6 employees. That is not what the law says.
If you consider that 5 full time employess and one part time employee is not the same as at least 6 employees and could have a huge tax consequence on the taxpayer.
In this case it could mean that an individual having an offshore corporation, could suddenly find themselves disallowed for a huge tax deduction.
I am glad the courts are there to keep CRA in line.
Dan White

Canada: How The CRA’s New Assessing Position Can Reduce Your FAPI

08 October 2009
Article by Soraya M. Jamal and Robert W. Nearing of McCarthy Tétrault LLP

The Income Tax Act (Canada) contains a foreign accrual property income (FAPI) regime that imputes “passive income” earned by a non-resident corporation (a controlled foreign affiliate) to its Canadian-resident controlling shareholders on an annual accrual basis, whether or not such income is distributed to the non-resident corporation’s shareholders. Passive income earned by a controlled foreign affiliate includes income derived from an “investment business.” Generally, an “investment business” will be any business that is carried on in a taxation year by a controlled foreign affiliate, the principal purpose of which is to derive income from property and other specified sources. However, such a business will not be an “investment business” if it can be established that ─ amongst other things ─ the controlled foreign affiliate, throughout the period during which the business is carried on, employs “more than five employees full time” (or the equivalent thereof provided by related corporations, certain members of partnerships, and, pursuant to a recent amendment, certain shareholders, corporations and partnerships) in the active conduct of the business.

Historically, the Canada Revenue Agency’s (CRA) assessing practice has been to treat any business with less than six full-time employees and whose principal purpose is to derive “income from property” as an investment business.1 The basis for the CRA’s assessing practice was a number of cases that interpreted the phrase “more than five full-time employees,” as used in connection with the small business deduction for Canadian corporations.2

Recently, however, the CRA has confirmed that it is changing its assessing practice for purposes of the FAPI regime3 such that a controlled foreign affiliate will now meet the “more than five full-time employees” exclusion in the investment business definition where the controlled foreign affiliate employs five full-time employees and one part-time employee in the active conduct of the business.4 Consequently, a Canadian shareholder of a controlled foreign affiliate that employs five full-time employees and one part-time employee in the active conduct of its business will not be subject to FAPI imputation, provided other requirements are satisfied.

This change to the CRA’s assessing practice was prompted by the recent Tax Court of Canada decision in 489599 B.C. Ltd. v. The Queen.5 In this case, the issue to be determined was whether a taxpayer satisfied the “more than five full-time employees” requirement at a time when it employed five full-time employees and two part-time employees. The Tax Court of Canada concluded that the expression “more than five full-time employees” can be satisfied with the employment of five full-time employees and one part-time employee.

In reaching this conclusion, the Tax Court declined to follow the Federal Court Trial Division’s decision in Hughes & Co. Holdings Ltd. v. The Queen,6 wherein the Federal Court held that “more than five full-time employees” means at least six full-time employees. Notwithstanding that the Hughes decision has been followed in other cases, the Tax Court’s view in 489599 B.C. Ltd. was that the Hughes case was incorrectly decided because the Federal Court had relied on irrelevant precedents, adopted a method of statutory interpretation that was inconsistent with that established by the Supreme Court of Canada, and misinterpreted Parliament’s intention with respect to the language used in the expression. Furthermore, the Tax Court found that it was not bound by the Hughes decision as the Federal Court’s interpretation of the expression was obiter. In finding that the phrase “more than five” should not be equated as meaning “at least six,” the Tax Court stated that had Parliament intended the provision in question to apply only to those businesses that employ at least six full-time employees, Parliament would have used such language.

Consequently, taxpayers who have imputed FAPI based on the CRA’s past assessing practice should consider filing amendments to past returns based on the CRA’s assessing practice.

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Tax Audit Solution to disposition to worthless shares.

October 8, 2009 by Dan White.

How to get rid of worthless shares.

No matter what you do when it comes to taxes, you will get into trouble if you don’t keep a proper paper trail. Don’t count on the CRA help desk to keep you out of trouble.

When it comes to getting rid of worthless shares, but the shares still exist in the market… you could find yourself with tax problems if you ever get audited. An audit is a process where CRA works to disallow as many expenses and losses as possible. The best Tax Audit Solution is to be prepared ahead of time. An audit ready paper trail is the answer. Don’t get into tax problems because you did not take the time to do things right in the first place.

If your share dispostion is not covered under the Income Tax Act which spells out the circumstances under which you can report the value of certain shares as zero, and claim a capital loss for the full amount that you paid for them.

You need to get rid of the shares and have a paper trail to prove it.  A simple way would be to write up an agreement of purchase and sale to someone at non arms length, e.g. a friend or family member. Transfer the shares to them, write a cheque for a buck, and Bob’s your uncle.

Dan White

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CRA foiled in Tax Grab.

October 4, 2009 by Dan White.

CRA foiled in Tax Grab.

Alberta Power foils the tax man who tried to claim that the sale of an asset was “income” but fortunately Alberta Power had the financial strength to fight CRA in Tax Court and justice prevailed.

Alberta Power (2000) Ltd. (Alberta Power), a subsidiary of ATCO Ltd. (ATCO), has received confirmation from the Tax Court of Canada ordering Canada Revenue Agency (CRA) to reverse its 2006 reassessment of Alberta Power’s 2001 tax return.

The impact of the judgment is a $13.7 million recovery of income tax and related interest expense reassessed by CRA in 2006. In addition, Alberta Power will receive interest income of approximately $3.1 million earned on such amounts paid to CRA. These adjustments will result in a $8.8 million increase in ATCO earnings after non-controlling interests. CRA will be required to refund to Alberta Power approximately $28.0 million including interest and net of consequential adjustments to other taxation years arising from the judgment.

The reassessment treated the proceeds received from the sale of the H.R. Milner generating plant to the Alberta Balancing Pool as income rather than as a sale of an asset. Alberta Power successfully argued that its treatment of the proceeds as a capital receipt was correct.

Dan White

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Big Brother will cause a lot of tax problems for Canadians… example of what we are up against.

October 3, 2009 by Dan White.

This is typical of our government attitude. We are quickly becoming a country where we elect our dictatiors. It is really quite disgusting.

Read on to see what Peter Hilier has to say about this issue.

Dan White

OPINION: What you don’t know about lawful access By:  Peter J. Hillier  On: 01 Oct 2009 For: Network World Canada Creator

The Investigative Powers for the 21st Century Act creates too much opportunity for abuse by intelligence and security organizations.

Why telecom carriers are naïve about the Technical Assisatnce for Law Enformcent in the 21st Century Act

The Government of Canada has gone down the lawful access road on two previous occasions, prior to the introduction in June of Bills C46 and C47. The previous Liberal bills did not get past first reading due to impending elections and changes of government.

The crafters of the previous submissions had a tremendously difficult time getting the telecommunications providers on board given the investment they would be forced to make in order to provide the backbone for Big Brother without some compensation.

Bill C-46, the Investigative Powers for the 21st Century Act (IP21C) and Bill C-47, the Technical Assistance for Law Enforcement in the 21st Century Act (TALEA) aim to give Canadian law enforcement, national security agencies and other “authorities” broader powers to acquire digital evidence to support their investigations. This includes provisions to allow police access, without a warrant, to the personal information of users including names, addresses, telephone numbers, email addresses and internet protocol addresses. Bill C-46 ensures police can obtain warrants for current and historical transmission data, but also allows police to remotely activate existing tracking devices on cellphones and cars. It also included requirements for the telecommunications providers to decrypt date for production of evidence if they have the ability to do so.

In its current form, the legislation is not balanced. It creates too much opportunity for abuse by intelligence and security organizations, let alone law enforcement agencies. Where is the evidence that expanded surveillance powers they contain are essential and that each of the new investigative powers is justified?

To this end, the Bill is more reflective of an intelligence gathering legislation than it is a piece of law enforcement law. The federal Privacy Commissioner, in conjunction with her provincial counterparts, has warned the crafters of the legislation to be cautious in moving forward with the legislation as is.

Now that the appropriation bill C-47 has been split from the legislative piece, C-46, the telecommunications providers see the opportunity for the federal government to foot the bill for the implementation of technology, as well as a per request fee to respond to requests from law enforcement agencies, etc. The telecommunications providers have seemingly acquiesced to the Crown and have the attitude that it will be introduced into law sooner or later; we may as well be prepared. Ironically, they are not.

They have not yet thought through the impacts past the routine requests by law enforcement agencies to gather evidence on child exploitation, because that, after all, is the basis for the entire legislation. With that, the telecommunications providers assume if they apply a fee to each request, the municipalities and Crown will not over burden them with requests for fear of cost overruns. Given the expanded powers of this legislation, this is a terribly naïve mindset.

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Commission Sales people are treated unfairly by CRA… Taxes are about revenue, and not about fairness!

October 3, 2009 by Dan White.

The article below was written by Jamie Golombec. You just have to respect him as a writer. He “gets” it when it comes to the unfairness of the tax system.

In this article he hits the nail on the head about the unfairness of the employment expenses.

It is clear that it makes more sense to be a business than an employee if you have to pay your own expenses. Of course qualifying as a business is complex and is the biggest target market for CRA.

Dan White

No way to ski by expenses rules

Ski instructors case shows that employees are treated unfairly

Jamie Golombek, Financial Post  Published: Saturday, October 03, 2009
Related Topics

If you’re an employee, you are no doubt well aware of the discrimination imposed on you by the Income Tax Act. Compared with your self-employed neighbour, the Act severely restricts your ability to write off myriad legitimate expenses.

This unfairness came to light yet again last week when the Canada Revenue Agency responded to a question posed by a taxpayer as to whether ski equipment is deductible as an employment expense by ski instructors who earn salaries and commissions.

Under the Tax Act, an employee may only deduct “the cost of supplies that were consumed directly in the performance of the duties of … employment and that the … employee was required by the contract of employment to supply and pay for.”

CRA’s Interpretation Bulletin IT-352R2 “Employee’s Expenses, Including Work Space in Home Expenses,” discusses employment expenses and states specifically that “supplies” will “not include special clothing … worn by employees in the performance of their duties …and any types of tools.”

Since ski equipment is not a supply “consumed directly in the performance” of the job, the cost of the skis were ruled not deductible.

There are additional deductions permitted for commissioned employees who may be required to pay their own expenses and work away from an employer’s place of business, but those specifically exclude capital expenses other than for automobiles and airplanes.

Even if the ski instructors were commissioned employees, the CRA views the cost of ski equipment as a capital expense and therefore not deductible.

This inequity is not new and even reached the Supreme Court of Canada in a 2004 decision, which concluded that a broker who paid $100,000 to purchase a client list from a departing broker was not permitted to deduct any of it as an employment expense. As the Court wrote: “That employees are treated differently than taxpayers earning income from business … is not novel nor readily seen as fair … This seemingly inequitable result … is the result of the structure of the [Income Tax] Act.”

The 2006 federal budget attempted to address this inequity by introducing the non-refundable Canada Employment Credit. As Jim Flaherty, the Finance Minster, said at the time: “This new tax credit gives Canadians a break on what it costs to work, recognizing expenses for things such as home computers, uniforms and supplies.”

To claim the credit, no expenditures need actually be made. Rather, this credit is available to anyone who reports employment income. The amount for 2009, on which the credit is based, is the lower of your 2009 employment income or $1,044.

Since it is a tax credit, the actual tax savings are calculated with reference to the federal credit rate for 2009, which is 15%, equating to a maximum credit of $157.

Considering that a decent pair of boots, bindings and skis can run well over a thousand bucks, the credit is small solace to these alpine workers.

Jamie.Golombek@cibc.com-Jamie Golombek, CA, CPA, CFP, CLU, TEP is the managing director, tax and estate planning, with CIBC Private Wealth Management in Toronto.

Read more: http://www.financialpost.com/personal-finance/story.html?id=2061608#ixzz0SsJfxvOr

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FEDERAL TAX: “Individuals and Businesses Can Now Pay Their Taxes Online”-Jean-Pierre Blackburn

October 2, 2009 by Dan White.

Bit of a rant here..

I just can’t understand how we can still breath with all this smell of bull in the air.

FEDERAL TAX: “Individuals and Businesses Can Now Pay Their Taxes Online”-Jean-Pierre Blackburn

Wow! kick up your heels….. we were just dying to find an easier way to pay CRA. No way Jose!

CRA works to stream line their operation. They are equally masters of efficiency and propaganda

It is not that CRA can not find out where you bank, but don’t make it easy for them it is not in your best interest.

Dan White

By: Marketwire .
Oct. 2, 2009 10:26 AM

(See Dan White Comments below)

JONQUIERE, QUEBEC — (Marketwire) — 10/02/09 — The Honourable Jean-Pierre Blackburn, Minister of National Revenue and Minister of State (Agriculture and Agri-Food), announced the launch of a new online service at the Canada Revenue Agency (CRA).

(COMMENT: By Dan White: I guess being minister of revenue is not a full time job?)

“Taxpayers and businesses can now send payments to the Canada Revenue Agency instantly from their accounts at participating financial institutions using the new My Payment service,” said Minister Blackburn. “This new service is yet another achievement aimed at reducing the paperwork and compliance burdens for Canadians.”

(COMMENT: By Dan White: or is it about reducing the paperwork for CRA? not that I am not in favour, I just like honesty instead of propaganda)

The new My Payment service is safe and uses the existing security of your online banking services. It is also private-no sensitive tax or banking information will be shared between the CRA and a financial institution.

(COMMENT: By Dan White: I guess telling them where you bank so they can seize your account if the need be, is not sensitive?)

Minister Blackburn added that “My Payment ends the inconvenience of timing payments to arrive on the right day by mail by crediting CRA accounts at once for payment transfers. The service also ends the hassle of monitoring outstanding cheques to avoid non-sufficient-funds transactions, by only allowing payments when funds are immediately available from your account.” This service will equally benefit businesses of all sizes and individual taxpayers.

(COMMENT: By Dan White: And when what the last time Canadians said they have this problem?)

My Payment is accessed using a portal on the CRA Web site. The service lets individuals and businesses send payments electronically through a secure link with Canadian financial institutions who offer Interac® Online payment service. Currently, those institutions include the following: BMO Bank of Montreal, Scotiabank, TD Canada Trust, and RBC Royal Bank. This new service will be available on October 5, 2009.

(COMMENT: By Dan White: Now let me see…. I link onto CRA site, I connect to my bank account. hmm if this was a business, my response would be: “Are you out of your mind?”)

Transactions completed through My Payment can contain several payments for a combination of both individual and business accounts at the CRA. Payments can be made from a personal or a corporate bank account at a participating financial institution.

For more information about My Payment, or to use the service, go to www.cra.gc.ca/mypayment.

FACT SHEET

My Payment - a new service for businesses and individuals

My Payment is an electronic payment service, accessed through the CRA website, that allows individuals and businesses to send payments directly to the Canada Revenue Agency (CRA) from an account at a participating financial institution(i).

My Payment is fast and easy to use. The service is provided through Interac® Online and its many benefits include:

- Immediate payment - no accounting for the time it takes to mail a cheque.

- Safety and security - the payment is completed through your existing online banking service.

- Privacy - no personal information is exchanged between the CRA and your financial institution.

- Simplicity - payments to several CRA accounts can be made in a single transaction.

How do I use My Payment?

1. Select the My Payment option from the CRA Web site (www.cra.gc.ca/mypayment).

2. Compose your payment by listing the accounts and amounts you will be paying. You will need your account information as provided by the CRA.

3. Select the “Pay now” option and then choose your financial institution. You need to be registered for online banking with your financial institution.

4. Log in to your financial institution’s online banking with your usual login ID and password.

5. Choose an account from which to deduct your payment.

6. Confirm the payment. You will be automatically directed to a confirmation page.

7. Print or save a copy of your transaction receipt.

Is My Payment secure?

Yes. My Payment is secure for a number of reasons:

- You don’t need to enter any financial information, card numbers, or login information on the CRA site.

- The payment is completed through your existing online banking service.

- No personal information is shared between the CRA and your financial institution.

(COMMENT: By Dan White: It seems to me that the name address and location of my bank is rather personal)

To maintain security, keep your identification information confidential.

For more information, visit www.cra.gc.ca/mypayment.

(i) The following financial institutions currently offer Interac® Online as a payment option: BMO Bank of Montreal, Scotiabank, TD Canada Trust, and RBC Royal Bank.

® Trade-mark of Interac Inc. Used under licence.

Contacts:
Canada Revenue Agency
Noel Carisse
Media Relations
613-952-9184

Office of the Minister of National Revenue
and Minister of State (Agriculture and Agri-Food)
Sophie Doucet
Press Secretary
613-608-3252

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Welcome to the Registered Disability Savings Plan.

October 1, 2009 by Dan White.

 Quite interesting how there are getting to be more and more savings plans. As in most things in life, you can look at them and see the good and the bad.
Here is what is wrong with this.
You are giving the government control over more and more of your money.
Money in a government program is money where the government can change the rules at will.
And if you run into a tax problem, unlike an RRSP, CRA can just go in and take your money in the same way they take money from people’s bank accounts.
And as this is a plan where you place your AFTER TAX dollars….. you better make sure you understand just what the heck you are getting into.
For me, I love my country, I don’t trust my government.
This same government who says they don’t have to observe Canada’s laws…. eg…. charter of rights and freedoms, when they go out of the country…. It is interesting that they say we have no jourisdiction over the governments offshore policies, but they have jurisdiction over our offshore wealth.
Hmmmmm

Dan White

Registered Disability Savings Plans: A future of financial security

Wednesday, September 30th, 2009 | 11:50 am

Canwest News Service

If you or someone in your family is eligible for the Disability Tax Credit, there is a new registered savings program that you should know about: the Registered Disability Savings Plan (RDSP).

The RDSP was introduced by the Federal Government. This unique plan is designed to help Canadians to save and invest for themselves or a disabled family member in a tax-deferred environment.

“The RDSP is a welcome addition to existing government programs designed to help ensure the long-term financial security for people with disabilities,” said David Birkbeck, head of registered products strategy at Royal Bank of Canda.

Here’s what you need to know to make the most of an RDSP:

Who can qualify?

The beneficiary of an RDSP must be a resident of Canada with a Social Insurance Number, under age 60 and be eligible for the Disability Tax Credit (DTC). To qualify for the Disability Tax Credit, the individual must have a prolonged and severe impairment in physical or mental function, which is confirmed by a qualified medical practitioner and accepted by the Canada Revenue Agency (CRA).

Who can open an RDSP?

The following people can open an RDSP:

-A person with a disability, who is of the age of majority and has the legal capacity to manage his or her finances.

-The parent of a person with a disability who has not attained the age of majority.

-A guardian or other representative who is legally authorized to act on behalf of a person with a disability.

Tell me about making contributions

Contributions to an RDSP are not tax deductible, but they grow within the plan on a tax-deferred basis. There is no annual contribution limit, but there is a lifetime limit for total contributions of $200,000. Contributions can be made up until the end of the year the beneficiary turns 59.

Is there government assistance?

Contributions may be eligible for federal government matching grants (Canada Disability Savings Grant) up to $3,500 annually and the plan may be eligible for government bond amounts (Canada Disability Savings Bond) up to $1,000 annually. The money in an RDSP can be used for any purpose, as long as it is for the benefit of the plan’s beneficiary.

Within Registered Disability Savings Plans, RBC clients will have access to a wide variety of investment options including RBC Funds, RBC GICs and RBC Savings Deposits. There will be no annual administration or withdrawal fees. Clients will also have the opportunity to make regular, pre-authorized contributions.

RBC has also joined forces with Planned Lifetime Advocacy Network (PLAN), a non-profit organization which led the advocacy for the creation of the Registered Disability Savings Plan, to help educate and offer advice to Canadians. As PLAN’s preferred national RDSP provider, RBC is working closely with PLAN to assist Canadians with disabilities and their families.

For more information please visit: www.rbc.com/rdsp.

For more information on Planned Lifetime Advocacy Network (PLAN) or for more about RDSPs please visit: www.plan.ca or www.rdsp.com.

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UBS is somewhat of a false alarm…. but it is working to scare tax evaders.

October 1, 2009 by Dan White.

Windfall for CRA to the current tune of 7.6 million dollars and growing.
Some of you may know that I don’t have a lot of respect for the voluntary disclosure program because I am seeing that this can be guaranteeing your worst case scenario can really happen. VD as we have come to know it, is not that desirable. If you are not prepared for a full audit and if you don’t have all your ducks in order, you are just asking form more tax problems than you already have.

I don’t like offshore for evading tax…. I see offshore as for genuine business. If you are doing tax evasion…. it is not as simple as VD, if you are not doing tax evasion,,,,then simply don’t…. it is not a good idea…. Legal Tax Avoidence is quite another matter, but you need some serious advice to know the difference.

It also looks like the UBS deal is a great bunch of CRA propaganda to scare and bring offshore tax evaders in from the warmth to the frying pan.

Won’t you come into my parlour?, said the spider to the fly.

This is quite a situation…. read on to see wehat Gary Lamphier has to say…. very interesting reading.

Dan White

No teeth to tax watchdog’s war on cheats

CRA relies on ‘voluntary disclosures’

By Gary Lamphier, Edmonton JournalOctober 1, 2009

Back in August, I wrote a column that was highly critical of Jean-Pierre Blackburn, head of the Canada Revenue Agency.

“While the U.S. government has doggedly pursued Switzerland’s biggest bank (UBS) for helping a small army of Americans to dodge the Internal Revenue Service,” I noted, “the CRA has had zip to say about UBS’s well-publicized activities in Canada, or whether similar cases of suspected tax fraud are taking place here.”

My piece followed news of a watershed deal under which UBS agreed to cough up information on some 4,450 bank accounts held by suspected U.S. tax cheats. At one point, the accounts held $18 billion US of assets, or an average of more than $4 million each.

After years of haggling, the landmark U.S. accord finally punched a hole in the dam of Swiss bank secrecy. It followed an admission by UBS that it had taken part “in a scheme to defraud the U.S.” government by helping the bank’s rich clients evade the IRS. UBS agreed to pay a related $780-million penalty.

But let’s get back to Blackburn. My criticism of Canada’s chief tax collector seemed to hit a nerve.

After months of stony silence on the UBS issue, he suddenly emerged from his self-imposed cocoon, granting a flurry of interviews. He was also made available to me, although by then he had already stated his case to other reporters, so I declined.

In those interviews, Blackburn offered a stirring defence of his department’s plan to force UBS to spill the beans on its tax-dodging Canadian clients, just as the IRS had done with the bank’s U.S. clients.

Of course, U.S. authorities had already done much of the heavy lifting for Blackburn, helpfully identifying $5.6 billion of assets held directly by Canadians in UBS accounts in Switzerland, as far back as 2005.

The accounts were set up by UBS’s so-called “Canada Desk,” a clandestine operation of jet-hopping, suitcase bankers who bypassed the bank’s properly licensed Canadian subsidiary, directly wooing clients here in contravention of Canada’s banking laws.

Blackburn certainly talked a good game. He assured reporters the CRA was on the case, and its lawyers were ready to stare down the bankers from UBS, forcing them to disclose the names of Canadian clients.

“UBS tried to delay, but in the beginning of September, we will have a meeting between our lawyers and them to obtain that information,” he told Globe and Mail reporter Greg McArthur, who first revealed UBS’s secret Canada Desk last November.

“Is it a question of thousands of dollars or millions? I don’t know,” he said, in an apparent effort to play down the magnitude of the$5.6 billion of suspect assets already identified by U.S. authorities.

Fast-forward to Wednesday–the final day of September. In a bid to catch up on the progress of Blackburn’s campaign to lift the lid on UBS’s dubious activities in Canada, and its tax-cheating Canadian clients, I called Ottawa. Nope, the minister wasn’t available, I was told. But CRA spokeswoman Caitlin Workman gladly filled me in on the box score to date. I have to say, it’s not overly impressive.

Seems the CRA has managed to conduct just one meeting with UBS officials since Blackburn issued his declaration of war back in August. And although Workman couldn’t confirm it, the meeting was reportedly conducted by telephone, not face to face.

At present, no further meetings are scheduled, she added. She couldn’t explain why.

“It could be that we just don’t have a time yet. It doesn’t necessarily mean that there will be no more meetings, and the discussions are ongoing. But I’m just not at a point yet where I can say, ‘OK, tomorrow there’s a meeting.’ ”

In total, the CRA has received 57 “voluntary disclosures” thus far from Canadians who held accounts with UBS. “Of those 57, we have finished reviewing 20 of them. And from the 20 we’ve finished reviewing, we have assessed $7.6 million in unreported income, as of last Thursday,” she adds.

Got that? Of the $5.6 billion in reported assets secretly held by Canadian account holders at UBS in 2005–a full four years ago– the CRA has so far recovered$7.6 million of unpaid tax money. That’s a little over one-tenth of one per cent of the assets in question.

Upset yet?Hey, this gets better. For tax cheaters who hold money in such accounts, there is no legal means at present to compel them to come forward. Unless UBS discloses their names–which seems pretty unlikely–they could duck the CRA for years.

And if the cheaters do finally “come clean” half a decade from now, they won’t necessarily face any penalty for their tardiness, either.

“The minister has discretion to waive penalties for the previous 10 years,” Workman says. “For the entire period for which your (belated) disclosure is accepted, you will be free from criminal prosecution,” she adds.

“Because you’ve come forward voluntarily and been honest and above-board, even if belatedly, you won’t have the penalty owing, but will still have to pay the tax and the interest. It’s an incentive to come forward, and for the CRA, to recover that income.”

There you have it. Your tax-collection agency at work. Something tells me the lawyers for UBS and their tax-dodging clients aren’t exactly quaking in their boots.
© Copyright (c) The Edmonton Journal

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Lottery winnings could now be taxable. Only in Canada? You say.

October 1, 2009 by Dan White.

Well here we go again, another Canadian perk under attack by CRA. If you lottery winning has a skill testing question, expect CRA to check the list of winners and assess you for the winning as your income.

You can be sure this is going to happen within the next three years.

This really sucks.
I guess on the other hand… I don’t enter lotteries, so I guess this will not affect me personally.
But it will really take the wind out of a winner, to get a bill after they have spent and given away their winnings.
Dan White

*
IT-213R Prizes from lottery schemes, pool system betting and giveaway contests
o Other formats

Income Tax Interpretation Bulletin
Prizes from lottery schemes, pool system betting and giveaway contests

NO: IT-213R

DATE: October 19, 1984

SUBJECT: INCOME TAX ACT
Prizes from lottery schemes, pool system betting and giveaway contests

REFERENCE: Paragraph 40(2)(f) (also subsections 52(4), 5(1) and 9(1), and paragraph 69(1)(c))

This bulletin cancels and replaces IT-213 dated May 12, 1975. Current revisions are designated by vertical lines.

Lottery Schemes

1. The amount or value of a prize received by a taxpayer from a lottery scheme is not taxable as either a capital gain or income unless, due to the circumstances applying to the lottery scheme, the prize can be considered to be income from employment, business or property or a prize for achievement referred to in paragraph 56(1)(n).

2. While paragraph 40(2)(f) specifies that no taxable capital gain or allowable capital loss results from the disposition of a chance to win or a right to receive an amount as a prize in connection with a lottery scheme, subsection 52(4) states that for the purposes of computing any tax consequences after receiving a prize a winner in a lottery scheme is deemed to have acquired the prize at a cost equal to its fair market value at the time of acquisition.

3. A lottery has been defined as a scheme for distributing prizes by lot or chance among persons who have purchased a ticket or a right to the chance. If real skill or merit plays a part in determining the distribution of the prize the scheme is not a lottery (unless it is based essentially on chance and the degree of skill is minimal). Again, when the chances of a prize are obtained wholly gratuitously, as for instance, a prize awarded to the winner of a game, the scheme is not a lottery.

Pool System Betting

4. Paragraph 40(2)(f) also provides that no taxable capital gains or allowable capital losses arise from the disposition of a chance to win a bet or a right to receive an amount as winnings on a bet in connection with a pool system of betting referred to in section 188.1 of the Criminal Code. The nature of pool system betting is such that the only winnings are in the form of cash from the respective pool. Consequently, no additional capital gain or loss tax consequences could arise on subsequent disposition of the winnings and thus it is not necessary (as described in 2 above, in the case of a lottery) to deem the winnings to have been acquired at fair market value.

5. A “pool system” of betting is defined in the Athletic Contests and Events Pools Act as a pool system of betting on any combination of two or more professional athletic contests or events. The fact that a degree of skill is involved in the selection of the outcome of the contest or event in the pool betting distinguishes it from a lottery scheme as described in 3 above.

Other Schemes

6. Where a prize has been won otherwise than through a lottery scheme or a pool system of betting, neither paragraph 40(2)(f) nor subsection 52(4) will apply. The tax implications of receiving these other prizes will vary, depending on the following factors:

(a) When the prize has been received as a gift, it is not included in computing income at the time of receipt. However, the recipient will be deemed to have acquired the prize at its fair market value pursuant to paragraph 69(1)(c), so that a subsequent disposition of the prize will result in a capital gain on any increase in value since the time of its acquisition. A prize can be reasonably considered to be a gift from the viewpoint of the recipient, even though chance and/or skill may have been involved in the win. Ordinarily a gift is not considered to have been made until the donee has received delivery of the gift and accepted it in a completed and irreversible transaction.

(b) The prize will be received as income where it is received by virtue of the recipient’s employment pursuant to subsection 5(1) and paragraph 6(1)(a), received by virtue of the recipient’s business pursuant to subsection 9(1) or received in respect of an achievement in a field of endeavor ordinarily carried on by the recipient pursuant to paragraph 56(1)(n) (see IT-75R2).

(c) Where the prize is not received as income as described in (b) and is not a gift as described in (a), no amount will be included in income upon receipt of the prize and the provisions of paragraph 69(1)(c) will not apply. Such a situation would arise where the contestant has incurred a cost towards winning the prize such as purchasing a ticket or paying an entrance fee entitling the contestant to participation in the contest. In such a case, while there are no tax consequences resulting from receipt of the prize, any subsequent disposition of that prize may result in a capital gain or loss. In computing any such gain or loss the taxpayer’s cost of the prize will be the original cost of the ticket or entrance fee rather than the fair market value of the prize as used in (a) above.

It should be noted that where “personal use property” is involved, the $1,000 exemption contained in subsection 46(1) may eliminate any capital gains on disposition of a prize as described in (a) and (c) above.

7. In some instances, a ticket (or entrance fee) of the type described in 6(c) above entitles the holder to something in addition to a prize, for example, some entertainment value. Where, in such a case, the portion of the ticket that relates to the prize is considered insignificant in relation to the total cost of the ticket, the fact that a portion of the cost has been incurred towards the prize may be ignored and the prize will be treated as a gift to the taxpayer as described in 6(a) above.

8. Where the winner referred to in any of the paragraphs above is a syndicate, the income tax consequences to the individual members of the syndicate are the same.

9. Some examples of the manner in which the rules in 6 to 8 above apply are given in the paragraphs which follow.

Employer-promoted Contests

10. Where an employer who was accustomed to awarding employees with a bonus has provided a scheme or giveaway contest in which the bonus or some amount in lieu of a bonus is divided among the employees as prizes following a draw, the scheme would not be a lottery and the prizes are considered to be employment income under subsection 5(1). However, if the employees and their families account for only a small percentage of the participants in a scheme, are not given a favoured position in relation to the other participants and they are subject to the same contribution requirements (if any) towards the scheme as other participants, the value of any prize won by chance is not employment income but is considered a win from a lottery scheme. Therefore, paragraph 40(2)(f) and subsection 52(4) will apply. IT-470, “Employees’ Fringe Benefits - After 1980″ and Special Releases to IT-470 discuss holiday trips and other prizes.

Television and Radio Programs

11. The value of a prize or other award received by a person for being at or participating in a radio or television program is generally not included in income when the person is not party to an employment or business contract, and

(a) it is awarded through a draw because, for example, the person is in a “lucky” seat or has a certain brand of merchandise at home, even though the person may have to demonstrate some minor degree of skill or knowledge before being eligible to receive the prize, or

(b) the prizes that go to winning contestants, the consolation prizes that go to losing contestants or the merchandise gifts given to all participants are all that the person receives for appearing in the program. On the other hand, if a contract exists, such as may be the case where a professional actor, an entertainer or some other person appears on a television show as a celebrity and receives a giveaway prize or wins a prize by skill or chance for appearing or participating in a contest on the show, the prize will be subject to tax as business or employment income.

In all cases cited in this paragraph, the capital gains implications will be established on the basis of the particular circumstances in each case through application of the rules given in 6 or 7 above.

Free Tickets in Lieu of Volume Rebates or Bonuses

12. Volume bonuses or rebates from suppliers are included in computing a purchaser’s business income. However, where a supplier provides customers with free tickets for a draw for a prize with the winning ticket to be drawn strictly by chance, the prize is ordinarily considered a gift. Its value is not included in the recipient’s business income and the application of paragraph 69(1)(c) to the deemed cost of acquisition of the prize is as set out in 6 above. On the other hand, if real skill or merit is involved in the win, it will be a question of fact to be determined in accordance with the circumstances in each case whether the prize is a gift or whether its value is business income to the recipient.

Annuities as Prizes

13. Where the prize in a lottery scheme is an annuity, for the purposes of determining the amounts to be brought into income, the initial adjusted cost basis of the annuity is considered to be the fair market value of the annuity when it was acquired in accordance with subsection 52(4). Should the annuity be a prescribed annuity contract, as defined in Regulation 304, the adjusted purchase price of the annuity will be its fair market value at the time it was acquired. For prescribed annuity contracts and those other annuity contracts not subject to the accrual rules, annuity payments are brought into income under paragraph 56(1)(d) and a deduction from income is allowed under paragraph 60(a) for a portion of the adjusted purchase price as determined under Regulation 300. For other annuity contracts, which are subject to the accrual rules, the income from the annuity is determined according to the provisions of paragraph 56(1)(d.1) and section 12.2 in which the adjusted cost basis is a determining factor. In the case of the application of paragraph 56(1)(d.1) and section 12.2, the income calculation should be furnished by the issuer.

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