Blog Entries

Acquisition of US Real Estate

kmoody@moodystax.com — Mon, 05 Jan 2009 08:00:00 +0100

Apologies in advance ... this is lengthy and a little technical but it's a complex topic! Notwithstanding the recent weakening of the Canadian dollar, the decline in the value of US real estate may still present some attractive buying opportunities for Canadians.

The acquisition of US real estate by a Canadian resident not only has Canadian tax implications, but may also create US income, gift and estate tax consequences.

The purchase, sale, or rental of US re [...]

Merry Christmas

kmoody@moodystax.com — Mon, 22 Dec 2008 20:00:00 +0100

Merry Christmas and Best Wishes for the New Year!

What a year! I certainly don't recall a year as volatile and wild as the one that 2008 provided us. Overall, I would have to characterize it as a great year. How can you not when you are alive to breathe in the wonderful air, enjoy your family and friends, experience the natural beauty of our surroundings and enjoy our freedom. While 2008 also provided its share of volatility and financial tragedies, it also had many success stories. [...]

Non-Resident Trust and Foreign Investment Entity Legislation: Update

kmoody@moodystax.com — Mon, 15 Dec 2008 08:00:00 +0100

By Paul R. LeBreux, LLB, LLM, TEP (friend of Moodys LLP and principal of Global Tax Law Professional Corporation)

It has been almost 10 years to the day that Canada's then Minister of Finance proposed new tax measures aimed at overhauling the method for taxing "non-resident trusts" and "foreign investment entities". These new tax measures were said to be needed to combat what the government had long perceived as an abuse of the Canadian tax system. [...]

Thaw Transactions

kmoody@moodystax.com — Fri, 05 Dec 2008 08:00:00 +0100

By Nicolas Baass, LL.B., LL.M. (Tax)

As a follow-up to our November 24, 2008 blog entry regarding tax planning during uncertain times, another tool that should be considered is the so-called estate "thaw" or "refreeze." As discussed in the November 24, 2008 entry, a freeze is a powerful succession planning tool. It could possibly be made even more potent by refreezing in these uncertain times.

Those business owners, who have planned ahead and opted for an estate fre [...]

Tax Planning in Uncertain Times

kmoody@moodystax.com — Mon, 24 Nov 2008 08:00:00 +0100

Wow! What a bizarre time we have been living through recently. The stock markets have been extremely volatile. Bank failures. Large business failures. The price of oil has come down by two-thirds. Real estate values have declined. What next? If I only had the answer ....

It is during these tough economic times that it is tempting to put all tax planning on hold. However, this can provide an opportune time - never a better time - to tax effectively plan your affair [...]

Charitable Tax Shelters

kmoody@moodystax.com — Mon, 27 Oct 2008 08:00:00 +0100

Well, 'tis the Season! We are fast approaching December 31st, which is the end of the taxation year for all individuals and most trusts. Accordingly, much last minute tax planning will occur in order to ensure effective tax management. One of the most common tax planning techniques is to look at charitable donations (with gifts needing to be made on or prior to December 31, 2008 in order to be used as tax credits for individuals and most trusts for the 2008 taxation year).

Mos [...]

Subsection 256(9) - Timing Problem with Capital Gains Deduction

kmoody@moodystax.com — Wed, 22 Oct 2008 00:00:00 +0100

A very common tax savings is the capital gains deduction that can, subject to various conditions, be utilized upon the realization of a capital gain on the disposition of qualified small business corporation shares. The deduction can shelter up to a lifetime maximum of $750,000 of capital gains. However, very careful planning must be done in most cases in order to ensure that the deduction can be utilized.

One trap is subsection 256(9) of the Income Tax Act. This short provision sta [...]

Our First Anniversary!

kmoody@moodystax.com — Wed, 01 Oct 2008 00:00:00 +0100

My, how time flies! A year ago, Moodys LLP Tax Advisors opened its doors with great expectations and hoping to start the tax world on fire. Well, it certainly has been an interesting year!

The objective of opening Moodys LLP Tax Advisors was simple: to focus on what we do best – tax advisory services – and delegate the rest to other more qualified advisors. The Income Tax Act and related matters (such as cross-border advisory services, estate planning, investment advisory services [...]

Real Estate Inventory - Capital Gains vs. Income

kmoody@moodystax.com — Mon, 15 Sep 2008 00:00:00 +0100

Our July 9, 2008 blog entry on Capital Gains vs. Income highlighted the challenges that taxpayers face when dealing with dispositions of property and the tax treatment thereof. One of the more difficult issues in this area is whether or not a disposition of real estate property could be considered to be on account of income.

To the extent that real estate is considered to be inventory and not capital property, then such properties may not be transferred on a tax deferred basis to a [...]

Election Call

kmoody@moodystax.com — Tue, 09 Sep 2008 00:00:00 +0100

As many readers know, Stephen Harper and the Conservatives asked the Governor General to dissolve Parliament on September 7, 2008 and a Federal Election was called for October 14, 2008. While the pundits and the media will be working overtime for the next 34 days, what does this mean for income tax purposes?

There were a number of income tax bills before the House of Commons and the Senate. One bill in particular, Bill C-10, Income Tax Amendments Act, was before the Senate prior t [...]

US Tax Changes

kmoody@moodystax.com — Tue, 22 Jul 2008 00:00:00 +0100

As most readers know, Canada’s system of taxation is one that will tax based upon residency. To the extent that you are a resident of Canada, you will generally pay Canadian income tax on your worldwide sources of income. To the extent that you are a non-resident of Canada, only certain types of income (such as Canadian source income or dispositions of taxable Canadian property) will be subject to Canadian income tax. Most of the countries in the world have a similar system of taxation as [...]

Small Change to the Eligible Dividend Rules

kmoody@moodystax.com — Wed, 16 Jul 2008 00:00:00 +0100

On July 14, 2008, The Department of Finance released a package of proposals to amend the Income Tax Act for various measures. Included in the package was a small amendment that proposes to tinker with the eligible dividend rules.

For readers that are familiar with the eligible dividend rules, such persons will know that eligible dividends are paid out of a Canadian Controlled Private Corporation’s (”CCPC”) General Rate Income Pool (”GRIP”). To the extent that a sharehold [...]

Capital Gains vs. Income

kmoody@moodystax.com — Wed, 09 Jul 2008 00:00:00 +0100

One of the more common income tax matters that Moodys LLP Tax Advisors advises on is whether or not a disposition (or a proposed disposition) of property will result in a capital gain (half of which is taxable), or will be fully taxed as income. Taxpayers often take for granted that dispositions of property will be treated as capital gains.

Prior to 1972, capital gains were not taxable in Canada. Accordingly, there were many tax positions taken by taxpayers that dispositions of p [...]

Supreme Court Decision - McLarty - Contingent Liabilities

kmoody@moodystax.com — Fri, 30 May 2008 00:00:00 +0100

On May 22, 2008, the Supreme Court of Canada released its decision in the McLarty matter. The issue before the Court was whether Mr. McLarty’s liability under a promissory note that was owing by him upon the acquisition of a certain oil and gas property was an absolute as opposed to a contingent liability. To the extent that the promissory note was a contingent liability, no deduction would be allowed by Mr. McLarty for such portion of the otherwise oil and gas expense deduction. The oth [...]

Tax Treaty Interpretation Case - Prevost Car Inc.

kmoody@moodystax.com — Mon, 12 May 2008 00:00:00 +0100

On April 22, 2008, the important decision of Prevost was released by the Tax Court of Canada. The facts in Prevost were quite straightforward:

Prevost was a Canadian corporation at all relevant times. Its shareholder was a foreign corporation - Prevost Holding B.V. - that was resident in the Netherlands.
Prevost Car Inc. paid dividends to its parent non-resident shareholder in 1996, 1997, 1998, 1999, and 2001.
When Prevost Car Inc. paid the dividends to its non-resident sharehold [...]

Personal Tax Season Over

kmoody@moodystax.com — Mon, 05 May 2008 00:00:00 +0100

Yes! It’s over! As a tax practitioner, many people who talk to me during April will often comment that I must be very busy since this is “harvest season”. While there’s no doubt that many tax practioners are often busy in April, Moodys’ practice does not focus on personal tax preparation.

There’s a very targeted reason as to why Moodys does not focus on personal tax preparation. That is because personal tax preparation should be the culmination of planning that occur [...]

Restrictive Covenants

kmoody@moodystax.com — Fri, 11 Apr 2008 00:00:00 +0100

Much of our firm’s day-to-day tax planning and research involves issues surrounding the purchase and sale of businesses. Such purchase and sales will often involve the acquisition and/or granting of a restrictive covenant. In many cases, the granting of the restrictive covenant could be as simple as the vendor agreeing not to compete with the purchaser’s business for a limited period of time in a specified geographical area.

Prior to 2003, some significant tax planning occurre [...]

Tax-Free Savings Account (TFSA)

kmoody@moodystax.com — Wed, 05 Mar 2008 00:00:00 +0100

As mentioned in the first blog entry of February 29, 2008, the February 26, 2008 Federal Budget introduced the TFSA. The new TFSAs appear to be similarly modeled after “Roth IRAs” that exist in the US. On the surface, the introduction of this vehicle does not appear to be all that earth shattering. However, upon a closer look, some significant planning may be able to be done.

The TFSA is a registered savings account that ultimately will enable taxpayers to contribute annual cont [...]

The Federal Budget

kmoody@moodystax.com — Fri, 29 Feb 2008 00:00:00 +0100

Well, welcome to the first edition of Moodys LLP Tax Advisors blog entries. We hope this entry is the first of many where many difficult tax issues are translated into plain English and any breaking news is quickly released onto the blog. Accordingly, we encourage you to come back and visit us often.

As you no doubt know by now, the Conservative Minority Government released its 2008 Budget on February 26, 2008. From a tax perspective, the Budget contains little in terms of great tax [...]