SimpsonWigle Law LLP Tax News

One of my favourite tax quotes is the following, which was written by the judge in J.F. Newton Ltd. v. Riddell, 45 D.T.C. 5276, [1991] 2 C.T.C. 91, 50 B.L.R. 136, 1990 CanLII 933 (BC S.C.), who was forced to review the wording and application of subsection 55(2) of the Income Tax Act in the context of the trial of a professional negligence claim:

It surpasses my imagination that anyone considers language such as this to be capable of an intelligent understanding, or that such language is thought to be capable of application to the events of real life, such as the sale of a business.

The CRA website now includes a post on the new method for keeping track of motor vehicle expenses. Read the rest of this entry »

Do I dare to write about the HST? I don’t, much, because I don’t know much about it. Nonetheless, let me share with you an insight about the Ontario HST that might make your practice life a little easier. Read the rest of this entry »

The following article appeared in a recent edition of the Hamilton Law Association Law Journal.

Why have separate classes of shares in the capital of a corporation for new investors? Creating separate classes of shares creates its own problems both from a tax and non-tax perspective. Nonetheless, for tax purposes it is sometimes desirable to have different groups of investors subscribe for different classes of shares in the capital of a corporation. Read the rest of this entry »

I’ve just published a permanent page to my blog on voluntary disclosures.

Professor Ben Alarie at the University of Toronto Faculty of Law (my alma mater, I’m proud to say) has started a tax wiki, which is meant to help “Canadians confused with complicated tax laws”. Read the rest of this entry »

You need to purify a corporation of its bad assets so that the corporation’s shares will be qualified small business corporation shares for the purposes of the $750,000 capital gains exemption. Let’s assume that you are confident about the values of the assets involved, so that you can leave bad assets with a value equal to exactly 10% of the total gross value of all assets of the corporation. How do you calculate the amount to remove, given that what you remove reduces both the gross value of the bad assets and the gross value of all of the assets of the corporation? The following formula seems to work: Read the rest of this entry »

A wife pays interest under a line of credit that her husband used to buy shares in a business. Can the wife deduct the interest? Not according to Bernacchi v. The Queen, 2010 TCC 306, unsurprisingly:

All in all, I am unable to conclude that there is a link between the interest paid by the Appellant and an income-earning purpose. While in 2005, 2006 and 2007 she paid interest on the line of credit pursuant to a legal obligation to do so, that obligation is traceable to the equalization arrangements under the Separation Agreement rather her use of that money to earn income from a business in her own right. The interest paid was on borrowed money used, not by her, but by her former spouse to purchase shares in his Bakery business. Accordingly, the criteria under subparagraph 20(1)(c)(i) are not satisfied and the appeals must be dismissed.

In Suffolk v. The Queen, 2010 TCC 295 (an informal procedure case), the Court undertook an interesting review of the caselaw relating to the validity of notices of assessment that contain errors and the form required for a valid notice of assessment. The short story is as follows:

[17] Contrary to the position taken by the Appellant, the Federal Court of Appeal in Stephens v. The Queen [[1988] DTC 1170 at 1171] has held that there is no prescribed form for a notice of assessment issued under the Act:

Subsection 152(2) requires the Minister to “send a notice of assessment” to the taxpayer. Nowhere in the Act do we find prescriptions relating to the form of that notice. It follows, in our view, that the form of the notice does not matter and that the subsection merely requires that the notice be expressed in terms that will clearly make the taxpayer aware of the assessment made by the Minister.

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Accountants who recommended tax shelters and earned commissions for doing so that weren’t disclosed to their clients need to think twice about their bank account balances. In Lemberg v. Perris, 2010 ONSC 3690, the Ontario Superior Court ordered an Oakville accountant to pay his former clients $45,000 in damages for recommending an art-flip shelter to them. What his clients didn’t know until after the fact was that he had received a $7,500 commission for recommending the shelter. Unfortunately for the clients, the scheme involved was the very one considered by Associate Chief Justice Bowman (as he then was) in Klotz v. The Queen, 2004 TCC 147, which didn’t turn out too well for the taxpayers. The clients sued the accountant and won damages. Will this lead to a spate of lawsuits against similarly-situated accountants?