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.

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. (more…)

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”. (more…)

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.

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?

The Income Tax Act in numerous places requires interest to be paid, either by the taxpayer or the Minister, on certain overdue amounts. The rate applicable is computed by reference to the “prescribed rate”. The Act also provides for calculating certain kinds of benefits by reference to that same rate. The rate fluctuates each calendar quarter. Usually, the CRA publishes the rate on its website well in advance of each quarter. For some reason, however, the CRA has still not published the rate for 2010 Q3. What is a poor tax adviser to do? (more…)

Sometimes clients give me the impression that they think that once they have handed over a matter to me, their work is done: they can just sit back and watch me do my thing. Of course, nothing is further from the truth, especially in litigation matters. Litigation is hard work, and not just for the lawyer. The client can do a lot for his or her own case that will save money and make the case easier to win, not least because, as I like to tell my clients, no one will ever know the facts of the case like the client.

In that vein, Jordan Furlong has written an interesting post on how to be an effective client. Perhaps I’ll make it suggested reading for all new clients!

If the Canada Revenue Agency (CRA) challenges your return and you can’t afford a tax lawyer, how likely are you to win your case? Does hiring a lawyer help your chances? (more…)

In Rezler v. The Queen, 2009 TCC 609, the taxpayer made excess contributions to her RRSP. On appeal, the Tax Court judge responded as follows: (more…)

Tax Topics number 1984 (March 18, 2010) has an interesting article on estate freezes using partnerships in light of Krauss v. The Queen, 2009 TCC 597. (more…)