10/6/2017 Jasper Forum 2017: October 22, 2017 Tax Update – What’s New? Jasper Small Practitioners Forum October 22, 2017 Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP Video Tax News Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – Other Than That… …Mrs. Lincoln, how was the play? CCPC Consultation Paper Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Tax Rates • 2016 Rates unchanged • Other than indexing • Alberta Changes • Small Business Rate down 1% • Dividend tax rate up to compensate Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 1
10/6/2017 Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Tax Planning – Where Are We Now? • State of Integration • SBD 35.5% • 0.63% cost • High rate ABI 21% deferral • 2.24% • Defer, defer, defer Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Tax Planning – Where Are We Now? • State of Integration • SIBI 2.67% prepayment • 5.03% cost • Blend GRIP and RDTOH? • Pull it all out? • Watch out for foreign income Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Tax Planning – Where Are We Now? • State of Integration • Dividends no deferral, no ultimate cost • Recover RDTOH immediately? • Maybe not – if non-eligible Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 2
10/6/2017 Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? 2017 Federal Budget • What Wasn’t There? No changes to • Capital gains rates and exemption • Small Business Deduction • Principal Residence Exemption • Private Health Services Plans Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? 2017 Federal Budget • What Went Away? • Public transit credit (after June/17)* • Tax-free allowances for MLAs/Municipal Officers (after 2018)* • Home Relocation Loan (after 2017)* • Child Care Spaces Invest Tax Credit (immediate)* * In the first Budget bill Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? 2017 Federal Budget • What Else Changes? • First-time donors’ SuperCredit (no extension) • Infirm, Caregiver, Family Caregiver credits * • Consolidated in 2017 • Generally same or better credit • No credit for non-infirm dependents (parents 65+) * In the first Budget bill Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 3
10/6/2017 Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? 2017 Federal Budget • What Else Changes? • T2201 signed by nurse practitioners* • Medical expenses for fertility treatment * • (back 10 years) • Tuition credit for occupational skills broadened * * In the first Budget bill Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? 2017 Federal Budget • Anti-avoidance measures • RESP and RDSP investments • De Facto Control • Straddle Transactions (derivatives) Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? 2017 Federal Budget • The Big One – Billed Basis Acctg • aka the Work in Progress deferral • Accountants, Lawyers • Doctors, Dentists, Veterinarians, Chiropractors Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 4
10/6/2017 Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? 2017 Federal Budget - WIP • Phase in Period • Fiscal years commencing after March 22, 2017 • Budget phased in over two years • Draft legislation increases to five years • Lower of cost and FMV Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? 2017 Federal Budget - WIP • Cost of WIP? • Staff time? Benefits? Overheads? Owner time? • FMV of WIP? • CRA FAQ suggests contingency fees have nil value • Consistent with the law? Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? 2017 Federal Budget • Sales and Excise Tax • Ride sharing a taxi service July 1/17 • Tobacco and alcohol taxes increased Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 5
10/6/2017 Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? 2017 Federal Budget • Consultations • Cash Purchase Tickets • CCPC Tax Strategies Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • Non-Arm’s Length Share Sales • Are Unrelated Parties Arm’s Length? • Déjà vu? Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • The Half Loaf (Gervais Case) • GAAR Applies • Déjà vu? • Fifteen years and counting! Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 6
10/6/2017 Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • Trusts • 21 Year Rule • Avoidance challenged under GAAR Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • Trusts • Reversionary Trusts • Holdco is a Trust beneficiary • Holdco gives money to Trust • Trust acquires Opco with Holdco funds • S 75(2) attributes income to Holdco Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • Trusts • Reversionary Trusts – Tax Court • GAAR applies • Dividend taxed in Trust • Not delayed until paid to beneficiary Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 7
10/6/2017 Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • Trusts • Gains Paid or Payable • Trust sells CCPC shares • Trust distributes gains to 7 beneficiaries • Beneficiaries gift funds to CCPC principal • After claiming capital gains deduction Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • Trusts • Gains Paid or Payable • Court upheld gains added to principal’s income • “Secret agreement” between parties • Reassessed after three year limit Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • PUC Creation • Individual rolls shares to Holdco • Opco rolls assets to Holdco • PUC of shares averaged • RESULT: $595,154 more PUC for individual Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 8
10/6/2017 Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • PUC Creation • CRA reduced Individual’s PUC to $110 • Court agreed – GAAR applied • PUC averaging abused Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • Valuation • Estate freeze - $2 million valuation • July 1, 2011 valuation • Sold common shares to spouse & kids • Corporation sold for $4.5 million • Dec 15/11 agreement; Jan 13/12 sale Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • Valuation • Actual sale proceeds = FMV • Result: $2.2 million of gains taxed twice • Gross negligence penalties reversed Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 9
10/6/2017 Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • Shareholders’ Toys • $310,000 recreational vehicle • Personal use charged $2,000/week Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive Tax Planning • Shareholders’ Toys • FMV rental $4,500 to $5,000/week • Personal use 70%+ • Input tax credit denied Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News Jasper Forum 2017: October 22, 2017 2017 Tax Update – What’s New? Aggressive (?) Tax Planning • Prescribed Rate Loans • Subject to GAAR? Hugh Neilson FCPA FCA TEP Kingston Ross Pasnak LLP/Video Tax News 10
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