Unit 2 Flashcards
Individual deadlines
CH4
Filing deadline
-Apr 30th
-June 15th if either individual or spouse is
self-employed
-Balance due Apr 30
Corporation deadlines
CH4
-Filing deadline: 6 months after yr end
-Balance due
2 months AYE
3 months AYE for a CCPC claiming the SBD and PY TI is less than $500K
Installments individuals
CH4
Required if current yr estimate net owing is greater than $3K & one of the 2 preceding yrs.
-Due quarterly
-interest can be avoided if you calc installments based on PY balance
Calc installments for individuals
CH4
-Lesser of:
a) 1/4* estimated net tax owing for current
yr
b) 1/4* PY net tax owing
c) 1st 2 installments: 1/4 * net tax owing for second preceding yr + 1/2 * (net tax owing for preceding yr-sum of first 2 installments)
Corp installments
CH4
Required if net tax owing is greater than $3K for current yr AND for the proceeding yr
-Due monthly or quarterly
Corp monthly installments
CH4
-Lesser of:
a) 1/12* estimated net tax owing for current
yr
b) 1/12* PY net tax owing
c) 1/12* net tax owing for second preceding yr + 1/10 * (net tax owing preceding yr-sum of the first 2 installments)
CCPC is eligible for quarterly installments if ALL of the conditions are met
CH4
1) TI (including associated companies) less than $500K in current or prev year
2) Taxable capital (including associated companies) is at most $10M
3) SBD was claimed in current or prev yr
4) Perfect compliance history during the last 12 months
Corp quarterly installments
CH4
-Lesser of:
a) 1/4* estimated net tax owing for current
yr
b) 1/4* PY net tax owing
c) 1/4* net tax owing for second preceding yr + 1/3 * (net tax owing preceding yr-sum of the first 2 installments)
Interest & Penalties
CH4
-Refund owned by CRA: Individual =refund amount * (PR+2%) & Corp=refund amount *PR
-Late or deficient installments: interest= PR+4%
penalty= 50% for interest> $1K & 25% of interest<
-Missed payment deadline=tax owing * (prescribed rate + 4%) compounded daily
until amount fully repaid
rate= (1+(PR+4%)/365) ^ days late
-Late filing: penalty= unpaid tax * (5%+1% per completed months up to 12 months)
if CRA sends a letter goes to 10%+2% per month for a max of 20 months
-Repeated faliure for income = or > $500: Lesser of
a) 10% * unreported income
b) 50% of the difference between the
understatement of tax and the amount of tax paid in relation to the unreported amount
-False statement: greater of a) $100 b) 50% of understated tax
-Error in tax return by advisor: Greater of a)$1K b) 100% gross revenue from person
-Participating in misrep: greater of a)$1K b) 50% tax sough avoided
Assessments and reassessments
CH4
-Reassessment period:
Ind & CCPCs: 3 yrs from NOA
Corps: 4 yrs after NOA
-After period CRA doesnt generally reassess unless:
a) Taxpayer misrepresentation due to neglect or carelessness
b) Taxpayer filed a waiver with Minister within 3 yrs of date of Org NOA.
-Amend up to 10 yrs back
Notice of objection and appeal process
CH4
-If you disagree with a NORA & NOA
-Deadline is as follows
1)Individual: Later of a) 1 yr after filing due date 2)90 days after mailing NO(R)A
2) Other taxpayers: 90 days after the date of mailing the NO(R)A
-If taxpayer dissatisfied after objection process, either party can appeal to Tax Court of Canada within 90 D of CRA reply
Change in use
CH12
-Deemed to have disposed of prop at FMV when its converted and used for another purpose
Change in use
Busi –> Personal
CH12
-Deemed POD and reacquisition at FMV
-CG, recapture, TL are recognized
Change in use
Personal –> Busi
CH12
-FMV<Cost: FMV= deemed POD & new ACB
-FMV>Cost: Deemed POD=FMV & CG
reacquisition= Cost+1/2 (FMV-ACB)
-RECALL: PUP LOSSES ARE NOT DEDUCTIBLE
Principal residences- Income producing to personal
CH12
-If no CCA was claimed during that time change of use does not apply
-Taxpayer may elect not to have deemed disposed at the change of use.
-Elections allows taxpayer to claim PRE up to 4 yrs prior to change of use.
-DONT RECCOMEND TO TAKE CCA
Busi investment loss
CH12
-If taxpayer has made a claim on CGE in preceding yrs or current yr, some of BIL would be restricted
-Restriction would be LESSER of:
a) BIL for the yr (before deducting the
restricted portion)
b) Cumulative CGE claimed in preceeding yrs * factor for that yr
2/1 before 1988
3/2 1988-1989
4/3 1990-Feb 27 2000
3/2 Feb 2000 - Oct 18 2000
2/1 Oct 18 2000- current
Eligible SBC
“Eligible small business corporation share” in ITA
CH12
- CCPC that used more than 90% of the FMV of its assets principally in active business
-CCPC where CV of assets and those related corps are less than = $50M
Deferral provisions of shares of eligible SBCs
CH12
a) Individual owned the CS of the eligible SBC throughout the 185-day period immediately preceding the sale
b) Individual reinvested the shares if another eligible SBC within 120 of the end of the year which the shares were sold.
MAXIMUM DEFERRAL=CG * (Lesser of (1)POD and (2) cost of replace of shrs/POD)
Def provisions of shares of replacement property
CH12
-When prop is disposed of and then replace with a similar capital prop.
-If applied, no tax consequences on disposition
-Split into voluntary vs involuntary
Voluntary disposition
CH12
1)Taxpayer must acquire the replacement prop within 12 MONTHS following the end of the taxation year in which the former prop was sold
2)Real property
3)Prop was used for business
4) Similar prop must have been purchased
-Date of disposition: the date an amouint has become receivable as the POD of the former property
Involuntary disposition
CH12
1)Taxpayer must acquire the replacement prop within 24 MONTHS following the end of the taxation year in which the former prop was sold
2) Prop is lost, stolen, expropriated or destroyed
3) Any kind of property except vacant land
4) Prop DOES NOT have to be used to earn business income
5) Acquire a similar prop
Deferred capital gain on prop replacement
CH12
-LESSER of:
a)POD-ACB
b) Cost of replacement prop-Cost of prop disposed
-THE COST OF THE REPLACEMENT PROPERTY IS REDUCED BY THE DEF CG
-IF ALL POD ARE USED TO PURCHASE A PROP 100% OF GAIN CAN BE DEF
Deferred recapture on prop replacement
CH12
-LESSER of:
a) UCC of replaced prop-Dispositions
b) Cost of the replacement property
-THE COST OF THE REPLACEMENT PROP IS REDUCED BY THE DEF CG
Related individuals
-If they are connected by blood relationship, marriage or common low partnership or adoption
-For tax purposes, individual is NOT considered to be related to nieces, nephews, aunts, uncles or cousin
- Related to:
a) Parent, grandparent (and those of spouse)
b) Siblings and siblings’ spouse
c) Children and grandchildren
Related corps
i) A person who controls the corps, if its controlled by one person
ii) A person who is a member of related group that controls the corp
-Any person related to person described in i&ii
NAL parties summary
1) Actual POD=FMV
-deemed proceeds=actual SP
-purchaser ACB=actual price paid
-Double tax=no
2) Actual POD=$NIL
-deemed proceeds=FMV
-purchaser ACB=FMV
-Double tax=no
3) Actual POD>FMV
-deemed proceeds=actual SP
-purchaser ACB=FMV
-Double tax=YES
4) Actual POD<FMV
-deemed proceeds=FMV
-purchaser ACB=actual price paid
-Double tax=YES
Double taxation
1) If actual SP>FMV: taxpayer pays tax on the entire amount of the dif between the selling price and the cost of the asset.
-The purchase cost is limited to FMV, as such the seller is paying tax on gain that doesnt exsist.
2) If actual SP<FMV: seller pays tax on the difference between FMV of the asset and cost base.
-Since the purchase cost base is restricted to actual sp, the purchaser will pay tax again on the dif between FMV and lower cost base when sold
EX: POD<FMV
John shrs with ACB 200 and FMV 350. He sells them to brother for 250, brother later sells from for 600
John
-POD=350 RECEIVES 250 FMV
-ACB=250
-CG=100
Brother
-POD=600
-ACB=250. ACTUAL SP
-CG=350
EX: POD>FMV
John shrs with ACB 200 and FMV 350. He sells them to brother for 400, brother later sells from for 600
John
-POD=400 RECEIVES 400 ACTUAL SP
-ACB=250
-CG=150
Brother
-POD=600
-ACB=350 FMV
-CG=350