EDUCATION TAX CREDIT - UNIVERSITY OUTSIDE CANADA

In an August 28, 2008 External Technical Interpretation, CRA notes that a fee to attend an educational institution located outside Canada qualifies for the tuition credit if it is recognized by an accrediting body (that is nationally accepted in that country) as being an educational institution which confers degrees, at least at the bachelor or equivalent level.

MEDICAL EXPENSES

In an October 23, 2008 External Technical Interpretation, CRA notes that amounts paid by an individual to a “medical practitioner” or to a “public or licensed private hospital” to obtain medical services qualify as medical expenses.

Qualifying medical expenses can be in respect of amounts paid to persons, or for services received, either within or outside of Canada.

Editor’s Comment

In a March 27, 2008 Tax Court of Canada case, the Tax Court found that amounts paid to an alternative medical provider such as an acupuncturist in Ontario, may be eligible medical expenses even though the acupuncturist was not regulated under the provincial medical association at that time.

This decision has now been overturned in the Federal Court of Appeal.

85(3)

EMPLOYEE TRAINING

CRA’s Income Tax Technical News (ITTN) No. 13 provides that when training is taken by an employee primarily for the benefit of the employer, there is no taxable benefit, whether or not this employer-paid training leads to a degree, diploma or certificate.  Accordingly, costs are deductible to the employer and not a taxable benefit to the employee.

This was also discussed in an August 29, 2007 Internal Technical Interpretation where CRA noted that employer-paid training costs for the son/employee of the sole shareholder to upgrade his employer-related skills would normally be deductible to the employer and not a taxable benefit to the son assuming the criteria in ITTN No. 13 is met.

SCHOLARSHIPS

In two March 7, 2008 Tax Court of Canada cases, the taxpayers were successful in overturning CRA’s employment income reassessment.  In both cases, the taxpayers were employees of Dow Chemical Canada and their children received scholarships of $3,000 under the Company Scholarship Program.  CRA included these amounts as employment income in the parent’s hands.

EMPLOYEE VS. INDEPENDENT CONTRACTOR

In three Federal Court of Appeal cases, the Federal Court confirmed the Tax Court decision that in all three cases the workers were employees of the payor, not independent contractors, and the payor was required to remit Employment Insurance and Canada Pension Plan.  Also, the workers were not allowed to deduct business expenses.

first case consisted of 130 health care workers who were placed by the Appellant in a number of health care facilities for short-term work.  The second case was a worker for a family corporation.  The third case was simply a worker being treated as an employee of the payor.

85(4)

TRAVEL EXPENSES

In a September 30, 2008 Tax Court of Canada case, the taxpayers owned a rental property in Florida in which they made several trips to meet with the condo association to review the interview process for renting the property, to repair and paint the property, to inspect the property and to purchase minor items for the property.  The taxpayer deducted the motor vehicle expenses to travel to Florida.  CRA disallowed these expenses on the basis that the property was managed by an independent company and the travel and motor vehicle expenses were of a personal nature.

Taxpayer Wins!

The Court accepted the taxpayers’ evidence that the trips did not have a personal component.  Therefore, the travel expenses were allowed.  The travel expenses were supported by a log which recorded 14,596 kilometres for the trips in 2001 and 10,927 kilometres for the trips in 2002.

85(5)

DIRECTOR LIABILITY - ADMINISTRATOR OF NON-PROFIT ORGANIZATION

In a June 2, 2008 Tax Court of Canada case, CRA assessed the taxpayer in her capacity as director of the non-profit organization for unremitted GST.

Taxpayer Wins!

The Court found that she exercised the degree of care, diligence and skill that a reasonably prudent person would have exercised under these circumstances.  She therefore was exempt for the personal liability on the unremitted GST.

The Court noted that she was 23 years old with no business experience and no post-secondary education when she became a director of the organization because of her interest in the organization’s objectives.  She was assigned the role of secretary but was limited to preparing the Minutes.  She did not sign cheques.

The Court found that the Appellant has discharged her burden of proof on the balance of probabilities, and that she has shown that she acted with reasonable care, prudence and diligence given the circumstances of this case.

85(6)

RESTRICTED FARM LOSSES - TAXPAYER WINS

In an August 29, 2008 Tax Court of Canada case, the taxpayer is a dentist who also carried on an emu farming business and a business of breeding Arabian horses.  These businesses had substantial losses which were deducted against the dental income for the years 1999 and 2000.

CRA reduced the losses of $382,852 and $202,475 respectively to $8,750 for each year on the basis of the Restricted Farm Loss rules in the Income Tax Act.

Taxpayer Wins!

The Court noted that the Appellant’s profitable dental business was supporting his unprofitable farming businesses and the Appellant had substantial capital committed and time spent.  It is not a precondition that the two sources be connected.  The farm’s profitability, both actual and potential, must be considered.

85(7)

PRIOR PAYMENTS

Spousal support payments made prior to a Written Separation Agreement will not be deductible unless the Agreement specifically provides for this.  For example, in one case, even though the lawyers exchanged correspondence, they did not reach a final agreement in time and the prior year payments were not deductible.

RRSP DIVISION OF MATRIMONIAL PROPERTY

In an October 16, 2008 External Technical Interpretation, CRA notes that the Income Tax Act permits a direct transfer of an amount from an individual’s RRSP to an RRSP of which his/her former spouse is the annuitant, where the payor and recipient are living separate and apart.  The payment or transfer must be made under a Decree, Order or Judgment of a competent tribunal or under a Written Separation Agreement, and the transfer or payment relates to the division of property in settlement of rights arising on the breakdown of a marriage.

85(9)

NATIONAL DO NOT CALL LIST

http://www.crtc.gc.ca/ENG/dncl.htm

At this web address you will be able to register for the Do Not Call List in addition to finding more information on the following:

·       file a complaint about a telemarketing call,

·       general information for consumers and telemarketers,

·       how the CRTC handles telemarketing complaints.

ELECTRICITY COST CALCULATOR

http://www.energy.gov.on.ca/index.cfm?fuseaction=conservation.calculator

To get a quick estimate of what your monthly electricity costs would be, visit this website (geared towards the Ontario market).  In addition to this tool, the ability to determine how much you’ll save by switching to Compact Fluorescent bulbs is available. 

For tips on how to save energy go to:

http://www.powerwise.ca/tips/

This site provides numerous tips on how to conserve energy on a category by category basis.  A few examples of the categories are: windows and doors, appliances, lighting, cooling, heating, seasonal, and , and insulation.insulation.

85(10)

CREDITOR PROTECTION

Amendments to the Bankruptcy and Insolvency Act that extend creditor protection to all RRSPs, RRIFs and DPSPs came into force on July 7, 2008.  The provision is subject to a clawback of contributions made in the twelve months prior to bankruptcy subject to overriding protection under certain provincial legislation.

Also, new regulations with respect to unpaid wages came into force at that time.