88(2)

Some 2009 year-end tax planning tips include:

1.    Certain expenditures made by individuals by December 31, 2009 will be eligible for 2009 tax deductions or credits including: moving expenses, child care expenses, safety deposit box fees, charitable donations, political contributions, medical expenses, alimony, eligible employment expenses, union, professional, or like dues, carrying charges and interest expenses, certain public transit amounts, and children’s fitness amounts.

 

2.    The 2009 Federal Budget proposes to introduce a temporary Home Renovation Tax Credit for expenditures made after January 27, 2009 and before February 1, 2010 in excess of $1,000, to a maximum of $10,000, resulting in a maximum Federal credit of $1,350 ($9,000 x 15%).

 

       For details, see www.cra.gc.ca and click on Home Renovation Tax Credit.

 

3.    You have until March 1, 2010 to make tax deductible Registered Retirement Savings Plan (RRSP) contributions for the 2009 year.

 

4.    Consider purchasing assets eligible for capital cost allowance before the year-end.

 

5.    Consider selling capital properties with an underlying capital loss prior to the year-end if you had taxable capital gains in the year, or any of the preceding three years.  This capital loss may be offset against the capital gains.

 

6.  Registered Education Savings Plan (RESP)

     A Canada Education Savings Grant (CESG) for RESP contributions will be permitted equal to 20% of annual contributions for children (maximum $500 per child per year).

88(5)

 

CRA ADMINISTRATIVE CHANGES

On June 11, 2009, CRA introduced policy changes for employment benefits.  For example,

 

Overtime Meals and Allowances Provided to Employees

For 2009, CRA will consider no taxable benefit to arise if:

•    the value of the meal or meal allowances is reasonable; a value of up to $17 will generally be considered reasonable,

•    the employee works two or more hours of overtime right before or right after his/her scheduled hours of work, and

•    the overtime is infrequent and occasional in nature.  Less than three times a week will generally be considered infrequent or occasional.  However, this condition may also be met where the meal or allowance is provided three or more times per week on an occasional basis to meet workload demands such as major repairs or periodic financial reporting.

 

Loyalty Programs

For 2009, CRA will no longer require loyalty points (e.g., frequent flyer points) that are controlled by the employee to be added as employment income by the employee as long as:

•    the points are not converted to        cash,

•    the plan or arrangement is not         indicative of an alternate form of      remuneration, or

•    the plan or arrangement is not for   tax avoidance purposes.

 

Non-Cash Gifts and Non-Cash Awards

For 2010, the following changes are being made to CRA’s gift and award policy.  The current rules are that up to two gifts and two awards costing $500 or less are non-taxable to the employee but deductible to the employer.

•    Non-cash gifts and non-cash awards to an arm’s length employee, regardless of the number, will not be taxable to the extent that the total aggregate value of all non-cash gifts and awards to that employee is less than or equal to $500 annually.  The total value in excess of $500 annually will be taxable.

•    In addition to the above, every 5 years a separate non-cash long-service award may also qualify for non-taxable status to the extent its total value is $500 or less.

 

88(6)

EXCESS CONTRIBUTION TO RRSP - TAX AND INTEREST

In a June 18, 2009 Tax Court of Canada case, the taxpayer made excessive contributions to an RRSP and was assessed a 1% per month tax plus interest.

The taxpayer’s waiver request was refused.

 

DIRECTOR LIABILITY - UNPAID GST/HST

In a May 4, 2009 Tax Court of Canada case, the taxpayer/director was assessed for personal liability for unpaid GST/HST of $236,344 plus interest of $7,372 plus penalties of $9,651 for a total of $253,367.

Taxpayer Wins!

The Court noted that where the director has little understanding of financial documents, he may rely on others to handle the financial aspects without incurring personal liability for unpaid GST/HST.

Also, in a May 12, 2009 Technical Interpretation, CRA notes that directors cannot be assessed more than two years after they cease to hold office.

 Legal advice is critical in this area.

 

SUPERFICIAL LOSSES

In a January 22, 2008 Technical Interpretation, CRA notes that a taxpayer’s loss from the disposition of property is deemed nil to the extent that it is a “superficial loss”.

For example, this applies if the taxpayer sells a security which is then purchased, or repurchased, by a Trust governed by the taxpayer’s RRSP, RRIF or TFSA within the period of thirty days before, or thirty days after, the disposition.

 

88(8)

INPUT TAX CREDITS (ITCs) – CAUTION

In corporate structures, it is important to ensure that it is the recipient of the supply that pays the expense and claims the ITC.  CRA has made reassessments where the wrong person in a corporate group has claimed the ITCs.