tag:blogger.com,1999:blog-4402283548766807872.post8030894987631435266..comments2024-03-14T19:35:14.456-04:00Comments on The Blunt Bean Counter: Tax Planning Using Private Corporations - The New Liberal ProposalsThe Blunt Bean Counterhttp://www.blogger.com/profile/11358868550072516313noreply@blogger.comBlogger62125tag:blogger.com,1999:blog-4402283548766807872.post-8041270953903169382019-02-24T21:24:12.115-05:002019-02-24T21:24:12.115-05:00Hi Unknown, unfortunately I have no idea how the r...Hi Unknown, unfortunately I have no idea how the rules work with regulatory capital, I am having enough trouble understanding how they work with regular capital :)<br /><br />I would ask your accountant or an accountant who deals with regulatory companies. Sorry. The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-71691051471332194482019-02-22T13:39:29.566-05:002019-02-22T13:39:29.566-05:00Active Assets, Active Income:
Various OPCOs (e.g. ...Active Assets, Active Income:<br />Various OPCOs (e.g. mortgage brokerages) need minimum regulatory capital of $25,000 or $50,000. If it is in cash it counts at face value; if in public stocks it would take $50,000 of stocks to count as $25,000 of regulatory capital (50% derating). Would you expect that regulatory capital would generally be seen by the CRA as active business assets for the LCGE rules? If the assets are generally considered active assets, then would income from those assets (eg. interest, dividends) count as business income or passive? Seems that regulatory capital may be seen differently than other excess assets in the OPCO.Unknownhttps://www.blogger.com/profile/03015041517276985466noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-61436341637047153372018-10-09T20:01:58.166-04:002018-10-09T20:01:58.166-04:00Hi Anon:
I don't think the CRA has released a...Hi Anon:<br /><br />I don't think the CRA has released any updated forms yetThe Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-83765742499936934342018-10-07T13:11:01.573-04:002018-10-07T13:11:01.573-04:00Hi, where do you report your situation regarding t...Hi, where do you report your situation regarding the new rules on dividends to family members and determination of exemption qualifications for the 2018 tax year? i.e. where you state you are exempt or not based on the rules. On the T2 when reporting the dividend paid or on the T1 when the family member records the dividend received? Do you state on the T2 that the dividend is going to a family member? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-8527994691510678242017-10-13T21:50:28.283-04:002017-10-13T21:50:28.283-04:00Hi Anon:
Most tax professionals do not think the ...Hi Anon:<br /><br />Most tax professionals do not think the CRA's intention is to eliminate the CDA for arm-length transactions and typical stock portfolio gains. <br /><br />However, there are some drafting issues relating to capital dividends based on the proposed liberal legislation. So unfortunately I am not commenting on this topic until clarified.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-21425532421224719852017-10-13T15:19:39.759-04:002017-10-13T15:19:39.759-04:00Thank you for the post.
How does the proposed tax ...Thank you for the post.<br />How does the proposed tax changes affect Capital Dividend Account (CDA)? Will it completely eliminate CDA? if so should the stocks held in corporate account with unrealized gain be sold before end of 2017 and distributed as Capital dividend?<br /><br /> Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-34976612407149504392017-09-28T20:56:11.951-04:002017-09-28T20:56:11.951-04:00Hi Anon
You are not alone, many do not think most...Hi Anon<br /><br />You are not alone, many do not think most of the Liberal proposals make any sense. The whole premise of comparing an employee to an employer shows the Liberals are missing the point of risk and entrepreneurship.<br /><br />Many biz people have pointed out that they hold excess cash for not only retirement, but to smooth down periods and to invest when the proper opp arises. So I really dont get the premise of the passive rule changes, mostly because it is only a deferral and not absolute tax.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-75773453126804729122017-09-28T09:42:25.244-04:002017-09-28T09:42:25.244-04:00I just finished watching a re-broadcast of Ministe...I just finished watching a re-broadcast of Minister Morneau's tele-townhall held yesterday on his Facebook page. One of the examples he gave regarding passive investments in a Small Business Corp. was this: Suppose you have two individuals who want to invest $100k in a hardware business. Person A who does not have a corporation would be taxed on his $100k needed to invest at 40% and would have $60k left to put towards the investment in the hardware business. Person B who has a corporation would be taxed in the corporation at 15% and would have $85k left to invest in the hardware business. The Morneau tax changes aims to address this 'unfairness'. Am I missing something here? Does this make sense? Does any other Western Democratic Government look at retained earnings & investments in a corporation this way? <br />On another note, just read in the Globe & Mail yesterday that Buffett's Berkshire Hathoway in the US is holding $100 billion USD in cash. I'm very confused by the goal here.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-84896517429396477142017-09-17T10:20:53.136-04:002017-09-17T10:20:53.136-04:00Vert Nice informative blog for the layperson I am....Vert Nice informative blog for the layperson I am. One current strategy is to detain whole life permanent insurrance in the PC. The proceeds upon death Being passéd on throught the CDA tax free. If the CDA is nicked, does that affect the whole life insurance gist? These heavy paid premiums would the générate a négative return. Dosent make sense.Pete S.noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-64962208922009088682017-09-15T16:45:49.846-04:002017-09-15T16:45:49.846-04:00Philosophically if a Corp is trying to grow they a...Philosophically if a Corp is trying to grow they are not supposed to be impacted , however your example is one of many situations where the rules get complicated since what happens if u wait and don't reinvest I can't help you the passive rules are so complex I expect this to be where the Liberals give if they do anywhere The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-34577319296180037932017-09-15T16:41:10.300-04:002017-09-15T16:41:10.300-04:00All great comments that I agree with. Your second ...All great comments that I agree with. Your second comment is the key one these proposals are not only lacking clarity but have not considered multiple issues they seem to impact. SIGHThe Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-56099621646750816842017-09-15T16:38:32.846-04:002017-09-15T16:38:32.846-04:00Sorry I don't have any farmers as clients work...Sorry I don't have any farmers as clients working in Toronto so I cannot comment The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-10939425565650765162017-09-14T21:36:53.078-04:002017-09-14T21:36:53.078-04:00Great blog, I have a question regarding retained e...Great blog, I have a question regarding retained earnings. If a small business owner is trying to grow their business and has accumulated retained earnings, while they seek avenues or the right opportunity to grow their business by acquisition or through other direct investment means.... it is conceivable to have retained earnings accumulating passive income in the interim. Are the Liberals trying to 'tax' retained earnings? If so, how are businesses supposed to grow if they are penalized by a new tax that will diminish their ability to do so?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-14191552436662079772017-09-14T10:54:05.841-04:002017-09-14T10:54:05.841-04:00One issue I have not seen addressed anywhere, incl...One issue I have not seen addressed anywhere, including this excellent blog BTW, is that many contractors are FORCED to incorporate. As companies reduce full time employees to reduce cost/FTE and show increased production per FTE etc., those wishing to work for them must either give up a huge proportion of their income to a recruitment firm which effectively incorporates them if they are sole proprietors, or not get the work. This forced incoporation costs an individual thousands of dollars a year in tax/legal/paperwork. Morneau would have us believe that you have a choice when in fact, you often do not.<br /><br />Secondly, the scarcity of actual details makes these proposals worrisome (ie. what exactly is the test to determine contribution; what happens if the contribution changes over time as where a woman takes a "leave from the PC to raise the couple's children, etc.).<br /><br />And lastly, the overall tone of Morneau's comments are insulting: using the current tax code is not "cheating" nor not paying a "fair share".Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-67297068920232549052017-09-12T10:16:21.264-04:002017-09-12T10:16:21.264-04:00I'm trying to understand in particular the far...I'm trying to understand in particular the farmers' anger about the proposed barriers to LCGE multiplication. If some of their adult children who have already been working on the farm are going to inherit and continue as farmers, will there be a significant increase in capital gains liability. And relatedly, in circumstances when a farm transfer currently uses the LCGE on the children, and not just the parents, why is it in the children's interest to use their LCGE at that moment? Don't they leave themselves open to a major c.g. tax bill later in their life, at the next intergenerational transfer? I don't have a dog in this race, but I do like to understand what people are angry about.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-89396665225996301112017-09-07T19:53:56.641-04:002017-09-07T19:53:56.641-04:00Thx Anon, I am not as worried about getting the ta...Thx Anon, I am not as worried about getting the tax elsewhere as I am the Liberals hurting small business and the incentive to start a small biz.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-71142703154221416792017-09-06T23:33:47.662-04:002017-09-06T23:33:47.662-04:00What about CEOs and other high-income Canadians wh...What about CEOs and other high-income Canadians who receive deferred compensation in the form of stock options, of which only 50% is ultimately taxed? This is supposed to cost Ottawa way more (approximately $840 million per the linked March 2017 CBC article) than income sprinkling. According to this article, most of the taxpayers who benefit from this measure are not even from the high-tech or other start-up industries. <br /><br />According to Minister Morneau, we “all [must] pay our fair share of taxes --- with no exceptions”, and so “our Government ... is taking steps to address tax planning strategies and close loopholes that are only available to some—often the very wealthy or the highest income earners—at the expense of others.” “... such practices can undermine confidence in our economy by giving tax advantages to a select few. We don't think that's fair.” " ... some of the highest-income earners are effectively being taxed at a much lower rate than everyone else.”<br /><br />Are these stock option recipients paying their fair share of taxes? Are they paying roughly the same tax as their neighbor who earns the same? Are they not effectively being taxed at a much lower rate than everyone else? Is this the “level playing field” that Minister Morneau claims is necessary? <br /><br /><br />http://www.taxfairness.ca/en/blog/close-stock-option-loophole-why-should-we-subsidize-super-rich-ceos<br /><br />http://www.cbc.ca/news/business/stock-option-deduction-tax-rate-1.4030442<br /><br />https://www.pressprogress.ca/bay_street_pressured_liberals_to_break_promise_to_close_ceo_tax_loophole_documents_show<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-63757208927253043762017-08-31T00:00:21.759-04:002017-08-31T00:00:21.759-04:00Hi Anon
And your situation will be like many othe...Hi Anon<br /><br />And your situation will be like many others, whether they cut back or dont start new or additional businesses, the gov proposals will be detrimental to the economy.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-12107757016542254592017-08-30T13:17:08.831-04:002017-08-30T13:17:08.831-04:00While most will remain in Canada, they can and wil...While most will remain in Canada, they can and will change the nature of the work they do. I intend to cut out all work that is not interesting or too time consuming even though some clients need this service. Perhaps someone else can take that on. This reduction in scope of practice will result in at least one layoff and allow me to lease a smaller space. Will earn less, pay less in taxes and enjoy a more balanced life. Time to try out this 40 hour work week I hear so much about.<br />The passive income piece will just mean that tax cannot be deferred. So, the current govt. will have more revenue but future govts will have less revenue (I'll be taking out tax paid money from the corp in retirement). Doesn't seem smart as the boomer retirement wave is about to crest and the tax payer base is about to shrink.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-3272396756081553462017-08-30T12:56:25.855-04:002017-08-30T12:56:25.855-04:00Hi Anishmakim:
Thx for your comments
1. agree
2....Hi Anishmakim:<br /><br />Thx for your comments<br /><br />1. agree<br />2. Dr's were provided this advantage in lieu of fee increases in prior negotiations. Gov then should increase their fees. As for large firm professionals, they employ 100's of people and spend tons of money. the partners are pro rata owners in those businesses and do not get the small biz rate, but pay at 26% general rate, thus only tax deferral used in general to save for retirement.<br /><br />3. As noted above, only Dr's would benefit from the SB rate, large firm partners do not in general<br /><br />4. I agree, most people suck it up and stay in Cda. that does not mean a government that taxes highly is not hurting investment and spending long termThe Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-68131984275240606662017-08-30T08:16:01.380-04:002017-08-30T08:16:01.380-04:00A few comments.
1. This government campaigned as...A few comments. <br /><br />1. This government campaigned as tax and spend Liberals. All the small business owners who voted for them should have thought about their actions. <br /><br />2. The government is using a blunt force tool to go after high income professionals especially doctors. Doctors take on very little risk and don't put their life savings on the line to take advantage of income sprinkling and deferred taxes. The same comment applies to high income lawyers and accountants who work in big firms. <br /><br />3. There has to be a better way to separate the two groups. It might be a maximum threshold of passive assets or simply remove the small business tax rate. <br /><br />4. No doctor will leave the country because of these changes. Going to the land of Trump and Obamacare where S Corps pay personal tax rates and having to deal with many insurance companies instead of a single payer won't yield material benefits. anishmakimhttps://www.blogger.com/profile/09130415304431485185noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-8570851745966265912017-08-13T21:09:51.515-04:002017-08-13T21:09:51.515-04:00Hi Anon
Many tax accountants and tax lawyers are ...Hi Anon<br /><br />Many tax accountants and tax lawyers are not only upset at the proposals, but the lack of clarity for these proposals. We are still in the dark as to what would be considered business use, however, the examples above would appear to at least meet the conceptual criteria for biz use. As I say to my clients, we can offer no definitive answers at this point unfortunately.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-15260113162587783962017-08-10T08:21:04.755-04:002017-08-10T08:21:04.755-04:00A quick question on this:
I've a non trivial s...A quick question on this:<br />I've a non trivial sum(say a few million) in my CCPC and I use investments to generate some income.<br />What happens if this income is ploughed back into the business in the form of rent, IT expenses, staff salaries and even my own personal salary?<br />All this while I fund my new business ideas. Would this be a kosher use of investment income?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-82497627546813351602017-07-31T07:52:18.325-04:002017-07-31T07:52:18.325-04:00Hi Mi
The Ontario pension plan was cancelled with...Hi Mi<br /><br />The Ontario pension plan was cancelled with the Fed increase in CPP rates.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-26087713528641240852017-07-31T07:48:40.945-04:002017-07-31T07:48:40.945-04:00Tell us what you really think :)Tell us what you really think :)The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.com