My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. My posts are blunt, opinionated and even have a twist of humour/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, January 30, 2012

The Taxation of Automobiles

As discussed in my early January blog Mitigating Your Exposure to Five Popular Canada Revenue Agency ("CRA") Audit Target Areas, automobile expenses are often audited by the CRA and are one of the most contentious items in any review or audit. In my opinion, there are two reasons for this: (1) auto expenses are a fairly simple income tax concept and therefore easy to audit even for inexperienced CRA auditors and (2) auto expenses are an easy target because people do not properly document the business usage of their automobile and thus leave themselves at the mercy of an auditor.


In order to claim automobile expenses as an employee or commission employee, your employer must complete Form T2200-Declaration of Conditions of Employment. You can then claim your automobile expenses on Form T777  less any non-taxable reimbursements or allowances, to the extent your car is used for business purposes, as discussed in greater detail below. 

Self-Employed Individuals

Similar to employees, most self-employed people typically compile 100% of their gas receipts, repairs expenses, insurance premiums, toll highway fees, car washes and lease costs when organizing and gathering their information for personal income tax purposes. This full claim is then reduced, often after discussions with their accountant, by the personal portion of their automobile usage. For example, if your total automobile costs and expenses are $10,000 and you drive your car 75% of the time for business and 25% of the time for personal purposes, you would report $7,500 for your auto expense claim.


If your business is incorporated, the automobile expense issue is more complex. A decision must be made as to whether to own or lease the car in the corporation or whether to own or lease the car personally and charge back the corporation for business use. In the case where you pay 100% of the expenses for your personal car in the corporation, your accountant will typically make an entry to reduce the corporate auto expense by your personal usage ($2,500, using the above example) and charge your shareholder loan for your personal use. Alternatively, if you pay 100% of the auto expenses personally, your accountant will book an entry to increase auto expenses for your business use ($7,500 using the example above) and either have the corporation reimburse you for $7,500 or credit your shareholder loan for the $7,500 of business related costs you paid personally.

In order to avoid the standby charge discussed below, my firm typically does not recommend the purchase or lease of an automobile by the corporation, unless the automobile is used almost exclusively for business and can be documented as such.To be clear, I am not talking about a van, truck, etc. that is used 100% for business purposes, but a car that you drive essentially all the time, both personally and corporately.

Employer Owned Automobiles - The Dreaded Standby Charge

If you are an employee or a shareholder of a corporation that owns or leases the car that you use, you may have an employment benefit called a standby charge. Each year, the standby charge is calculated as 24% of the cost of the car, if the car was purchased, or 2/3 of the lease costs, if the car was leased. In addition, there could be an additional benefit for the operating costs, equal to ½ of the standby charge (if business use is 50% or greater) or 26 cents (for 2012) for each personal kilometre driven. As noted above, the benefit is always 24% of the original cost of the car, even as the car declines in value. Thus, consideration should be given to purchasing the car after three or four years where possible.

If your personal usage of a corporately owned vehicle is low relative to the business usage, there is a possible reduction in the standby charge. Where you drove primarily for business (>50%) and your personal usage km were less than 1,667 km a month or 20,004 km a year, the standby charge is calculated as follows:

Personal use kilometres/ (1,667 x the number of months the car was available to you) x the original standby charge calculated (24% x the original cost of the car or 2/3 the lease costs).

Essentially, the lower your personal use kilometres, the greater the reduction in the standby charge. Based on the formula above, once you reach 20,004 personal km the reduction is eliminated.

Business vs. Personal Usage

For individual and corporate taxpayers who claim a deduction for automobile expenses, the percentage of business use versus the percentage of personal use is often subject to a challenge by the CRA. As support for the relative percentage usage, at a minimum, I always recommend that the taxpayer note the car’s odometer reading as at January 1st and again on December 31st. The reason for doing such is that at least the quantum of kilometres driven in a year will be clear to the CRA reviewer or auditor. The best evidence to support the business use kilometres for purposes of an automobile expense claim is a log book which denotes the client or customer driven to and the number of kilometres the trip took; however, very few people maintain such detailed records. Many people often have to scramble to build a log book by going back up to three years and using their Outlook calendars to rebuild their driving records when asked by the CRA to support their business usage claim. This is not a fun exercise.

Depending upon the auditor, you can sometimes negotiate an agreed upon business/personal usage rate without a logbook; however, where the auditor agrees to this approach, it always results in a reduction of the business use claim by the taxpayer.

The CRA now offers to give some consideration to a log book for a sample period where there is one year of detailed record keeping. The following is what the CRA says in regards to a sample logbook:

The CRA would be prepared to afford considerable weight to a logbook maintained for a sample period as evidence of a full year's usage of a vehicle if it meets the following criteria.

The taxpayer has previously filled out and retained a log book covering a full 12-month period that was typical for the business (the “base year”). The 12-month period is not required to be a calendar year.

A logbook for a sample period of at least one continuous three-month period in each subsequent year has been maintained (the “sample year period”).

The distances travelled and the business use of the vehicle during the three-month sample period is within 10 percentage points of the corresponding figures for the same three-month period in the base year (the “base year period”).

The calculated annual business use of the vehicle in a subsequent year does not go up or down by more than 10 percentage points in comparison to the base year.

In Summary- Documentation is Vital

Claiming and documenting automobile expenses is a tedious and time consuming process. However, if you are ever audited, you will be thankful you undertook the effort.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

Tuesday, January 24, 2012

Is Your Corporation a Personal Service Business?

One of the first blogs I wrote was "I am a Contractor Unless CRA Says Otherwise" (Note: the link is being temperamental, so if you want to read that blog, either google it or it is listed as a favourite post on the right hand side-bar). In that blog I discussed the various criteria the CRA and the courts use to determine whether a person is an employee or a contractor. I then further discussed the income tax withholding issues that arise when the CRA attempts to re-characterize a contractor as an employee. Finally, I touched upon the concept of a personal service business (“PSB”) and the risk of incorporating if you are a contractor. In today’s post, I will expand on the PSB discussion.

For CFL fans of my vintage, the PSB rules came about because of the despised Ralph Sazio (despised if you were a Toronto Argonaut fan). Mr. Sazio, a member of the CFL Hall of Fame who led the Hamilton Tiger-Cats to three Grey Cup championships, decided he would incorporate a company to provide his services to the Tiger Cats to benefit from the low corporate tax rate. The CRA took Sazio to court, but Mr. Sazio won his case prompting the CRA to implement the PSB rules.

The PSB rules have reared their ugly head recently because of a CRA crackdown on IT consultants as discussed in this Ottawa Business Journal article by Peter Kovessy titled Taxman cracks down on IT consultants.

In addition, on October 31, 2011 the CRA released draft legislation that imposes further punitive rules on PSB's by removing the general rate deduction previously allowed. These new rules will become effective for taxation years beginning after October 31, 2011 and are discussed below.

The PSB rules deal with incorporated employees. Essentially, when a corporation has been interposed between what one would normally consider an employee-employer relationship, the employee becomes an "incorporated employee". As I have discussed in many prior blogs, incorporation is advantageous because it provides the following: access to the small business deduction and the related low income tax rate, a possible deferral of income tax, limited liability, and potential access to the $750,000 capital gains exemption on qualifying small business corporation shares.

In reviewing the PSB rules, you essentially need to ask yourself if you would reasonably be regarded as an employee or officer of the person or partnership to whom you are providing the services, but for the existence of your corporation . If you only have one or two clients and your corporation does not employ more than 5 full-time employees, and you do not meet the criteria I discuss in my contractor blog, you risk being characterized as a PSB.

So what are the income tax consequences of being considered a PSB once the new legislation is passed?

The corporation will be prevented from claiming the small business deduction, both federally and provincially, and as noted above, you will no longer even get the general rate reduction. In Ontario that means the corporation will be subject to income tax at a rate of 39.25% (in 2012). For comparative purposes, the current small business income tax rate is 15.5%. As a consequence, when taking money out of a PSB by way of dividends, the ultimate combined personal and corporate tax rate will approach 58% in Ontario, a very punitive amount which is 12% greater than a high-rate employed taxpayer would pay.

When determining the taxable income from a PSB, the only eligible deduction for the corporation will be any salary and benefits paid to the incorporated employee (yes, that means no other expenses such as travel, office supplies and auto are allowed). If the incorporated employee is a salesperson receiving commissions, expenses paid by the corporation that would have been allowed as a deduction to the individual personally as a commissioned salesperson will be allowed.

If you are concerned that your corporation may be a PSB, a conservative approach would be to pay yourself salary rather than using a dividend remuneration strategy. You may also want to avoid income splitting with family members who are not shareholders, however, your other business deductions are still at risk of being disallowed.

The proposed PSB rules are very punitive. If you may be an “incorporated employee” you should review your situation in detail with your accountant.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs. Please note the blog post is time sensitive and subject to changes in legislation or law.

Wednesday, January 18, 2012

A Butterfly Garden- One Child’s Wish

As I noted in my Bloggers for Charity wrap-up on Monday, the Make-A-Wish® Foundation of Canada is my favourite charity. Make-A-Wish® grants wishes for children with life-threatening medical conditions and is the largest wish-granting organization in the world.

Today I want to tell you about Rachel, a special girl who was the recipient of a “Wish” and is now a tremendous Wish Ambassador for the Make-A-Wish® Foundation. In addition, I want to draw attention to Rachel’s volunteer wish grantor to provide some perspective on the Make-A-Wish® wish granting process and possibly provide incentive for readers of this blog to become Make-A-Wish® supporters. Being a wish grantor myself, I can tell you that not only is the wish unforgettable for the wish child, but that the experience of assisting in granting a wish is incredibly satisfying.

It is very important to understand that privacy and confidentiality are the cornerstones of the Make-A-Wish® Foundation and that Rachel and her family have provided permission for her name and picture to be used by Make-A-Wish® and for this blog. Permission has also been obtained from the wish grantor for use of their comments. Some Make-A-Wish® children and their families prefer not to have any publicity around their wish and experience, which is always respected.

To give the wish granting process some context, I am going to talk about Rachel’s magical wish for a Butterfly Garden from the perspective of her wish grantor, and from Rachel’s perspective based on a speech she wrote for a recent Make-A-Wish® event, so please excuse any choppiness.

Volunteer Wish Grantor: When we first met Rachel and her family we knew that this was going to be a very special wish. Since being diagnosed with cancer, Rachel has been an inspiration to other children suffering life threatening illnesses. She wrote a book about her experience with cancer called “I can, eye can.” In her book she talks about her passion for animals and her dream of one day becoming a veterinarian.

We were immediately welcomed into her family’s home. During our first visit, Rachel eagerly showed us her backyard and told us about all the plants she wanted in her butterfly garden. Rachel was not only a bright young girl, but she also demonstrated an innate creativity and passion for wildlife. Rachel presented us with a “Butterfly Diagram” which depicted, in great detail, all the components of her dream garden including a pond, bicycle path, swing set, and lush plants to attract a variety of butterfly species. Rachel’s love for butterflies was evident very early on!

Rachel loved to spend time outdoors and most of our visits included burying each other in leaves and pushing Rachel on her swing set. We accompanied Rachel and her mom on a trip to the zoo for the Make-a-Wish® Scavenger Hunt. After an exciting day of looking at the animals, we asked Rachel what her favourite part of the day was and she excitedly replied, “the butterfly garden of course!”

Wish Child, Rachel: When my mom told me I had a deadly cancer called Ocular Melanoma and I would have to have my left eye removed, I was almost 5 and I was devastated.

But one day my mom and I were walking home from school when I spotted five yellow caterpillar machines parked in front of our house. I was speechless. And that’s when my wish for a butterfly garden began to come true.

A job that normally takes months to complete took only five days because of all the incredible volunteers who helped. They tore down our old deck and replaced it with a beautiful stone terrace. They arranged boulders around the yard, and planted flowers, decorative grasses and other wonders.

When it was almost done I looked at the faces of all those people and I was so grateful. And I remember telling them, “I may not know all your names, but I’ll never forget you.”

And so today I’ll say it again to you. I may not know all your names. But I’ll never forget you.

Thank you for helping wishes come true for kids who know what it’s like to have a life-threatening illness. Kids like me.

Volunteer Wish Grantor: When we shared the news with Rachel and her family that her wish was going to come true, her parent’s eyes filled with tears of excitement and Rachel ran laps around the living room. Rachel was going to receive the garden she’d dreamed of. The months that followed were exhilarating. Rachel was ecstatic to be involved in the planning of her garden, especially the opportunity to accompany a landscape designer, in picking out the plants for the garden. As volunteers worked tirelessly, that warm weekend in September, Rachel eagerly joined in. She assisted the volunteers with a variety of tasks from laying sod to planting flowers. Rachel loved to be given special projects to work on! There were many tearful moments as the family expressed their gratitude for the devotion of the volunteers who worked tirelessly to create a magical garden for Rachel. Since the completion of her butterfly garden, Rachel has spent much time playing outdoors with friends.

If you would like to donate to the Make-A-Wish® Foundation to support more magical wishes in 2012, please click this link, if you would like to learn more about volunteering, click this link.

Make-A-Wish® and Rachel recently worked together to achieve a Guinness World Records Title for Largest Human Star. Click here to see a video with Rachel being interviewed by Susan Hay of Global News and more information from the event and record itself.

Not all children choose to be front and centre like Rachel when speaking about their wish experience; however, all children who have wishes granted have unforgettable wish experiences that let them temporarily escape their current medical concerns.

For more information about Make-A-Wish® please visit:

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

Tuesday, January 17, 2012

Blogger for a Day-The YMCA - Way more than a Gym and a Swim

Readers of my blog will be aware that in November, several bloggers, including myself, launched a Bloggers for Charity initiative. The essence of this initiative was to auction off our blogs for one day to the person who bid to donate the largest amount to charity. That person would become a blogger for a day.

On my blog, the highest bid was made by Tim Penner with a bid of $250. Tim made his donation to the YMCA and his blog follows below. Please give his blog the same consideration and attention you would give to my blog and please consider making a donation to the YMCA and/or volunteering your time to the YMCA.

Why the YMCA is My Charity of Choice

By Tim Penner

I’m pleased to tell you about my charity of choice. You may be surprised to learn what it is. In fact, many people aren’t even aware that this well-known organization is a charity -- and most people have no concept of the breadth of services it offers to make this a better city.

I’m talking about the YMCA of Greater Toronto and I’d like to share with you why I donate to this organization and why you should consider doing the same.

We all know that our province and our city are going through tough economic times. Jobs are scarce, budgets are tight and the future is uncertain. If times are tough on average, I would submit that our youth are most challenged. Did you know?

· 1 in 4 children under 18 in the GTA live in a low-income household
· Youth unemployment in the GTA has surpassed 20%
· Surveys show that 1 in 3 teens and young adults in the GTA express a weak sense of belonging

When economic conditions are challenging, young people can be impacted disproportionately. Youth can end up disappointed, disengaged and disenfranchised. This can lead them to make bad choices as they seek a sense of belonging. If we fail to deal with the issues affecting young people, the short and long term impact on our city can be dramatic.

When I want to solve a problem, I like to go to experts to help me, regardless of whether that’s a doctor, a lawyer, an accountant or a mechanic. So who in Toronto has expertise with youth? It’s the YMCA. You may think of the Y as expert in “gym and swim”, and that would be true; but here are some stats you may not know about the services offered by the YMCA of Greater Toronto:

· 14,000 kids in the GTA go to a YMCA Day Care Centre daily.
· 7,500 kids attend a YMCA after school program every day
· 2,500 GTA kids go to a YMCA camp every summer
· 2000 staff and 6600 volunteers provide these fabulous services
· 110,000 young people make use of the YMCA for transitional housing, counseling, and employment training each year

What do families and young people find when they come to a YMCA? They find a welcoming, safe place. They find recreation and access to outdoor education. They find English skills training and career counseling. Perhaps most importantly, they find positive role models.

About 2 years ago, noting the challenges faced by our city, the YMCA Board (of which I am a member) established a new, very simple vision:

“The GTA will be home to the healthiest children, teens and young adults”.

By “healthiest”, we’re referring not only to physical health, but also mental health, and positive engagement in society. This is not the current state – it’s a vision.

In many ways, the YMCA is already making a huge contribution. We know that 4 out of 10 low-income families in the GTA already make use of a Y service today. But what about those people who are simply not able to access a YMCA? An extensive mapping exercise has shown us that roughly 65% of the Toronto population has ready access to a YMCA facility. We need to reach out to the balance of the population, especially in the neighborhoods that need us most.

We have a bold plan to build 5 new YMCA’s in the next 5 years. We’ve been working with partners and with government to build a viable plan and every aspect of the work is being approached with creativity.

One project involves collaboration with the United Way and a hospital in a part of town that needs more services. Another project will transform a Pan Am Games facility into a YMCA after the close of the 2015 Games. To help fund our plan we’ve sold our downtown head office for re-development so we can re-invest the money in new Y’s. But we need to raise considerably more capital.

The YMCA is a proven-effective provider of services to youth. Young people coming to a YMCA find health, fitness, recreation, friends, role models, and a positive sense of self. Our plan is to simply take this expertise – this proven success-model -- and expand it to a broader geographical area.

I simply can’t think of a better cause to positively affect people in Toronto now and for generations to come. I hope you will consider the YMCA as your charity of choice as well. If you wish to contribute to the YMCA, please follow this link.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

Monday, January 16, 2012

Bloggers for Charity- Wrap Up

The Bloggers for Charity initiative which was launched in November has concluded. All the winning bidders will have their "Blogger for a Day" blogs posted tomorrow. The unaudited donation tally is $12,575 including matching donations made by some of the bloggers. Special mention goes to Concentra Financial who made two very large donations.

Charitable initiatives often have an inherent flaw (i.e. One never knows if a donation is a brand new donation, or whether a donation would have been made to a charity anyways or finally, whether an initiative or fund raising campaign just resulted in a reallocation of charitable giving from one cause to another). Thus, I want to focus on the non-financial objective of Bloggers for Charity, that being raising the awareness for charitable giving.

In that vain, I want to thank all the bloggers listed below who put themselves “out there” and posted several times about the initiative and charitable giving and who have graciously offered up their blogs for a day. When the idea for this project arose in my tiny brain, what I really envisioned and hoped for, were blog postings across the country highlighting various charitable organizations. I am pleased to say that many of the blogs tomorrow will be posts about specific charitable organizations.

Where you read a blog posting written by a Blogger for a Day about a charitable organization, I ask that you consider donating your money or time to that cause or one closer to your heart.

My wife always tells me that I love kids and animals and they love me back, it's adults that I have trouble with. I have always loved being around and playing with kids. I have been a hockey and baseball coach, a Big Brother and a Make-A-Wish Grantor. I have also been on a few investment and other committees for charities, but that is not really my thing.

Anyways, where I am going with this is as follows: Tim Penner was the winning bidder at $250 on my blog and he will blog about the many great things the YMCA does tomorrow. I decided to match Tim's bid and donated $250 to the Make-A-Wish® Foundation of Canada, my favourite charity. On Wednesday, I will post a very special blog with the permission of Make A Wish, a Wish Child and her family and a Wish Grantor. This blog intertwines comments by Rachel (the Wish Child) and her Wish Grantor that will demonstrate the power of a wish and the satisfaction one gets in helping grant that wish. It is a really powerful blog and I hope you will take the time to read it.

Listed below are the bloggers who took part in this initiative; a veritable who's who of financial bloggers. I am sure you read many of these blogs, so please also read their Guest blogs tomorrow.

Boomer & Echo
Canadian Capitalist
Michael James On Money
Canadian Finance Blog
Retire Happy Blog
Financial Highway
Canadian Financial DIY
Where Does All My Money Go
Young and Thrifty
Canadian Personal Finance Blog

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

Wednesday, January 11, 2012

Understanding Your Personality Style- Your Key to Personal and Professional Success

Since I am a holistic type of guy, I not only want to help you financially, but I want to help you build better business and personal relationships. In that regard, today I have a guest blog by Chuck Reynolds of Excel Group Development, a firm that specializes in management development training.

I know what you are thinking, because I once thought the same. That being, communication training is airy fairy and does not work. However, my position on behavioural training and management development training reversed 180 degrees a couple years ago after Excel provided training to our partners and staff. My behavioural style is red. Red’s are best summed up as follows: “Be prepared, be brief, be Gone”. I have other partners that have a yellow or green behavioural style. Until I was trained, I never understood that they communicate and work better when you allow time for socializing and/or more time for decision making and present your case in a “softer” and less harsh manner amongst other communication methods. Just this basic realization has allowed me to communicate in a more effective manner with my partners. Imagine what this can do for your personal relationships as well as your business relationships.

So if your 2012 resolution is to have better relationships and a more profitable business... Chuck’s blog post below is a must read.

Enhancing your Personal Relationships and Building Profitable Relationships

By Chuck Reynolds

Last week I was in Punta Cana for some meetings. One day, while at a cafĂ© with a few others on the hotel’s expansive property, a woman with a name tag came up to our table, looked at me first, and then began speaking in Spanish, without using the customary “Hablas Ingles?” as most do. After some awkward attempts to converse on her part, she finally showed me a brochure for a Japanese restaurant, for which she was selling special dinner reservations. I finally replied with “Non, Gracias” to conclude this interruption. She departed a little disappointed.

Your behavioural style is like a language of interaction. Have you ever met a salesperson (or a stranger) who you instantly didn’t like? Or, have you ever met someone for the first time and instantly felt that you connected and that the conversation flowed? Much like the connecting power of speaking the same language, the reality is that we gravitate towards interacting with those who exhibit behavioural styles similar to our own.

Studies in North America and Europe show that people prefer to purchase from those who display a behavioural style similar to their own. For example, often a quieter, more introverted individual may be intimidated or turned off by a gregarious, extroverted individual they don’t know. The quieter person would like time to reflect on issues at some length, while the gregarious, energetic salesperson rattles off features of a product or solution. The tone, pace, speed and body language of interaction may unintentionally offend the other person. Contrast Oprah’s comfort level for asking deep and often personal questions, with another person’s quiet demeanour and desire for privacy. Compare one person’s extreme task focus with another person’s process focus (how we get the jobs done with our team), and again the unintentional “turn-off switch” may be activated.

In 2012, you will be amazed at how much you can prosper by developing an understanding and awareness of your own behavioural style, along with the styles of your clients/customers and staff. For example, we have some clients who are quite “fast-paced”, while others are more reflective. For the former group, we prepare for meeting with all the details to support their often “on-the-spot” decision making. For the latter group, we don’t rush them, we give them time to make their decisions at their own pace. We may send them information in advance of a meeting for their review, or we’ll follow up a few days after the meeting, once they have had time to look at all of the details and reflect on their choices. Using the wrong behavioural “language” can result in lost business opportunities, or even undermine staff engagement.

On the personal side, have you ever attended large extended-family functions (perhaps over the holidays) and encountered relatives you think of as “different”? Have you ever experienced huge surprise when your spouse or partner has a totally different perspective on a situation or event than you? It’s likely you have different motivators and different communication styles, which can conflict at times. I have two friends who are sisters and very close, but at times I have observed that they can have very different views on a situation. After seeing the results of their behavioural profiles, we all have a better understanding of where their differing viewpoints evolve from. Both are successful in what they do, however, they find their fulfillment in quite different areas. One sister’s passion is found in the act of serving others. The other sister likes to serve others as well, but does so through practical deployment of resources. The first sister is not as concerned about “ROI”, while her sibling is much more concerned about it.

It is no surprise then that Sister One left a successful business career years ago to go into the field of teaching, and now serves as a well respected Principal. Sister Two, also a business grad, has succeeded in the corporate arena in marketing leadership. The sister who is in Education, while she was a teacher, would tutor former students for free once they reached university, even with a limited schedule. Her more corporate-minded sibling had trouble appreciating why her sister would devote her valuable time to tutoring - if she had been interested in doing the same thing, she would have made a part time business out of it for profit.

Needless to say, not everyone you come in contact with will see things the way you do or communicate the way you do. Nevertheless, your capacity to “get along” is greatly enhanced when you drop the ego, stop expecting everyone to adapt to your style of communication, and instead start understanding their “language” of communication and adapt to them a little. It is said that you can get what you want by first helping others get what they want. As Stephen Covey said, “Seek first to understand before being understood.”

The fact is that, without realizing it, you may be speaking the wrong behavioural “language” for some of your clients, staff, friends, or family members. Resolve to invest in learning about behavioural styles, and you will have more opportunities to prosper, greater relational fulfillment, and fewer relational conflicts. What follows are some guidelines to help you along.

3 Steps for Building Profitable Relationships

1) Learn to understand your own behaviour style. There are a variety of behavioural style assessment providers and systems out there. Like anything, some are better than others, and some specialize in different applications.

(full disclosure – this is an area of passion for our organization).

2) Speak second. If you’re doing all the talking, you can be sure that your clients, customers, family members, friends or staff are getting plenty of opportunity to observe your behavioural-based communication style – but you aren’t learning much about theirs. A talk show host once said, “I never learned a thing while I was doing the talking.” Likewise, learn to ask questions first and observe before you put in your own two cents worth.

3) Speak in the native tongue. Once you have observed the style of the person you’re interacting with, use a similar behavioural language. For example, note the tonality, pace of speech, body language etc., and try to match it with your own. If their style includes pausing before answering a question, discipline yourself to be patient and allow for the silence – don’t jump in to fill the space. (For bonus points, both of you can get behavioural profiles to share with each other or within a team)

Chuck Reynolds is a Principal at Excel Group Development, a Human Capital solutions firm that serves clients of varying sizes and industries – from professional services firms and software companies to the US Marine Corps. They can be reached at or 1-888-892-6224.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

Monday, January 9, 2012

Estate Planning- A Tale of a Fathers Selfless Act of Love

When I wrote my blog post for My 7 Links Project, I struggled with "the most beautiful post" link. Money and beauty are often diametrically opposed. However, thanks to Lynne Butler of the Estate Law Canada blog, I now know what a beautiful financial post would read like.

A month or so back, Lynne had a blog titled “What my father’s death taught me about estate planning”. What was interesting about this blog post, is that Lynne essentially got out of the way and just said you have to read this amazing article. I wondered why Lynne had so little to say until I actually read the guest post on the Getting Rich Slowly blog. Essentially, Jody (the guest poster) relayed how her father planned while he was alive, to make her job as an executor as stress free as possible. If there was ever a selfless act of love in a financial sense, this is it.

This blog was of particular interest to me as I have written several blogs on this topic, Where are your Assets, Speak to your Executor-surprise only works for birthday parties, not death and You Have Been Named an Executor Now What. Like Lynne, I was amazed at how much thought Jody’s father put into his estate. This contrasts with the average person who often does not even inform their executor that they have been named, let alone provide a roadmap that can be followed once they are gone.

In her guest blog, Jody relayed the following things her father did while he was alive to minimize the fees associated with administering his estate, and just as importantly, to keep the process as stress-free for his daughter as possible. While I cannot do Jody's guest blog justice (you really should open the link above and read it), the following is a summary of some of the steps her father took to ensure he minimized Jody's stress in administering his estate.

Professional team

Jody’s dad not only built a team of advisors, a banker, accountant, insurance agent and lawyer, but he ensured he introduced his daughter to each of these advisors while he was alive and ensured that she had their contact information. Think about how smart that was. How much easier is it to communicate and work with someone you can put a name and face to?


Jody’s dad negotiated the estate fees with his lawyer down to 2% from the typical 4-5%. One can easily see why the lawyer accepted the lower fee. Jody’s father was so organized; the estate probably took one-quarter of the time most estates need to settle. Not only did he negotiate the fee, but he put those fees aside in a separate account.

Joint Accounts

Jody’s father added Jody to his bank accounts which allowed her to seamlessly pay bills. As Jody is American and there are no probate fees in the U.S., this was not done for probate purposes, but only for easing the administration of the estate for Jody. See my blog on Joint Bank Accounts, Documenting your Intention to understand some of the issues of using joint bank accounts in Canada.


Preparing for death

Jody’s father pre-paid his funeral expenses and even had a master binder that included funeral instructions - he told Jody to go to “F” for Funeral in his binder. Jody essentially had nothing to do but follow instructions.

In addition, her father left extra money for miscellaneous expenses that always arise on an estate. The extra money, whether left in a joint accounts or actually just given to a responsible child, is very important in Canada. The banks will typically pay for the funeral expenses and the probate fees, but access to the funds for any other expenses can be problematic until probate is authorized. Consequently setting aside funds so your executor will not need to beg the bank for access to accounts is a great idea.

Executor Fees

When Jody’s father informed her she would be named executor and he offered compensation, she, like many children, declined because she did not feel that she should charge her father.

However, after undertaking the executor’s job, Jody had this to say “After he passed away and I realized all that it entailed, I found myself thinking that maybe I should have taken him up on that offer. Being the executor of an estate — even a very well-planned estate — took about 10 to 15 hours a week for months. It’s a big job. I found myself resenting my brothers since I was doing it all.”

The above is a very insightful and honest comment and is the reality in many estates. Jody’s father showed even more insight when he disregarded Jody’s protestation on accepting an executor fee as he had arranged to give her 1% extra when his IRA was distributed.

I Cannot say it better than Jody

I conclude with one more quote from Jody. “I honestly consider my father’s financial planning to be a selfless act of love. Despite his generosity, I would trade every last cent for ten more minutes with him. When someone you love dies, it’s brutal. Emotionally, and physically. Trust me; you really are in no state to make these types of financial or legal decisions on your own”

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

Wednesday, January 4, 2012

Mitigating Your Exposure to 5 Popular CRA Audit Targets Areas

Being selected for an audit by the Canada Revenue Agency (“CRA”) can be a very stressful and costly experience. Aside from having a spiteful ex-spouse or former business partner report you to the CRA, in my experience, there are five specific areas the CRA targets for audit investigation that can generate audit headaches for even the most cautious of taxpayers. Below I discuss how you can facilitate the investigation process and significantly mitigate your tax reassessment should you be subject to an audit.

Employment and Commission Expense Claims

Expenses related to employment or commission based income, such as automobile, cell phone and salary paid to an assistant are key target areas for the CRA. For an employee to deduct these expenses, the employer must complete Form T2200-Declaration of Conditions of Employment.

To best mitigate any potential expense disallowance, keep a separate file folder for each expense category and place all applicable invoices in that file. For cell phone costs, clearly denote any personal calls on your phone bill and reduce your claim by these calls. Where you pay salary to an assistant, at minimum, keep a written job description and ensure you maintain payroll records. Where you pay salary to a family member to be your assistant, read this blog I wrote on paying salaries to family members.

The most contentious employment/commission expense claim is automobile expenses, specifically the percentage of business use versus personal use calculated by the taxpayer. Note your cars odometer reading at January 1st and December 31st, and keep a full and complete log book. This is the best evidence to support an auto expense claim. However, because the CRA knows that most people fail to heed this advice, they now offer to give some consideration to a logbook for a sample period, if you have kept a logbook for one consecutive 12 month period.

Interest Expense

As the rules related to claiming investment interest expense are complex, the CRA often audits these claims. This is especially true where funds have been comingled and a line of credit (LOC) has been used for both investment and personal purposes.

To mitigate any issues here, take the following steps. First, obtain a summary of interest paid for the year from your financial institution. Second, where LOC funds have been comingled, create a schedule that traces both the use of your investment funds and the monthly interest cost allocated between investment and personal use. Better yet, have a specific LOC for personal use and a separate one for investment use. Finally, keep back-up documents. This allows the CRA to easily trace funds going directly from any investment loan or your LOC to the related investment.

Rental Properties

Rental properties are yet another frequent target for audit by the CRA. They may question whether an expense is correctly categorized as a repair or an improvement to the property. An improvement needs to be capitalized and depreciated, while a repair can be expensed. The CRA’s basic position is set forth in Interpretation Bulletin-128R which states that if the repair betters the property, it may be considered capital instead of a deductible expense. When incurring a repair expense, you should consider the CRA’s “betterment” position, but the courts have considered repair expenses that are relatively minor compared to the value of the building as deductible.

Self-employment Income

For those who are self-employed, the CRA has almost no way to confirm your income and expenses without auditing you. Expect to be audited at some point in your self-employment working life. Follow the same advice offered above in regard to employment or commission expenses. However, self-employed people generally incur more marketing related expenses such as meals, sporting events, conferences, etc. Ensure that marketing-related receipts are marked with all pertinent details of the expense including the name of the client and the purpose of the expense. For conferences and travel expenses, provide back-up literature and lists detailing meetings you may have had with prospects, clients and suppliers.

Tax Shelters

The CRA has aggressively attacked any and all types of income tax shelters, save flow-through limited partnerships which are condoned by income tax policy. The CRA has been uncompromising on this issue. If your investment advisor pitches any kind of charitable donation scheme, Papaya Farm investment or similar type tax savings vehicle, turn and run the other way.

Taking the time to follow the preventive steps outlined above can help to mitigate both the financial pain and personal stress that can accompany an audit and income tax reassessment. Be organized and be prepared.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.