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, December 23, 2013

An Executor’s Nightmare

This is my last blog post of 2013. I would like to wish my readers a Merry Christmas and/or Happy Holidays and a Happy New Year. See you in January.

An Executor’s Nightmare

What is an executor’s nightmare? How about becoming the executor of two estates at once! That is what could happen if your spouse passed away while administering his or her Uncle Charlie’s estate. If you are your spouse’s executor, not only will you have to administer your spouse’s estate, but you may have to assume the executorship of Uncle Charlie’s estate. All this, while mourning the loss of your spouse.

As extreme as this seems, if Uncle Charlie did not provide for an alternate executor in his will, then subsection 46(2) of Ontario's Trustee Act permits you, as your spouse’s "personal representative" to act as executor under Charlie's will.  (Note: This post discusses Ontario. I am not sure if the law is the same in each province).

However, if Uncle Charlie named an alternate executor in the event of the death of his executor (i.e. your spouse) and his will was drafted such that the alternate could step in and perform those duties, then you can step aside.

Katy Basi, an estate lawyer and frequent contributor to this blog says "It is critical to ensure that you have a series of alternate executors/trustees appointed in your will, especially if your will creates trusts which could continue for a number of years after your death. If your last named executor/trustee dies, and the administration of your estate is not complete, or trusts are still ongoing, then the "personal representative" of your deceased executor/trustee may take over. This person could be a stranger to you, but Ontario's Trustee Act can swing into action and make it so."

Katy also notes that you have the ability to renounce your acceptance as the successor executor for Uncle Charlie without court approval, as long as you have not started acting as executor of Uncle Charlie’s estate or “intermeddling” in any way in Charlie’s estate. If you had started to act, you would need court approval to resign.

Finally, Katy says that if there are no named alternates, and you renounce as successor executor, then effectively there is no named executor and someone would have to apply to the court to be appointed as "administrator" (similar to the case of an intestate estate). Family members usually have first priority, but the court has discretion and may appoint a trust company or other non-family member under special circumstances. The consent of the beneficiaries entitled to the majority of the estate remaining at that time is often required for the application to be acceptable to the court. The court will need to approve the application, and the applicant cannot act until they get this approval, usually in the form of a probate certificate naming the applicant as "Successor Estate Trustee".

What should become clear from today’s post are two things:

1. If you are informed you have been named an executor, ensure the person naming you as executor has alternate replacements in their will, and that the will permits these alternates to act not only if you are deceased, but also if you are unwilling or unable to perform your duties as executor.  

2. Ensure your own will has alternate replacement provisions drafted with similar care.

The above blog post is for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Readers are advised to seek specific legal advice regarding any specific legal issues.


Monday, December 16, 2013

Financial Statement Reports for Dummies

In March 2011, I wrote a blog post titled Reading Financial Statements For Dummies. That post dealt with some tips on what to look for when reading financial statements ("F/S"). Today, I discuss the various types of reports that are attached to a set of F/S and the circumstances under which those reports are typically prepared.

Of course, "Dummies" is used in the popular culture context; since I even asked for help from my accounting standards quality control person in preparing this blog post. After all, I am first and foremost a tax guy, who the heck wants to be known as a boring audit guy :).

When you pick up a set of F/S for a private or public company, the first thing you will typically notice is the report attached to the financial statements. These reports which are signed by an individual accountant or accounting firm, indicate the level of assurance or credibility that a company wants or requires for its users (i.e. the readers of the F/S).

The type of report and the continuum of assurance goes like this:

Notice to Reader/Compilation Reports 

The lowest level report that can be provided by the preparer (typically an accountant or accounting firm) is a Notice to Reader report, often referred to as a compilation report; which actually provides no level of assurance. For these reports, the preparer receives information supplied by management or the owner of the company and “compiles” the financial information into a set of financial statements. It is clearly stated in the report that the preparers work is limited and that there is no assurance provided on the set of statements.

In a compilation engagement, the F/S do not have to be prepared in accordance with a financial reporting framework such as Canadian Accounting Standards for Private Enterprises (“ASPE”) (i.e. they could be prepared on a cash basis instead of the accrual basis, as long as this is specifically indicated).

A compilation engagement is typically prepared in circumstances where the only users are management and there is no need for all the disclosures necessary for a general purpose use (in most cases there are no notes attached to these F/S) and the company does not have any financing or arm's length shareholders. Thus, these statements are often just used to file income tax returns and as such, are the most cost effective F/S alternative.

The report contains a cautionary statement that the statements may not be appropriate for the users’ purposes. Even though no assurance is provided, when preparing a compilation report, the preparer must comply with professional standards, basic accounting principles and consider the reasonability of the information provided. The overall concept is that the preparer must ensure that the financial statements are not “false or misleading.”

Compilation services are not regulated in all provinces. One should check if the engagement is regulated and that the person engaged to perform the engagement is regulated.

The next type of report on the continuum of assurance is the Review Report:

Review Reports 

In comparison to a compilation report, a review report provides a moderate level of assurance. Specifically, a review engagement is commonly referred to as “Negative assurance” – meaning that nothing during the review has come to preparers’ attention causing them to believe that that the F/S are not, in all material respects, in accordance with Canadian ASPE.

The preparer determines the “plausibility” of the financial statements, primarily through the use of enquiry, analytical procedures and discussion with management and/or owner. “Plausible” is used in the sense of being worthy of belief, which is a moderate level of assurance.

This type of engagement is useful when a company does not need audited statements (which will be discussed next – which provide the highest level of assurance) – however, management or third parties want some assurance that the financial statements are plausible. For many of our client's who borrow money from the large banks, a review engagement is accepted in lieu of an audit and is the mid-price alternative (not that our clients are every concerned with price in respect of their F/S :).

Audit Reports 

An audit is the highest level of assurance that can be provided on financial statements. The procedures in an audit are much more encompassing than a review – such that the preparer can provide an opinion that the company’s financial statements are presented fairly, in all material respects, in accordance with the applicable Canadian accounting framework.

Although auditing has changed from the days of examining every document, current day computer assisting testing still requires extensive testing.

It is important to note that the audit provides “reasonable” assurance meaning that the preparer does not provide absolute assurance. Absolute assurance is not obtainable given the need for judgment, the use of testing and the fact that audit evidence is generally persuasive rather than conclusive.

Because of the detailed nature and the amount of work done, the cost to perform an audit and prepare audited financial statements can be expensive.

The type of report required is a matter to be discussed and agreed upon by the accountant/accounting firm and the client. You may be surprised to know that for each type of engagement, management is responsible for the preparation and fair presentation of the F/S.

As discussed above, each type of report provides a different level of assurance or credibility to the financial statements. If you have need to review a financial statement, it is important that you understand the level of reliance given to those set of statements, as all F/S reports are not created equal.

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, December 11, 2013

Gros Morne National Park - Part 2

On Monday, I recounted the first four days of my trip to Gros Morne National Park this summer. Today, I conclude with a summary of days five through eight.

Day 5

Lucky for us, it was a sunny beautiful day, with little wind for our hike to the top of Gros Morne Mountain. We had heard this hike could take anywhere from 6 to 10 hours and was considered very strenuous. Before we began our hike, we went to the Visitor Centre in Norris Point, where a helpful Parks Canada employee provided some clarification about the 16 km hike on the James Callaghan Trail. We were told the climb would start off with a fairly easy 1.5 hour
Such a pleasant warning
walk from the parking lot to the base. Next we would have a very hard 1.5 to 2 hour steep climb over broken rocks (shale and granite) called scree. Once we reached the top; we would then have a 3 to 4 hour trip back down. 

There was a more casual hike that wrapped around the mountain, but we selected the first option. In retrospect we were glad we took the direct route, as the alleged casual walk is not that casual in my opinion. It's full of rocks which are very hard on your feet. That is not to say the hike up the front of the mountain is a day at the beach. However, everyone we met hiking the direct route said they were glad they took the tougher steep climb than going up and down the casual route due to rocky gulches.

The walk to the base of the mountain was exactly as the park employee described. It is fairly easy and much of it was through forest which we appreciated as it blocked the sun. For us, the hike to the base took about 1hr and 15 minutes. The steep climb is as advertised. It is a very steep climb over broken rocks that never seemed to end. It felt like the mountain continually teased you as you thought you were done, only to find out you had more to go. The views going up are very nice, but the way up is not necessarily the greatest place to appreciate them and nothing compared to the views at the top of the mountain. 
Climbing the face of Gros Morne Mountain
We reached the top in 3 hours from our start off position in the parking lot. We were very tired. We had packed a lunch and our reward for reaching the top was to eat while taking in the awesome views afforded to us by being 800 meters high. Our decent was down the back of the mountain. The views of the fjords are unbelievable. The walk down is worse than the walk up as the rocks just pound your feet. People with hiking shoes were complaining so you can imagine how those hikers wearing runners felt. (We wore our hiking shoes on all the trails and were pleased we did.) Our only disappointment on this trail was that given the top of the mountain is considered an Arctic environment, the only animal we saw on our hike were Rock Ptarmigan chicks.

View from the top of Gros Morne Mountain
In total, our hike took 7 hours, which included probably just over a half an hour for lunch and picture breaks. My wife found the climb up very challenging. 

We rewarded ourselves with dinner at Chanterelles, the Sugar Hill’s fine dining restaurant. The highlight was an awesome cod wrapped in prosciutto with smoked coulis sauce sitting on a scallion shrimp rosti and lemon tart for dessert. As you have no doubt noticed, my wife and I enjoy our food.

Day 6

The weather gods decided they had provided the Goodfield’s with enough sunshine and the weather returned to rainy and misty. However, since we wanted a lazy day to recover from our Gros Morne hike, we did not really mind the rain. We purchased curry tuna sandwiches from Sugar Hill and took a leisurely drive of 25km or so past Cow Head to Parsons Pond to the Arches Provincial Park to view the arched rocks formed by sea wave erosion. The arches were interesting, but compared to what we had seen in the previous days, they dulled in comparison.

We then drove to Shallow Bay Beach which is a nice long sandy beach – unusual for Newfoundland. Unfortunately upon our arrival, the rain intensified and we had to leave. We went back to Western Brooke and drove slow to look for moose and caribou but had no success. We headed back to the Inn to rest up for what everyone told us was a must see show by the Anchors Aweigh band, at the Ocean View Hotel in Rocky Harbour.
Norris Point

Before the show we grabbed another dinner at Justin Thyme Bean & Bistro. I had chili scallops and a steak with onions and mushrooms that were excellent. My wife had a spinach salad with blue cheese and a hazelnut orange citrus dressing and salmon with black plums and apricot, both of which she thoroughly enjoyed.

The show exceeded my expectations. I would urge anyone visiting the Gros Morne area to check out the band. Please note you must reserve your seats if you have any hope of getting in. The show lasted almost 3 ½ hours and I was sad to see it end. The band is extremely entertaining. They are funny, great story tellers and excellent musicians. They play mostly local music but mix in a bit of everything else. The show was also surprisingly educational as the band provides a historical trip through Newfoundland both in their music and their banter. You really gain an appreciation of the pride Newfoundlanders have in their province and how they appreciate the tourists who come. I reiterate, a must see.

Day 7

Here’s a surprise, it was foggy and rainy again, only on this day you could cut the fog with a knife. Our intentions were to hike the Green Gardens, which is a very highly recommended trail in Woody Point. When we arrived at the trail we could not see five feet in front of us and debated whether it was worth hiking since we had almost no visibility. But as we had nothing else to do, we went for it. This trail takes you
Green Gardens Coastline
down to cliffs above a beach. We truly wondered about our intelligence as we could see absolutely nothing. About half way down the hill to the beach, the fog began to lift and our visibility began to improve. We could not see anything in the distance, but we could see immediately in front of us. After an hour or so down the hill, we arrived on flat land, which is essentially the land above the cliffs overlooking the beach. To our surprise, we were able to observe some awesome cliffs and coastline sites. I would recommend this hike, especially on a nice day. The hike back up was somewhat tiring and it took us three hours in total going up and down – not an easy hike.

We then went into Woody Point for lunch and had lobster sandwiches at the Galliott Studios, a store, gallery and restaurant (essentially the only item on the menu are lobster sandwiches). The studio has excellent coffee and lattes. While waiting for lunch, a whale swam by a boat docked at the studio giving it a good shove. Unfortunately, we did not see the whale, only the evidence of the rocking boat.

Day 8

Guess what? It was raining heavily again. Our best investment turned out to be North Face waterproof windbreakers we had purchased at Sporting Life earlier that summer. I cannot say enough about how our windbreakers kept us warm cut the wind. 

We were flying home later that day so we decided we would go back to the Tablelands for a 10:00 guided tour that is provided free of charge each day. The park representative was just outstanding
Tablelands in the fog
and tied together the visual surroundings with the geological history. The Tablelands are the result of the collision of the two ancient continents, that I discussed on Monday, but in this case, the way they collided caused the floor of the ocean to rise above the earth’s crust. Very little plant life grows or survives because of the heavy metal concentration in the earth, you are truly walking on the bottom of the ocean. 

If we did it again, we would take this tour at the beginning of the trip to gain a greater understanding of the geology we saw throughout the week. 

For lunch we went to Trout Lake and ate at the Seaside restaurant. The restaurant came highly recommended. We had soup and cod and it was very good, however, the restaurant is not cheap for lunch. 


Although the weather could have been better at times, my wife and I loved Gros Morne; but doing it as a pure hiking trip is not for everyone. The geology and beauty of the area are second to none and the people are friendly. I would definitely recommend visiting the Gros Morne area, particularly Norris Point, Woody Point and Rocky Harbour, for at least two to three days if you are travelling around the province.

P.S. If you are a hiker, here is a detailed list of some of the top hikes in Gros Morne.

Monday, December 9, 2013

Gros Morne National Park

Last summer my wife and I traveled to Gros Morne National Park in Newfoundland. We had a fantastic time! The variety of scenery, geological history, people we met and the seafood we ate made it an awesome week; even if the weather did not always cooperate. Today and Wednesday, I am going to recap our vacation, so if you are looking for my standard tax or money blog post and have no interest in Newfoundland, you may want to hit the escape button now. However, you may want to read on and learn about this very unique national park.

Newfoundland is a large province, so we made the conscious decision to just stay in Gros Morne National Park and hike its various trails. Do not let the word "park" fool you. The park is larger than some small countries.
View from top of Gros Morne Mountain

The park is a UNESCO World Heritage site. Under the UNESCO criteria, Gros Morne qualifies as an “outstanding example representing major stages of the earth’s history” and as an “area of exceptional beauty”. The historic criterion is met because the rocks of Gros Morne and Newfoundland demonstrate the theory of plate tectonics which describes how the surface of our planet is in constant change. As I understand it, Tuzo Wilson, a Canadian geologist, suggested the idea that the Atlantic Ocean closed and reopened and that an earlier ocean basin was crushed between two colliding continents raising the Appalachian Mountains – the western side being the rocks of ancient North America and the Eastern side being the rocks of Africa.

We selected Norris Point as our base and the Sugar Hill Inn for our accommodations. The four star inn is more upscale than most options in the area and you could certainly find cheaper alternatives. The inn has very nice rooms, an excellent restaurant and was centrally located, making it easy for us to travel to Rocky Harbour, Woody Point and various other points of interest in the park.
For those interested in travelling to Newfoundland and Gros Morne in particular, I will provide a brief summary of what we did, where we hiked, what we saw and some of the places where we ate. Just a word of warning: if Rogers is your cellphone carrier, you may not have use of your phone (which was actually a blessing in disguise).

Day 1

We flew into Deer Lake, picked up our rental car and drove about an hour to Norris Point. As we started our drive, a sign quickly caught our attention, noting that there had been four moose/car accidents this year. We were careful not to collide with a moose in the dark.

Day 2

We woke to a rainy, misty day, with low visibility. We had read that a good rainy day activity was to visit the Discovery Centre in Woody Point and that’s where we headed. The centre has exhibits on the natural and cultural history of the area and a great lookout on the Verdana when there is visibility. In retrospect, I would suggest the Discovery Centre is better visited later in your trip, after you have hiked the area and the geological information has greater context. 

The Discovery Centre parking lot is also where you pick up the Big Lookout trail. The hike has some excellent views; unfortunately our views were limited because of the weather. The hike is uphill and we decided to use the trek as a warm-up for our future hikes, despite the rain. The hike took about  1.5 hours (after a few hikes we realized we were always at the lower end of the hike estimates provided at the beginning of the trails – so if you want a gauge, 50 year olds in fairly good shape can do most hikes in good time).

After our hike we drove to the Old Loft restaurant in Woody Point. We had lunch outside on the deck. My wife and I both had the cod, which was very fresh and pan fried. The accompanying salad and fries were also very good. By the end of the trip, we considered this restaurant one of the best restaurants we had dined at when you consider quality and price. 

The Tablelands
Following lunch we went to the nearby Tablelands. To say the Tablelands have a unique terrain is an understatement. You are essentially walking on the ocean floor. The rain and fog made for poor visibility and our view of the Tableland Mountains was impaired. However, the walk was a very easy, flat walk that can take from 1.5 to 2 hours depending on how often you veer off the main track. (I will discuss the Tablelands in greater detail in my day 7 summary.)

After returning to our car, we drove back to Norris Point, about an hour drive and checked out Neddies Harbour Inn which was our other consideration when booking our accommodations. Neddies has a beautiful view of Norris Point, however, we did not get a chance to see any of the rooms.

Day 3

The weather on day 3 was very similar to day 2 a misty, cloudy day. We decided we would hike Bakers Brook Falls, a fairly easy 2 to 2.5 hour walk and is not dependent on clear views. The walk is not very interesting, but the prize at the end is some very nice waterfalls. This was a perfect hike for a misty day.

We then went for lunch at Java Jacks which was highly rated online. The restaurant is very quaint and we had nice salads and very light fish cakes. We also tried the mussels which were fresh and large, but the broth was watery. IMHO, when preparing a broth for mussels, the water from the mussels must be drained first and the broth should be tasty enough to dip your bread. This is a nice restaurant that many people rave about, but the watery broth took the restaurant down a notch in our opinion. 

We then drove to Lobster Cove to a scenic lighthouse. I guess it is a make work project, but there were two Park Canada employees in what seemed like a 20 square foot space in the lighthouse. Anyways, I digress, the view was awesome at the lighthouse and many people bring a picnic lunch. We also loved the two red Muskoka chairs placed at the end of the little trail where we could sit and admire the view. We later learned that these signature chairs were placed strategically on many trails and scenic spots. On our subsequent hikes we would look for these two red chairs. 

View from Jenniex house in Norris Point
On our way back to the Inn we stopped at a tea house called the Jenniex house in Norris Point. The view of Bonne Bay and the Tablelands is just spectacular from this vantage point. This is a must-see picture destination.

For dinner we ate at Justin Thyme Bean and Bistro, a new restaurant that was opened only two months earlier by a husband (Justin the chef) and wife (Lynne) team. We ended up eating at this restaurant several times, since the menu is imaginative and changes daily.

We started our meal with the aptly named Justincredible mussels. Where Java Jacks’ broth was waterlogged, this broth was a taste sensation. The mussels were large and fresh and the pesto cream sauce (the water from the mussels was drained) was excellent. We soaked up all the sauce we could with Justin’s homemade bread. My wife had read online about Justin’s butter poached lobster and had called ahead asking if he could prepare lobsters. We were pleasantly surprised that not only had Justin got the lobsters as per our request, but later found out he had made a special trip to get live lobsters at the fishery given the supply is limited post lobster season. All this for two people who might not show up for their reservation. The poached lobsters were outstanding - two of the best lobsters we have ever eaten anywhere in our travels. Overall just an awesome meal, if not a cholesterol nightmare.

Day 4

Western Brooke Pond
The travel gods were finally with us. We needed a clear, sunny, beautiful day for our pre-booked boat tour of Western Brooke Pond and got that day. This tour was a must according to any review we had read about Gros Morne and it did not disappoint.  

To get to the tour you had to walk 45 minutes (this is a very long walk and many of the elderly people we passed where struggling and later told us they had not expected such a long walk) to a dock. Once your reach the dock you set-off on a two hour boat tour; which more than lived up to its billing. Don't miss this tour if you go to Gros Morne. 

The fjords of Western Brooke Pond are what caught my attention on the “Come to Newfoundland” TV advertisements that got me interested in taking this trip. I remembered thinking to myself, this place looks like Norway. As I understand it, the pond actually started as a true fjord (which is saltwater) but as the glaziers moved and the land closed, it became a fresh water pond and is technically not a true fjord anymore. The scenery and fjords are spectacular.

After the tour we planned to hike Snug Harbour in the Western Brooke Pond area. However, at the start of the hike there was a water crossing which ran about 4 feet deep. To forge the water passage you needed a bathing suit, boots or water shoes, none of which we had.

As we were returning to the parking lot we saw a moose about 50 yards away in a field. Two minutes after we pulled out of the parking lot towards Cow Head, we saw three caribou. We had lunch and then headed back to undertake the Coastal Trail hike. It was very windy and while there was a nice ocean view, the scenery was mostly scattered driftwood. Not one of our favourite hikes, but supposedly it has a great view at sunset. One cool thing on this hike was the Costal Tuckamore, where coastal trees grow only on the protected side of the water so that they seem to lean away from the sea as they grow.  The mini forests have openings and you could walk under these contorted trees if you wished, however, they are pretty eerie and you would almost expect to be attacked by bats or witches :)

We had a light meal as we got psychologically ready for our penultimate hike of Gros Morne Mountain the next morning.

On Wednesday, I will conclude my Gros Morne travel recap. Hopefully, I have you sufficiently interested in Gros Morne and Newfoundland to read my conclusion. If not, you may want to at least read my Day 5 summary to see if I survived my trek up Gros Morne Mountain in one piece.

Monday, December 2, 2013

Should You Transfer Your Sole Proprietorship into a Corporation?

To minimize costs and test the economic waters, many Canadians start their own business as a sole proprietorship. If your business proves successful, you are then faced with the decision of whether
or not to incorporate. Today’s post discusses the income tax and business issues you must consider before deciding to move from a sole proprietorship to a corporate structure.

Legal Liability

As a business grows, sales tend to become larger and the consulting engagements more complex. Consequently, the risk of a product flaw or error becomes greater. As a proprietor, any legal action taken against your business places all your personal assets at risk, including your home (if it is in your name and not your spouses). Therefore, the decision to incorporate often makes sense just to ensure your personal assets are protected.

Until you incorporate, it is vital to ensure you maintain adequate business insurance and minimize the assets held in your own name.

Profitability and Tax Rates

As a proprietor, you must report your business income on your personal income tax return. As such, your profits are taxed at your marginal income tax rate. If you require all your business profits to fund your lifestyle; it does not make sense to incorporate your business (subject to other issues I will discuss below). However, if your business has become profitable enough that you do not need all the income generated, incorporation begins to make some sense as a tax deferral mechanism.

For example: In Ontario, the first $500,000 of active business income is taxed at only 15.5%. If you need $80,000 to live on and can leave the rest of the money in the corporation, you would defer at minimum 20% in income tax by utilizing a corporation (The marginal rate of income tax in the $80k range is approximately 35.5% vs. 15.5% corporate rate). If you are in the highest Ontario personal marginal rate you could be deferring upwards of 34%. By the way, active business income means what it sounds like: running a real business - manufacturing, wholesale, consulting, etc. A passive business earns income from stocks, rental properties, etc.

Capital Gains Exemption

One of the main advantages of incorporating is potentially being able to access the capital gains exemption for qualified small business corporation shares. The exemption is currently $750,000 per shareholder, but is scheduled to rise to $800,000 beginning January 1, 2014. Based on the 2014 exemption, a husband and wife who are 50/50 shareholders could sell their business for $1,600,000 and not pay any income tax, subject to the criteria discussed below. If you think your company may be worth millions in the future, you may even want to consider utilizing a family trust that would provide an exemption of $800,000 for every family member you include in the trust.

The criteria to determine whether shares qualify for the capital gains exemption are very complicated. The rules look back at the last twenty-four months prior to a sale and at the company on the date of the sale. In addition, the more successful you are, the harder it is to qualify. If you have excess cash and investments in the company you may fall offside the rules. I will discuss these confusing and complicated rules in a separate blog post in the future; but keep in mind, tax planning is imperative to ensure you qualify for the capital gains exemption.

Income Splitting

Income splitting opportunities for a corporation are often over-estimated. However, if you include your spouse as an owner, there may be significant income splitting benefits through the use of dividends. Dividends may be based on pure ownership (i.e.: Mr. A and Mrs. A each own 50%, so they each get 50% of any dividend paid) or you may be able to structure the corporation with discretionary shares that allow the dividends to be paid in any proportion to either Mr. A or Mrs. A (i.e.: 100% of the dividends are paid to Mrs. A and none to Mr. A). This type of structuring is complex and again you need to ensure you get proper tax and legal advice before utilizing a discretionary share structure.

How Do I Go from a Sole Proprietorship to a Corporation?

There are specific rollover provisions contained in Section 85 of the Income Tax Act that allow for you to transfer your sole proprietorship to a corporation on a tax-free basis. Shares of the corporation must be received on the transfer. The rollover is undertaken by filing Form T2057. Although this is a standard transfer provision, it is fraught with landmines.

The combined legal and accounting fees to undertake this transaction can range from $5,000 to $10,000 depending upon the complexity of the transfer. As such, many people decide to forgo this step, especially when they consider their main proprietorship asset to be personal goodwill (you are  the business and without you, it is worthless) as opposed to business goodwill (the portion of the business value that cannot be attributed to business assets such as inventory and equipment. i.e. The value of your business name, customer list, intellectual property etc). However, if you ignore filing Form T2057, you do so at your own risk.

This is because when you transfer your assets and goodwill from your proprietorship to a corporation, you are deemed to have sold or disposed of these assets at their fair market value. In order to avoid this deemed sale and to ensure you do not create any income or capital gains upon the transfer of these assets, I always suggest filing the tax-free rollover under Section 85.

As noted above, I have had clients argue they have no business goodwill and that all their goodwill is personal in nature. While in some cases there may be some validity to this argument, I think it is penny wise and pound foolish to take the risk that the CRA will deem a large gain on the transfer of your proprietorship goodwill when you can just make the election and eliminate that concern.

Once you have decided to rollover your goodwill to the corporation, it needs to be valued for purposes of the T2057 form, which can be a costly exercise. While not recommended, if you will be issued all the shares of the corporation, accountants may accept a client’s estimate of their goodwill for purposes of the election if it is reasonable and supportable. However, where other family members will become shareholders, a professional valuation is required. For example, if John transfers his proprietorship to a corporation and a valuator determines his shares are worth $500,000, John must be issued special shares worth $500,000 to ensure he has not conferred a benefit on his spouse or children. Once the special shares are issued to John, his spouse, family and/or trust subscribe for new common shares at $1.

It is important to note that I am glossing over several complex attribution rules here and you should not consider including any family member in the new corporation until you obtain proper income tax and legal advice. It is crucial to understand the ramifications of either decision and whether dividends must be paid to you in order to avoid the attribution rules.

Cost and administrative considerations

The cost of maintaining an incorporated company is far more expensive than operating a proprietorship. You must file financial statements with the CRA and the corporate income tax returns are complicated. You require annual legal resolutions and the administration is far more costly. Thus, I would not recommend the use of a corporation (subject to the other factors such as creditor proofing and the capital gains exemption discussed above) unless you could leave approximately $50,000 at minimum, but more like $75,000 of taxable income in the corporation after any salary you require.

Proprietors sometimes have difficulty separating their corporate funds from their personal funds as they are used to taking draws and simply paying tax on their business income. The corporate structure is more formal and personal drawings must be paid in the form of salary with income tax withheld and/or dividends. Both require filing of government forms (T4/T5).

The income tax benefits of a corporation can be significant. However, the transfer of a proprietorship to a corporation is very complex, especially when introducing family members as shareholders. It is thus vital that you engage an accountant and a lawyer to explain all the income tax issues to you before undertaking the transfer.

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, November 27, 2013

Mitigation – Unraveling the Puzzle

Today, in the conclusion of her two part guest post on the dismissed employee's obligation to mitigate damages, Marie-Hélène Mayer discusses the issue in more conventional dismissal situations. I thank Marie-Hélène for her excellent posts.

Mitigation - Unraveling the Puzzle

By Marie-Hélène Mayer

In my blog post on Monday, I discussed the recent decision made by the Ontario Court of Appeal in the case of Chevalier v. Active Tire & Auto Centre Inc. The outcome of this decision confirms a general principle of employment law: when one party breaches a contract, the other party is obliged to take all reasonable steps to minimize – that is, to “mitigate” their losses. In some cases, mitigation means a terminated employee may need to accept an offer of re-employment from their previous employer. Although not a common situation, it is happening more frequently and marks an important legal development. Today, I examine a more typical mitigation scenario: when an employee is terminated, provided with a severance package, but is not offered a position back with their previous employer.

When discussing the concept of mitigation it is important to go back to first principles of contract law. Mitigation is a principle of the law of damages for breach of contract. As employment law is in essence contract law, the concept of mitigation has figured prominently in employment law cases. As noted above, a dismissed employee must take all reasonable steps to minimize any losses they have suffered as result of the loss of their employment. In non-legal jargon this means that if you have lost your job, you have an obligation to find another job as quickly as possible to cut your losses.  

What is sometimes unclear to both employees and employer (and where most of the questions arise from both parties) is whether an employer must continue to pay an employee during their notice period, once that employee has secured new employment. An example is useful to clarify.    

Lisa is terminated November 1, 2013, and is provided with six months of notice. Lisa’s termination agreement does not address what happens if she gets another job before the six months are up. Lisa gets a new job on January 30, 2014. Is Lisa still entitled to receive the remaining months of salary and benefits? The technical legal answer (and the one you would encounter in a contract textbook) is that the employer is no longer obliged to continue to pay Lisa once she ceases to suffer an interruption in her earnings.  

The practical answer is, not surprisingly, rarely this straightforward. Usually a compromise is reached and a “mitigation clause” is inserted into the termination agreement. This legal term usually states that should the employee secure a new position before the end of the notice period, the employer will pay a portion of what is remaining – usually half. (This too can be negotiated). It is important to remember the general principle: an employee has a positive obligation to look for another job. This obligation can be modified by agreement, but the general presumption, absent agreement to the contrary, is that the employee must take reasonable steps to secure replacement income if their employment is terminated. 

In my experience, employees sometimes have unrealistic expectations and do not fully appreciate what steps they are obliged to take to look for a new position. There is a balance which needs to be achieved between the competing interests of employees and employers. Employees want the largest package possible and employers are looking for ways to minimize costs. 

Employers need to understand that in order for the doctrine of mitigation to apply – the employee must take reasonable steps to find a comparable position within the prescribed notice period. It is not reasonable to expect a former employee to simply take the first offer that comes along – especially if that offer is for considerably less money. Some lawyers will argue that an employee must accept any alternate employment. I disagree. The accepted thinking is that an employee is obliged to accept only a comparable position. This is sometimes tough for employers to accept.  

A final point for employers to consider is that no matter how well an employee may have mitigated their damages, employers must still meet their statutory obligations of notice and/or severance under applicable legislation. Payment under the applicable statutory requirements is not set off by mitigation earnings.

The above blog post is for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Readers are advised to seek specific legal advice regarding any specific legal issues.

Marie- Hélène Mayer B.A. (Hons.), LL.B/J.D. is an employment lawyer with Rubin Thomlinson LLP. Marie-Hélène has spent most of her career in private practice appearing before various administrative tribunals and courts. Her primary focus is advising employers and employees on workplace issues under both Ontario and Federal law, termination settlements, employment contracts, wrongful dismissal litigation and human rights complaints. Marie-Hélène has also worked for a large financial institution, where she acquired corporate human resources experience. Having worked in both private practice and in the corporate world means that Marie-Hélène can skillfully apply and interpret employment law in today’s business workplace. Marie-Hélène may be reached at Marie- Hélène’s own blog can be found at Club Mom

Monday, November 25, 2013

Employment Mitigation Issues - Does a Dismissed Employee Have to Return to Their Old Job if it is Offered Back?

As I have enough trouble writing about income tax and money, I have steered away from discussing employment issues on my blog, other than a rant about references and how they are A No Win Situation for Past and Future Employers and how people Waste References.

As most of us will be dismissed, fired or laid off at some point in our careers, I thought it would be interesting to have a series of posts on the mitigation of damages from both the employee and
employer's perspective. 

Since this topic is complex, I have enlisted the help of Marie-Hélène Mayer, an employment law specialist whom I have worked with over the years. In the first post of her two-part series, I think you will be shocked at how a recent court case expects employees to mitigate their damages in certain circumstances.


Termination and Return to Work: Ontario Court of Appeals Weighs in on Mitigation

By Marie-Hélène Mayer

One of the most frequent questions I get asked when providing advice to a newly terminated employee is how quickly he or she should be looking for a job. Employers are equally concerned with how quickly a terminated employee should be seeking replacement employment since they bear the entire financial burden of paying severance. Both employees and employers are often surprised to hear that an employee’s obligation to secure replacement employment (or as lawyers like to call it, “mitigate” their damages) is quite stringent and requires employees not only to take active steps to look for a new position, but may, in some instances, require the employee to consider going back to work for their former employer. This may sound counter-intuitive and impractical (it can be) but is happening with greater frequency.

Today, in the first part of a two-part series on mitigation, I discuss a recent decision of the Ontario Court of Appeal, Chevalier v. Active Tire & Auto Centre Inc. (“Chevalier”) 2013 ONCA 548, which confirms the principle that the law of mitigation, may in certain circumstances, require a terminated employee to accept an offer of re-employment from its previous employer. On Wednesday, in the second part of this series, I will examine an employee’s obligation to mitigate in the more conventional situation, where the employee is dismissed and not offered their job back.

In Chevalier, the employee had been the manager of an auto and tire centre. He was 55 years old and had worked there for 33 years. The employer was having financial troubles. The employer thought (erroneously) that he was entitled to lay the employee off on that basis without providing adequate notice. The employee took legal action. Five days after litigation began, the employer recalled the employee to work.

The employee declined to return to work and instead proceeded to trial. The employee made several allegations against his employer. He claimed that he was not prepared to return to his job because it would be too embarrassing and humiliating. The employee also claimed that his employer had embarked on a deliberate campaign of harassment and intimidation which made returning to work impossible. But the evidence simply did not support his claims. The Court found no basis to conclude that the employer had been motivated by anything other than legitimate business reasons when it decided to lay off this employee. In short, the employer had not engaged in poor conduct or any “campaign of harassment”. In the end, the Court found that a reasonable person in the same position would have accepted the offer to return to the workplace. Since the employee should have returned to work when requested, but refused, no damages were awarded.

What does this mean as a practical matter? If you lose your job, and later your employer changes its mind and offers you your job back, are you obliged to take it? If you are an employer, are you under an obligation to re-employ a terminated employee? Are there limits on how and when it should be done?

Here are a few things to think about if you are an employee faced with this situation. The legal landscape has changed. Judges are unlikely to be impressed by the fact that you may find it uncomfortable to return to work after being let go. This is particularly true if your employer has been experiencing financial difficulties. Getting a new job is difficult, and when an employer makes a legitimate offer to rehire an employee, unless you have something better waiting for you, most employees would be foolish to not accept the offer and demand a notice payment instead. The Courts are unlikely to side with the employee unless there is evidence that the employer’s offer is insincere or that the relationship between the employer and the employee is completely irreparable. Similarly, a court would not expect an employee to accept a job offer from their former employer if there is evidence that the employee was humiliated or embarrassed prior to being let go.

If you are an employer, your intentions must be sincere and should look that way too. Optics are very important. Employers who can show that they have behaved appropriately and that the work environment is respectful may save themselves significant severance dollars. Employers must act at all times as though a record is being created (and make sure that they do create a documentary record) and conduct themselves appropriately. Employers who do so can limit their liability and a potential wrongful dismissal suit down the road.

Join me again on Wednesday, I will discuss mitigation in context of more traditional dismissal cases.

The above blog post is for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Readers are advised to seek specific legal advice regarding any specific legal issues.
Marie- Hélène Mayer B.A. (Hons.), LL.B/J.D. is an employment lawyer with Rubin Thomlinson LLP. Marie-Hélène has spent most of her career in private practice appearing before various administrative tribunals and courts. Her primary focus is advising employers and employees on workplace issues under both Ontario and Federal law, termination settlements, employment contracts, wrongful dismissal litigation and human rights complaints. Marie-Hélène has also worked for a large financial institution, where she acquired corporate human resources experience. Having worked in both private practice and in the corporate world means that Marie-Hélène can skillfully apply and interpret employment law in today’s business workplace. Marie-Hélène may be reached at Marie- Hélène’s own blog can be found at Club Mom

Friday, November 22, 2013

Year-end Tax Tip Tweets - For the Week Ending November 22nd

My Twitter year-end tax tips for this week are listed below. This is my last set of tweets on this topic. As I tweet tax and money related information fairly regularly, you may want to follow me on Twitter @bluntbeancounter.

Tips for Week of November 18 - November 22, 2013

Did your kids attend private school in 2013? Ask if any of the fees can be claimed as child care expenses and/or a donation #yearendtips

If you turned 71 this year, you must convert your RRSP to a #RRIF or annuity by the end of the year #yearendtips

Consider donating shares of public companies as opposed to cash; you will pay no #capitalgains tax. #yearendtips

Look at whether purchasing a #flowthrough share is effective for your tax and investment purposes. #yearendtips

Purchasing a tax shelter investment? The refund may be held by the CRA (although they lost a case) until the tax shelter is audited #yearendtips

Children cut out, charities cut in

In today's Globe and Mail, Marjo Johne writes an interesting article on how donating some of the families fortune can create a philanthropic legacy - but also bitterness among heirs if not done right. Katy Basi, an estate lawyer and frequent contributor to this blog and I are quoted. Here is a link to the article.

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, November 18, 2013

Wealth & Estate Planning Missteps

Wealth & Estate Planning Missteps

To help you avoid parting with your wealth, I'd like to share my article (link here) that I wrote today for the Globe and Mail Online Personal Finance Tax Section titled "Want the kids to inherit the house? Avoid these common tax mistakes." This article deals with common wealth and estate planning errors parents accidentally make because
they lack knowledge or because they listened to a tip they picked up at a cocktail party. These missteps relate to real estate transfers, probate planning and inheritance issues.

I would like to thank Roma Luciw, the Globe’s personal finance web editor, for providing me with the opportunity to write this article during Financial Literacy Month.

Long time readers will be shocked that Roma was able to have me condense my originally submitted article to only 650 words. I really appreciated Roma’s editorial expertise.

Dream Job by Richard Peddie - Book Giveaway Winners

The two winners of the autographed copies of Richard Peddie's Dream Job book giveaway are Steve K. and Imelda L.You will be contacted by email to arrange delivery.

Thanks to all the people who entered the contest. I had several women who entered on behalf of their husbands or boyfriends, since they thought they would like the book. Very interesting, I wonder how many guys would enter on behalf of their wives or girlfriends if it was a women related book giveaway. Just saying :)


Friday, November 15, 2013

Year-end Tax Tip Tweets - For the Week Ending November 15th

My Twitter year-end tax tips for this week are listed below. I really like this week's tips as many are not the standard tips you read, if I do say so myself. You can also see them as they come out daily on Twitter each morning and afternoon. My twitter name is @bluntbeancountr. I hope there will be one or two tips that are beneficial.

Tips for Week of November 11 - November 15, 2013

If you make installments, review your income tax situation to see if the Dec 15th tax installment is necessary #yearendtips

If you plan to withdraw $ from your #TFSA, do it before Dec 31 so the withdrawal will be + back to your limit on Jan 1/14 #yearendtips

If you own a corporation, review your shareholder loan account to determine what you may need to dividend in 2013 #yearendtips

If you cashed in a #RRSP in 2013, the tax is often under withheld. Prepare a draft return to see if you have a tax liability #yearendtips

If you have not made a #RESP contribution in 2013, consider making one before Dec 31st#yearendtips

Don’t wait until February 28th to contribute to your RRSP. Contribute now if you have the money #yearendtips

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, November 11, 2013

Tax Loss Selling - 2013 Version

For the third year in a row, I am posting a blog on tax loss selling. I am doing it again because the topic is very timely and every year around this time, people get busy with holiday shopping and forget to sell the “dogs” in their portfolio and as a consequence, they pay unnecessary income tax on their capital gains in April. Additionally, while most investment advisors are pretty good at contacting their clients to discuss possible tax loss selling, I am still amazed each year at how many advisors do not discuss the issue with their clients. So if you have an advisor, ensure you are in contact to discuss your realized capital gain/loss situation and other planning options (if you have to initiate the contact, consider that a huge black mark against your advisor). For full disclosure, other than the "missing dividend section" and updating dates, there is very little that is new in this post.

I would suggest that the best stock trading decisions are often not made while waiting in line to pay for your child’s Christmas gift. Yet, many people persist in waiting until the third week of December to trigger their capital losses to use against their current or prior years capital gains. To avoid this predicament, you may wish to set aside some time this weekend or next, to review your 2013 capital gain/loss situation in a calm methodical manner. You can then execute your trades on a timely basis knowing you have considered all the variables associated with your tax gain/loss selling.

This blog post will take you through each step of the tax-loss selling process. In addition, I will provide a planning technique to create a capital gain where you have excess capital losses and a technique to create a capital loss, where you have taxable gains.

Reporting Capital Gains and Capital Losses – The Basics

All capital gain and capital loss transactions for 2013 will have to be reported on Schedule 3 of your 2013 personal income tax return. You then subtract the total capital gains from the total capital losses and multiply the net capital gain/loss by ½. That amount becomes your taxable capital gain or net capital loss for the year. If you have a taxable capital gain, the amount is carried forward to the tax return jacket on Line 127. For example, if you have a capital gain of $120 and a capital loss of $30 in the year, ½ of the net amount of $90 would be taxable and $45 would be carried forward to Line 127. The taxable capital gains are then subject to income tax at your marginal income tax rate.

Capital Losses

If you have a net capital loss in the current year, the loss cannot be deducted against other sources of income. However, the net capital loss may be carried back to offset any taxable capital gains incurred in any of the 3 preceding years, or, if you did not have any gains in the 3 prior years, the net capital loss becomes an amount that can be carried forward indefinitely to utilize against any future taxable capital gains.

Planning Preparation

I am posting this blog earlier than most year-end capital loss trading articles because I believe you should start your preliminary planning immediately. These are the steps I recommend you undertake:

1. Retrieve your 2012 Notice of Assessment. In the verbiage discussing changes and other information, if you have a capital loss carryforward, the balance will reported. This information may also be accessed online if you have registered with the Canada Revenue Agency.

2. If you do not have capital losses to carryforward, retrieve your 2010, 2011 and 2012 income tax returns to determine if you have taxable capital gains upon which you can carryback a current year capital loss. On an Excel spreadsheet or multi-column paper, note any taxable capital gains you reported in 2010, 2011 and 2012.

3. For each of 2010-2012, review your returns to determine if you applied a net capital loss from a prior year on line 253 of your tax return. If yes, reduce the taxable capital gain on your excel spreadsheet by the loss applied.

4. Finally, if you had net capital losses in 2011 or 2012, review whether you carried back those losses to 2010 or 2011 on form T1A of your tax return. If you carried back a loss to either 2010 or 2011, reduce the gain on your spreadsheet by the loss carried back.

5. If after adjusting your taxable gains by the net capital losses under steps #3 and #4 you still have a positive balance remaining for any of the years from 2010 to 2012, you can potentially generate an income tax refund by carrying back a net capital loss from 2013 to any or all of 2010, 2011 or 2012.

6. If you have an investment advisor, call your advisor and request a realized capital gain/loss summary from January 1st to date to determine if you are in a net gain or loss position. If you trade yourself, ensure you update your capital gain/loss schedule (or Excel spreadsheet, whatever you use) for the year.

Now that you have all the information you need, it is time to be strategic about how to use your losses.

Basic Use of Losses

For discussion purposes, let’s assume the following:

· 2013: realized capital loss of $30,000

· 2012: taxable capital gain of $15,000

· 2011: taxable capital gain of $5,000

· 2010: taxable capital gain of $7,000

Based on the above, you will be able to carry back your $15,000 net capital loss ($30,000 x ½) from 2013 against the $7,000 and $5,000 taxable capital gains in 2010 and 2011, respectively, and apply the remaining $3,000 against your 2012 taxable capital gain. As you will not have absorbed $12,000 ($15,000 of original gain less the $3,000 net capital loss carry back) of your 2012 taxable capital gains, you may want to consider whether you want to sell any “dogs” in your portfolio so that you can carry back the additional 2013 net capital loss to offset the remaining $12,000 taxable capital gain realized in 2012. Alternatively, if you have capital gains in 2013, you may want to sell stocks with unrealized losses to fully or partially offset those capital gains.

Creating Gains when you have Unutilized Losses

Where you have a large capital loss carryforward from prior years and it is unlikely that the losses will be utilized either due to the quantum of the loss or because you are out of the stock market and don’t anticipate any future capital gains of any kind (such as the sale of real estate), it may make sense for you to purchase a flow-through limited partnership (be aware; although there are income tax benefits to purchasing a flow-through limited partnership, there are also investment risks) . 

Purchasing a flow-through limited partnership will provide you with a write off against regular income pretty much equal to the cost of the unit; and any future capital gain can be reduced or eliminated by your capital loss carryforward. For example, if you have a net capital loss carry forward of $75,000 and you purchase a flow-through investment in 2013 for $20,000, you would get approximately $20,000 in cumulative tax deductions in 2013 and 2014, the majority typically coming in the year of purchase. Depending upon your marginal income tax rate, the deductions could save you upwards of $9,200 in taxes. When you sell the unit, a capital gain will arise. This is because the $20,000 income tax deduction reduces your adjusted cost base from $20,000 to nil (there may be other adjustments to the cost base). Assuming you sell the unit in 2015 and you have a capital gain of say $18,000, the entire $18,000 gain will be eliminated by your capital loss carry forward. Thus, in this example, you would have total after-tax proceeds of $27,200 ($18,000 +$9,200 in tax savings) on a $20,000 investment.

Donation of Flow-Through Shares

Prior to March 22, 2011, you could donate your publicly listed flow-through shares to charity and obtain a donation receipt for the fair market value ("FMV") of the shares. In addition, the capital gain you incurred [FMV less your ACB (ACB is typically nil or very low after claiming flow-through deductions)] would be exempted from income tax. However, for any flow-through agreement entered into after March 21, 2011, the tax benefit relating to the capital gain is eliminated or reduced. Simply put (the rules are more complicated, especially for limited partnership units converted to mutual funds and an advisor should be consulted), if you paid $25,000 for your flow-through shares, only the gain in excess of $25,000 will now be exempt and the first $25,000 will be taxable.

So if you are donating flow-through shares to charity this year, ensure you speak to your accountant as the rules can be complex and you may create an unwanted capital gain.

Superficial Losses

One must always be cognizant of the superficial loss rules. Essentially, if you or your spouse (either directly or through an RRSP) purchase an identical share 30 calendar days before or 30 days after a sale of shares, the capital loss is denied and added to the cost base of the new shares acquired. 

Disappearing Dividend Income


Every year, I ask at least one or two clients why their dividend income is lower on their personal tax return. Typically the answer is, "oops, it is lower because I sold a stock early in the year that I forgot to tell you about". Thus, if you manage you own investments; you may wish to review your dividend income being paid each month or quarter with that of last years to see if it is lower. If the dividend income is lower because you have sold a stock, confirm you have picked up that capital gain in your calculations.

Creating Capital Losses-Transferring Losses to a Spouse Who Has Gains

In certain cases you can use the superficial loss rules to your benefit. As per the discussion in my blog Capital Loss Strategies if you plan early enough, you can essentially use the superficial rules to transfer a capital loss you cannot use to your spouse. A quick blog recap: if you sell shares to realize a capital loss and then have your spouse repurchase the same shares within 30 days, your capital loss will be denied as a superficial loss and added to the adjusted cost base of the shares repurchased by your spouse. Your spouse then must hold the shares for more than 30 days, and once 30 days pass; your spouse can then sell the shares to realize a capital loss that can be used to offset your spouse’s realized capital gains. Alternatively, you may be able to just sell shares to your spouse and elect out of certain provisions in the Income Tax Act.

Both these scenarios are complicated and subject to missteps, thus, you should not undertake these transactions without first obtaining professional advice. If you intend to transfer losses this year, you must act quickly (you only have ten or so days to get this done) to ensure you are not caught by the 30 day hold period and the settlement date issue noted below.

Settlement Date

It is my understanding that the settlement date for stocks in 2013 will be Tuesday December 24th. Please confirm this date with your broker, but assuming this date is correct, you must sell any stock you want to crystallize the gain or loss in 2013 by December 24, 2013.


As discussed above, there are a multitude of factors to consider when tax-loss selling. It would therefore be prudent to start planning now, so that you can consider all your options rather than frantically selling via your mobile device while sitting on Santa’s lap in the third week of December.

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.

Friday, November 8, 2013

Year-end Tax Tip Tweets - For the Week Ending November 8th

This week I started tweeting daily year-end tax planning tips under the hashtag #yearendtips. The tweets are constrained by Twitter's 140 character restriction, so are fairly simplistic and lack detail. Notwithstanding the tweet restrictions, hopefully, these tips will act as a reminder for your year-end tax planning or cause you to review a tax issue you had not considered.

My Twitter year-end tax tips for this week are listed below. My twitter handle is @bluntbeancountr. I hope there will be one or two tips that are beneficial.

Tips for Week of November 4 - November 8, 2013

Review your year-to-date realized capital gains/losses & determine if you need to realize any capital losses to save tax #yearendtips

Consider making year end charitable #donations, especially if the donation will put you over the $200 minimum threshold #yearendtips

Consider paying non-eligible #dividends in 2013 to take advantage of lower tax rates before the rate increases Jan 1/2014 #yearendtips
(the tax rate on non-eligible dividends, typically paid by private companies, will increase for taxpayers in the highest marginal tax rate from 32.57% to 34.92% on Jan 1, 2014. If you are an Ontario super-rate taxpayer, the rate increases from 36.47% to 38.6%)

If possible, defer the receipt of bonuses or other income if you expect your marginal tax rate to be lower in 2014. #yearendtips

If you are self employed, purchase equip or incur an expense in the next few months rather than waiting until early in 2014 #yearendtips

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, November 4, 2013

Dream Job by Richard Peddie – Book Review and Giveaway

Richard Peddie, the former president and CEO of Maple Leaf Sports and Entertainment (“MLSE”), recently released his memoirs in a book titled “Dream Job”. The book weaves together tales and lessons of business, leadership and sports – so if you are a sports fan and business enthusiast, you should thoroughly enjoy this book. I happen to have two autographed copies of the book that I’m prepared to giveaway to you, my readers. If you are interested in a copy, please email and I will draw two winners from a hat on November 18th.

Mea Culpa – Let’s Get this Over With

For Toronto Maple Leafs fans, Mr. Peddie has been a lightning rod for criticism because of the Maple Leafs lack of success and Stanley Cup drought. In addition, both the Toronto Raptors and Toronto FC soccer team were less than successful during Mr. Peddie’s reign.

To Richard’s credit, he does not hide from his teams records. He states that he may have stayed longer, “but I got tired of losing”. He has “regrets about some of the general managers I hired”, including (in reference to John Ferguson) “our big mistake, you don’t put a rookie GM in charge of the Maple Leafs” and “ in hindsight, what was I thinking hiring a reserved, taciturn coach [sic] for the Toronto market?”. He puts Rob Babcock, the former GM of the Raptors, “among the worst hires of my entire career” and in regard to the Raptors, he states “the record is disappointing, it’s unacceptable and it wore me down”.

Richard says that “as the CEO responsible for the performance of the Leafs between 1996 and 2011, I can assure you that losing caused me the most pain”. Throughout the book Mr. Peddie states that the most ridiculous notion held by fans was that MLSE only cared about money and not how well the team performed. He refutes that notion, saying he and MLSE cared deeply and that the insinuation makes no economic sense (more playoff games means MLSE makes more money).

With the sports teams’ records dealt with, let's look at some of the pearls of business wisdom and sports tidbits in the book.

Business Background and Philosophy

It is interesting to note that Richard loved basketball and always wanted to run a basketball team from the time he was 20. Hockey was not his first sports love.

In the book, Richard takes you through his varied careers with Colgate, Pillsbury, Labatt Communications, The SkyDome and MLSE, which is very interesting reading, if you are interested in the business of business.

Mr. Peddie states that the value of MLSE grew six-fold from a $300 million enterprise value to somewhere close to two-billion while he was CEO. While the reasons for the growth are multi-faceted, a significant reason was that instead of having the Leafs and Raptors at cross purposes, MLSE was able to eventually synergistically combine four teams.

If there is one business takeaway from the book, it is how important Richard feels vision and values are to any leader and their organization and how they must be adhered to and not just be statements on plaques in a company’s reception area.

There are very many insightful quotes; three I found very interesting were the following:

  • You earn “respect first, affection second”
  • "Management gets the workforce it deserves” – in reference to the Harold Ballard era and the sex scandal at Maple Leaf Gardens
  • "The ability of a CEO to remember employee’s names and circumstances matter a great deal”

The Dark Side of the Dream Job

While being the president and CEO of MLSE has significant perks, when the fans’ beloved Maple Leafs are not winning, the job can be outright scary. In chapter two, Mr. Peddie discusses death threats he received, fans wanting to fight him and how someone hired a plane with “Fire Peddie” to fly over the Air Canada Centre ("ACC") and how there were three websites devoted to firing him. 

Interesting tidbits

Although the book provides some very insightful business and leadership tips and food for thought, what I really enjoyed as a sports fan were some of the sports related tidbits. Here are some of the more interesting ones:

Vince Carter was a “mama’s boy” and even after he was traded, his mother assumed she could continue to enter the private lounges at the ACC.

When Ken Thompson, the richest man in Canada, was being shown potential new seats at the ACC (season ticket holders were given a chance to select new seats when the team moved from Maple Leaf Gardens), he selected two great Platinum seats. However, 48 hours later he called back and asked for first row gold seats. These seats were only one row higher and saved him a seat licence and club fee. Rich guys are no fools.

I always hated the popcorn at Maple Leaf Gardens – I now know why. Richard reveals that the popcorn at Maple Leaf Gardens was always stale because it was made weeks ahead as there were not enough machines to pop it freshly.

A very interesting tidbit that touched me personally is when Richard speaks about how he would often give his own personal lower bowl Maple Leaf and Raptor tickets away prior to a Leafs game. He would go up to the purple (highest) section and find a kid with a Leafs or Raptor shirt on and give them his seats. Sort of his own “Campbell’s Van Line move of the game”. Why I found this interesting is that about twelve years ago I was given purple tickets to a Leafs game and took my son, who of course had his Leafs shirt on. A guy in a suit who said he worked for MLSE asked us if we wanted his tickets to move to the lower bowl and gave us his tickets. I do not remember the MLSE executive saying his name, so it may not have been Richard, but we were given the tickets and appreciated the gesture. What is funny about this incident is that my son who was 9 or 10 at the time wanted to stay in the purples since he could see the whole ice and I had to drag him to the great seats in the lower bowl.

A non-sports related tidbit is that Richard notes in his book that he was not a great student until later in university and if it hadn’t been for a teacher increasing one of his marks, he may never have even gone to university. Why I find this interesting is that I have always felt marks (except for the truly brilliant) were overrated and the intangibles are often of much greater importance (remember that if I ever interview you). Here is a perfect example of a great CEO who very easily could have not even gone to university if not for some luck.

I will stop here so you have something left to read, but I highly suggest you give the Dream Job a read and if you would like the chance to win a free signed copy, send your information to Lynda.