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.

Tuesday, October 9, 2018

Sometimes You Just Have to Shake Your Head

Some people make financial decisions that just make you want to shake your head. Often these head shaking decisions are the result of not obtaining professional advice. Today, I am going to discuss a few situations were not obtaining the proper advice can lead to potential issues and/or detrimental consequences. I also discuss a non-financial situation that has caused my head to shake so hard I fear for my brain's safety.

Not Using Accountants and Lawyers

Look, I get it. accountants and lawyers can be expensive, but when you require them, you just need to accept they are a cost of personal or business life. Over the years, I have noted the following negative results that occurred because people refused to engage the proper professional advisor, which left me shaking my head:

Selling the Assets of a Business

Occasionally people figure they will split the difference and hire only a lawyer instead of an accountant when selling the assets of their business. The theory being the legal work must be done, and the lawyer must also be proficient at business and tax planning. The major consequence of doing this type of transaction without the advice of an accountant is that sometimes only the gross sales price of the assets is addressed in the agreement, but the allocation of the sale price is not dealt with. This leads to two issues:

1. The most tax efficient allocation of the purchase price is not negotiated for the vendor.

2. With no allocation, both sides just choose what is best for them. As a result, the CRA has two different allocations on the same transaction. Not a recipe to avoid an audit.

Transfer of Property to a Family Member

Over the years, I have discussed this issue multiple times. Many people transfer properties to their children for tax or probate purposes. Where you transfer your principle residence to a family member, the transfer can result in the loss of a part/all of your principal residence exemption on a future actual sale to an arms length party. Where you transfer land or a rental property to a family member, a deemed disposition on the transfer of the land or rental property may result. When I am engaged on a file that relates to cleaning up these type transfers, I shake my head and I think of the expression: penny wise and pound foolish - since these files typically result in the client owing significant taxes and incurring large professional fees, that could have been avoided with advice upfront.

As a reminder, where you transfer your principal residence to a child (say 50% ownership) who has their own principal residence or does not live in the house, you have effectively changed a tax-free principal residence into a 50% taxable asset (the value of the house at the time of transfer becomes the cost for the child, and any increase in that value becomes taxable to the child when the house is ultimately sold).

If you transfer land or a rental property to a child, the transfer will likely result in a deemed disposition to the parent at the fair market value (“FMV”) of the property and tax is due immediately on the difference between the original cost and the FMV at the time of transfer. In these circumstances the income tax liability and penalties (since the transfer often occurred many years ago) are so large I shake my head not only in disbelief but with profound sadness.

Note: Above I say likely because in certain circumstances a lawyer may, on purpose, separate legal ownership from beneficial ownership (the real value) before the transfer for probate planning purposes. If you are considering this, you must get tax as well as legal advice to ensure your specific situation does not result in a taxable event and both your accountant and lawyer agree the intended result is the actual result - i.e.: no taxable event and probate savings.

Not Paying for a Will

In this September, 2016 blog post I discussed that 62% of Canadians do not have a will. If that statistic is not enough to make your head shake, how about this situation: a few years ago, a lawyer I work with called me to discuss whether I was interested in taking on a client who had engaged him (I ultimately decided to pass on taking on this file for a few reasons). He told me that the client’s father did not want to incur the cost of hiring a lawyer and paying for a will even though he had various businesses and multiple real estate properties. The father passed away and the client was now dealing with the estate. However, the inaction of the father was only a minor head shaking compared to the second part of the story. The wife, who was left with a huge mess by her late husband, somehow also did not see fit to have her own will drafted. She then died without a will, leaving the estate in a tangled web, with the children tasked with sorting it out. Why a surviving spouse who had to deal with the aftermath of an estate left by their spouse who passed away without a will, would not immediately ensure they had their own will drafted, is beyond comprehension!

The Small Dog Park is for Large Dogs

I cannot conclude this post without a final non-financial head shaking situation. My wife and I have two dogs. We started taking our new puppy (she is about 17 lbs) to the dog park to play and socialize with other dogs. We entered the section for small dogs (the park is split into small and large dog sections) and encountered a man with a very large dog. I politely asked him if he could take his large dog to the section for large dogs. He told me his dog does not get along well with other dogs and therefore he must keep him apart from other large dogs. I said I appreciate that, but this is the small dog section. He said, too bad, he was not leaving. My wife and I looked at each other and simultaneously shook our heads. We walked away; which for me is a good thing, since I tend to talk back, but the combined size of the owner and dog were enough for me to keep my trap shut.

If that was not bad enough, a month later we went to the same park and encountered the same situation with a woman and her large dog. Again, I politely asked if she could take her large dog to the section for large dogs. Same response: no, my dog does not get along with other dogs. I suggested she should not bring her large dog to the dog park for small dogs if her dog has social difficulties. She got upset and said we were the third couple today telling her to leave and she was tired of being told what to do and was not leaving. My wife and I looked at each, shook our heads, and wondered if there is a correlation between dogs that don’t get along with other dogs and less than brilliant dog owners.

So, in conclusion. If you are undertaking a financial transaction, please obtain tax and legal advice and if your dog does not get along with other dogs, don’t bring them to a dog park.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.


  1. Dog parks are to dog trainers as personal services businesses are to incorporated individuals - something to be avoided at all costs!

  2. Mark, just want to say thank you. Your blog is very informational and entertaining. I came across your blog several days ago and looked up your bio. Happen to have a friend who works at your firm and asked her if you are a legend in your firm. She said you are famous and you are down to earth but you frown a lot unlike the photo. Thought it would be an interesting observation to share.

    It's incredible how you kept up this blog for 8 years. Just wondering do you still personally write these blogs yourself? I am amazed. You have just made a great impact by inspiring a young accountant.

    1. Hi Charlene

      You gave me my smile for the day, now I can go back to frowning. Yes I write them personally and 8 years is a very long time. I may be enlisting assistance very shortly. Glad I inspired a young accountant. Thx for the personality review, good to know.

  3. Mark: You speak to the transfer of land or a rental property to a child, but not cash. In my case, we are planning to build an expensive addition to our home for the purpose of having my aged parents come live with us. I would have them get a secured LOC to do this. Afterwards, they sell the farm to preserve their capital gains exemption and pay off the LOC. Catch is, we're asking them to pay for the addition. I would think having them gift me the money would avoid the issues you raised above. I am seeking professional (lawyer & accounting) advice, which is slow coming, but what are your thoughts?

    1. Hi Shawn

      I am glad you are getting proper professional advice. Sorry, but I don't provide personal tax planning advice on this blog. All I will say is that in isolation, a parent can gift cash to a child over 18.