Federal Budget 2017 - March 22

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AltaRed
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Re: Federal Budget 2017 - March 22

Post by AltaRed » 13 Mar 2017 15:45

I agree. Don't see how Twa2w can do what he is doing unless: 1) it is attribution of income based on proportionate contribution to the asset, or 2) claim more spousal tax credit.

See http://www.taxtips.ca/filing/spousal-di ... ansfer.htm for explanation re: 2) above.
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Re: Federal Budget 2017 - March 22

Post by twa2w » 13 Mar 2017 16:18

AltaRed wrote:I agree. Don't see how Twa2w can do what he is doing unless: 1) it is attribution of income based on proportionate contribution to the asset, or 2) claim more spousal tax credit.

See http://www.taxtips.ca/filing/spousal-di ... ansfer.htm for explanation re: 2) above.
Not sure either but when you sit down with an auditor several years in a row and go through entire tax return line by line and explain everything in detail and the auditors were satisfied.
The reason initially was to claim more spousal credit but the last two years I did this, my spouses income was too high and the auditors never flinched. He/ she knew the dividends were mine.
Maybe I got lucky. In any event all audits and reviews were all clean as far as CRA was concerned.
The last two years were not really deliberate on my part. I was in a hurry to do taxes and just carried on the previous years split without thinking it through. In hindsight, with a little more time I likely would have realized it was incorrect. However, I explained very clearly to auditors that they were my dividends. I think I kinda realized I might be offside on that during the audit but just gave the auditor the info and held my breath. When everything was clear I didn't think anything more about it.

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Re: Federal Budget 2017 - March 22

Post by SQRT » 14 Mar 2017 08:10

twa2w wrote:
AltaRed wrote:I agree. Don't see how Twa2w can do what he is doing unless: 1) it is attribution of income based on proportionate contribution to the asset, or 2) claim more spousal tax credit.

See http://www.taxtips.ca/filing/spousal-di ... ansfer.htm for explanation re: 2) above.
Not sure either but when you sit down with an auditor several years in a row and go through entire tax return line by line and explain everything in detail and the auditors were satisfied.
The reason initially was to claim more spousal credit but the last two years I did this, my spouses income was too high and the auditors never flinched. He/ she knew the dividends were mine.
Maybe I got lucky. In any event all audits and reviews were all clean as far as CRA was concerned.
The last two years were not really deliberate on my part. I was in a hurry to do taxes and just carried on the previous years split without thinking it through. In hindsight, with a little more time I likely would have realized it was incorrect. However, I explained very clearly to auditors that they were my dividends. I think I kinda realized I might be offside on that during the audit but just gave the auditor the info and held my breath. When everything was clear I didn't think anything more about it.
What will you do this year?

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Re: Federal Budget 2017 - March 22

Post by twa2w » 14 Mar 2017 11:35

well this year is totally different in terms of income breakdown with my spouse so I will declare all the dividends for 2016.

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Re: Federal Budget 2017 - March 22

Post by ig17 » 19 Mar 2017 11:40

Trudeau's senior advisor Gerald Butts:
https://twitter.com/gmbutts/status/843094503246454784
"If it wasn’t clear before, we know now that Trudeau is serious about inequality." #Budget2017
Translation: prepare to bend over for more taxes on "the rich".

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Re: Federal Budget 2017 - March 22

Post by ghariton » 22 Mar 2017 16:39

No major tax changes. In particular, no change to capital gains inclusion rate or dividend tax credit. A task force will look at these and report in time for the fall budget update. In practice, that means no changes in the 2017 taxation year. They are worried about what the U.S. will do, and want to wait and see.

Deficits will stay high for the next five years, despite a big slowdown in spending increases. Budget will be in balance earliest 2050.

Big push on innovation and infrastructure, but it looks as if the money will mostly be recycling money already designated in last year's budget.

George
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AltaRed
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Re: Federal Budget 2017 - March 22

Post by AltaRed » 22 Mar 2017 16:47

Agreed. Not much that really could be done pending how the elephant will be rolling over on to the mouse. The deficit numbers continue to be terrible though. A huge price for our children and grandchildren to inherit.
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Re: Federal Budget 2017 - March 22

Post by adrian2 » 22 Mar 2017 17:01

ghariton wrote:
22 Mar 2017 16:39
Budget will be in balance earliest 2050.
:rofl:
(probably rolling 6 feet under by then)
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Re: Federal Budget 2017 - March 22

Post by planB » 22 Mar 2017 17:04

Federal budget highlights from KPMG.

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Re: Federal Budget 2017 - March 22

Post by Koogie » 22 Mar 2017 17:37

From the KPMG report:

"Holding a passive investment portfolio inside a private corporation—The budget states that, since corporate income tax rates are generally lower than personal tax rates, this strategy can facilitate the accumulation of earnings by owners of private corporations."

Ahh, no not really. Investments don't qualify for CCPC rates. Sure, the government has to wait for the individual taxation portion until I take the money out but isn't that the point of integration ? Realistically, I am the one taking the gamble because generally tax rates go up, not down. So the longer I hold invested money in my CCPC, the higher the chances that I will pay MORE tax on it when I withdraw it. I guess that is no good for paying for the bribespromises they made today though so they want theirs now rather than later.
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Re: Federal Budget 2017 - March 22

Post by ghariton » 22 Mar 2017 17:49

Also an end to income sprinkling, i.e. using a CCPC to distribute income through family members who pay at a lower effective tax rate. That's how I funded the children's education and was one of the main reasons I set up a CCPC (the other was to build up retirement funds via retained earnings). Both reasons gone now. Luckily I foresaw their passing, paid out the retained earnings, and dissolved my CCPC last year.

Oh well, it was fun while it lasted.

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Re: Federal Budget 2017 - March 22

Post by Koogie » 22 Mar 2017 17:56

ghariton wrote:
22 Mar 2017 17:49
Also an end to income sprinkling, i.e. using a CCPC to distribute income through family members who pay at a lower effective tax rate. That's how I funded the children's education and was one of the main reasons I set up a CCPC (the other was to build up retirement funds via retained earnings). Both reasons gone now. Luckily I foresaw their passing, paid out the retained earnings, and dissolved my CCPC last year.
Oh well, it was fun while it lasted.
George
I never used income sprinkling. Hell, I've never paid myself or DW enough to even break out of the 20% bracket. But, I have used a CCPC to keep my retained earnings, invested them for the future and hoped to provide for us while still following the rules.

Oh well... spare a passing thought for those of us who played by the rules and still might get f***ed.
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Re: Federal Budget 2017 - March 22

Post by SQRT » 22 Mar 2017 18:08

Inclusion rate for cap gains and div taxation are still in their radar. Gladthey didn't move on it now though.

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Re: Federal Budget 2017 - March 22

Post by ghariton » 22 Mar 2017 19:07

SQRT wrote:
22 Mar 2017 18:08
Inclusion rate for cap gains and div taxation are still in their radar.
Yes indeed.

However it's difficult to see how that will play out. If they study it over the summer and fall, it's unlikely that they will make substantive changes for the 2017 taxation year. By 2019 they will be in full election mode, and won't want to make lots of voters unhappy. So it's 2018 or wait for the next mandate. But 2018 is the year the Ontario Liberals hope to get re-elected. I know the measures we are discussing are federal, but isn't there a risk that unhappiness will spill over to Ms. Gwynne? (As if she needed any more?)

I think I'll hang on for a few more months before crystallizing any capital gains. I want to see how Mr. Trump and the Republican Congress are making out (no pub intended). Of course, if things go badly enough, perhaps I won't have to worry about capital gains taxes because I won't have to worry about capital gains.

George
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Re: Federal Budget 2017 - March 22

Post by Peculiar_Investor » 23 Mar 2017 08:09

Another summary, TaxTips.ca - 2017 Federal Budget.
TaxTips.ca wrote:To be consistent with the rules for other registered plans such as Tax-Free Savings Accounts (TFSAs), Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs), the budget proposes to extend anti-avoidance rules used for these plans to RESPs and RDSPs
The TaxTips.ca page also mentions the Tax Measures Supplementary Information on the Budget website.

Another minor item that's probably more nostalgia for FWF'ers, RIP Canada Savings Bond | Financial Post
The Canada Savings Bond, once a prized interest-bearing gift from grannies everywhere will cease to exist.

The symbol of safe savings and a secure source of government funding since its creation, the year after the end of the Second World War, the CSB has been in severe decline since its peak in the late 1980s, losing ground to a plethora of competing retail investments.

Once valued at more than $50 billion, the program has declined to about $5 billion, and now accounts for less than one per cent of total federal market debt.

The government reviewed the program, and determined it would be phased out this year, with no new sales in 2017, according to the federal government’s budget document published Wednesday.
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Re: Federal Budget 2017 - March 22

Post by kcowan » 23 Mar 2017 16:22

ghariton wrote:
22 Mar 2017 17:49
Also an end to income sprinkling, i.e. using a CCPC to distribute income through family members who pay at a lower effective tax rate. That's how I funded the children's education and was one of the main reasons I set up a CCPC (the other was to build up retirement funds via retained earnings). Both reasons gone now. Luckily I foresaw their passing, paid out the retained earnings, and dissolved my CCPC last year.
I think George is deserving of some kind of FWF planning award for "Making hay while the sun is shining"!
ghariton wrote:
22 Mar 2017 19:07
SQRT wrote:
22 Mar 2017 18:08
Inclusion rate for cap gains and div taxation are still in their radar.
However it's difficult to see how that will play out. If they study it over the summer and fall, it's unlikely that they will make substantive changes for the 2017 taxation year.
I heard an interesting theory from one of the BNN prognosticators. Make the capital gain tax dependent on the length of time held. If one year, tax at 100%. If 10 years, tax at 40% (instead of 50%) of the value. Prorate in between.

I thought it had potential. It would give something to long term holders while penalizing speculators. With additional provisions, it could even be made to apply to permanent residences (e.g. 40% would become 0%).

Of course it would make ACB calculations even harder. But I like the concept.
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Re: Federal Budget 2017 - March 22

Post by longinvest » 23 Mar 2017 16:28

kcowan wrote:
23 Mar 2017 16:22
I heard an interesting theory from one of the BNN prognosticators. Make the capital gain tax dependent on the length of time held. If one year, tax at 100%. If 10 years, tax at 40% (instead of 50%) of the value. Prorate in between.

I thought it had potential. It would give something to long term holders while penalizing speculators. With additional provisions, it could even be made to apply to permanent residences (e.g. 40% would become 0%).

Of course it would make ACB calculations even harder. But I like the concept.
That would be similar to my proposal, earlier in this thread:
longinvest wrote:
08 Mar 2017 10:11
Actually, I wouldn't mind too much a 100% inclusion rate if the capital gain was calculated in inflation-adjusted terms. In other words, I buy $100 of stuff in 2017. In 2027, 10 years later, I sell the stuff for $150. Meanwhile, CPI has increased from 129.5 to 157.9. The inflation-adjusted capital gain would be $150 - ($100 X (157.9 / 129.5)) = $150 - $121.93 = $28.07.
[...]
For simplicity, the CPI would be considered on an annual basis (not on a monthly basis). The CRA could publicize each year's CPI for tax purpose (which would be the average total CPI for the year, as published by Statistics Canada). [...]
In the above example, the $28.07 taxable gain is equivalent to a 56% inclusion rate after 10 years (28.07/50.00 = 0.56). But, instead of being an arbitrary inclusion rate set by politicians, the rate is determined by how actual inflation affected the investment.
Last edited by longinvest on 23 Mar 2017 16:34, edited 2 times in total.
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Re: Federal Budget 2017 - March 22

Post by DenisD » 23 Mar 2017 16:31

Once the CRA takes over our ACB calculations, they'll be able to fiddle with them to their hearts content. Most likely not in our favour. And they'll be so complicated, most people won't even try to verify them.

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Re: Federal Budget 2017 - March 22

Post by DenisD » 23 Mar 2017 16:46

kcowan wrote:
23 Mar 2017 16:22
I heard an interesting theory from one of the BNN prognosticators. Make the capital gain tax dependent on the length of time held. If one year, tax at 100%. If 10 years, tax at 40% (instead of 50%) of the value. Prorate in between.
Yabbut most short term traders lose money. CRA might collect less tax with this scheme.

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Re: Federal Budget 2017 - March 22

Post by SQRT » 24 Mar 2017 04:08

kcowan wrote:
23 Mar 2017 16:22


Of course it would make ACB calculations even harder. But I like the concept.
Yes, I like it too, but for someone who trades in and out of one name, it might get tricky. Average, FIFO, LIFO? When I sell a share of TD is it the one I bought in 1997, the option I cashed in 2003, or the one I bought in 2009? Or some average?

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Re: Federal Budget 2017 - March 22

Post by longinvest » 24 Mar 2017 07:23

SQRT wrote:
24 Mar 2017 04:08
kcowan wrote:
23 Mar 2017 16:22
Of course it would make ACB calculations even harder. But I like the concept.
Yes, I like it too, but for someone who trades in and out of one name, it might get tricky. Average, FIFO, LIFO? When I sell a share of TD is it the one I bought in 1997, the option I cashed in 2003, or the one I bought in 2009? Or some average?
I don't see a reason to change the current average rule. But, DenisD's comment about short-term traders is a good counter argument to "smart ACB" calculations, in addition to the higher complexity of calculations.

The current 50% inclusion rule might not be perfect, but it seems good enough. Luckily, according to the G&M, Bill Morneau says government not planning to raise rate on capital gains:
In an interview with The Globe and Mail in his Parliament Hill office Thursday, Mr. Morneau expressed concern with the continuing speculation about whether Ottawa will raise the inclusion rate on capital gains.

“Those were not in our budget and those are not key areas of focus,” he said.
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Re: Federal Budget 2017 - March 22

Post by ig17 » 24 Mar 2017 08:06

longinvest wrote:
24 Mar 2017 07:23
The current 50% inclusion rule might not be perfect, but it seems good enough. Luckily, according to the G&M, Bill Morneau says government not planning to raise rate on capital gains:
In an interview with The Globe and Mail in his Parliament Hill office Thursday, Mr. Morneau expressed concern with the continuing speculation about whether Ottawa will raise the inclusion rate on capital gains.

“Those were not in our budget and those are not key areas of focus,” he said.
Yeahbut:

Don’t relax too much: Finance Minister Bill Morneau doesn’t rule out future changes to capital gains taxes | Financial Post
Ottawa made no changes in the federal budget to the way capital gains are taxed, but Finance Minister Bill Morneau isn’t completely ruling out changes in the future.

When asked about possible changes to the way profits from selling off personal assets are taxed in the future, Morneau left the door open.

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Re: Federal Budget 2017 - March 22

Post by Shakespeare » 24 Mar 2017 09:16

What they should do is what Sask just did: raise the GST.
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Re: Federal Budget 2017 - March 22

Post by kcowan » 24 Mar 2017 09:32

I agree that any differing calculation is dependent on the proper calculation of ACB. But that is already required. Why not make it more fair if they change it anyway? I think the problem is that politicians want something dumb enough for them to understand. That will eliminate any more rational approach.
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Re: Federal Budget 2017 - March 22

Post by longinvest » 24 Mar 2017 09:53

kcowan wrote:
24 Mar 2017 09:32
I think the problem is that politicians want something dumb enough for them to understand.
Yes. But, it's not such a bad thing, when you think about it. If it's dumb enough for politicians, it should be dumb enough for lots of people. As long as it's good enough (like the current 50% inclusion rule), I won't complain. It's the KISS principle (Keep It Simple Stupid Keep it simple, stupid).
Last edited by longinvest on 24 Mar 2017 19:47, edited 1 time in total.
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