Tax Questions

Income tax policy, rules, problems, strategy and software. Property and consumption taxes too.
ostrich
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Post by ostrich »

My father passed away in August, so according to the link you provided I would have until April 30 to file tax returns. But I'd just as soon get it done as soon as I can so that it's all resolved. Can you go to

I've been looking through some of the other stuff, and what looks like old corporate books and records. Some are from a company that my father was I believe one of the directors of, but the records are quite old - the company was incorporated in 1981 and there are some documents dated between 1986-1991 where I believe my father was involved with the firm. I'm pretty sure the corporation was dissolved and doesn't exist anymore.

Another set of documents seems to relate to some type of association between the first corporation and another one that for the most part doesn't seem to involve my father - it is a US corporation so there are some US corporate tax filings documents and the like. These date from around 1995. The only way this appears to involve my father at all is that there was obviously some partnership between that corporation for some project.

Would there be any reason to need to retain any of this stuff? I'm 99% sure the first corporation was either dissolved or went bankrupt. Are there any general guidelines for this kind of thing?
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Post by gossg »

I turned down an investment in an LP of raw land, awaiting Calgary to grow out in that direction. The main reason was that I couldn't see any way to "expect" income from it. The land was currently being rented to a farmer who paid about enough to cover the taxes.

Perhaps I could "expect" farmland rental rates to rise dramatically. But I cannot lie with any kind of a straight face. I decided not to consider the investment. I don't know whether I'd have gone for it if the immediate reaction hadn't been so clear.

I wanted to use borrowed funds to make the investment, so the deduction status was very important.
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Post by Norbert Schlenker »

brucecohen wrote:IIRC, CRA wants records kept for at least 7 years.
For a deceased taxpayer, wait for the Notice of Assessment and then apply for a Clearance Certificate. Once that's issued, you can ditch everything (except the Certificate).
ostrich wrote: Would there be any reason to need to retain any of this stuff? I'm 99% sure the first corporation was either dissolved or went bankrupt. Are there any general guidelines for this kind of thing?
If the most recent date on it is 1995, forget it. CRA isn't going to look that far back for any individual taxpayer, especially if they're dead. I would still get the Clearance Certificate before I built the bonfire though.
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Is Mortgage Tax Deductible?

Post by itguy »

In Canada, Is mortgage tax deductible? I think in US its possible. My accountant says we can't. But www.tdmp.com says we can. How far is it true?
All comments are appreciated..Thanks!
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Post by pitz »

If the proceeds of the mortgage were used to invest in assets or obligations that have the potential of providing taxable income in the future, then yes, the interest on money borrowed is deductible.

That website appears to be selling something that's been colloquially called the Smith Manouevre. There's a lengthy thread concerning it on here (use the search function); its pretty risky, and you need to keep costs and risk under strict control in order for it to be effective.
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Post by patriot1 »

A mortgage is a form of security for a loan. Whether the interest on a loan is deductible depends on what the money is used for, not the form of security. If it's used to buy a taxable investment, the interest is deductible. If it's used to buy a personal good - including a personal residence - it's not.

Note this works both ways. If you owned a rental house, and took out a mortgage to buy a private car, the interest would not be deductible. But if you took out a mortgage on your personal residence to buy a taxi, the interest would be deductible.
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Post by jeebuz »

I am a bit confused on what "There is no attribution on the CTB or UCCB" means for investments purchased for the child using CTB funds.

In who's hands are the interest + capital gains on the investments taxed?
1. The lowest income parent?
2. The child?
3. No-one?

#3 seems doubtful. #2 is effectively the same as #3 until the child earns more then the basic exemption amount. I really hope it's not #1. :D

Thanks to anyone who responds...

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Post by ukridge »

I'm not sure, but I recall hearing the lower income parent interpretation. My wife gets it direct deposited as she's the lower income parent. She includes it in the tax return as well. (At least as far as I remember).

As for sheltering the generated income, you can add the CCTB into an RESP account and let it accumuate tax free. (You may have already considered it, but this in case you haven't). If you have the RESP match room, you also get the CESG grant to boot.

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Post by adrian2 »

milo wrote:if I have been getting the cctb deposits for a few years, can I just move the money to my 3 kids as a lump sum now?
Do I have to prove that the money moved from from the cctb? How do i do that?
In the past, I had an automatic investment plan on the same date and amount the CTB (as it was then called) was deposited into my bank account. As it was a dollars and cents amount, it should have been pretty obvious for any potential auditor that it is, in fact, the CTB being transferred into an in-trust investment account.

As for going back, I don't know. Do you feel lucky? I wouldn't go for more than one year retroactively, but I'm not a tax adviser.
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Post by adrian2 »

jeebuz wrote:I am a bit confused on what "There is no attribution on the CTB or UCCB" means for investments purchased for the child using CTB funds.

In who's hands are the interest + capital gains on the investments taxed?
1. The lowest income parent?
2. The child?
3. No-one?
#2.
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Post by jeebuz »

Thanks Adrian. This is what I assumed when I started investing the CTB.

ukridge: I am currently making biweekly $100 payments into the RESP to get the maximum CESG match every year. Otherwise I would be using the CTB for RESP contributions.

For me the CTB investment(s) are a "slush fund" for some undetermined future purpose. If my child is deserving it will go toward a downpayment on their first house. Otherwise I'll likely use the funds for something frivolous for myself and my wife (like a nice touring motorcycle or a trip to Europe, lol)

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Post by marty123 »

adrian2 wrote:
jeebuz wrote:I am a bit confused on what "There is no attribution on the CTB or UCCB" means for investments purchased for the child using CTB funds.

In who's hands are the interest + capital gains on the investments taxed?
1. The lowest income parent?
2. The child?
3. No-one?
#2.
Just to be clear:

CTB:
Interest and dividends from investments can be taxed to the child if some conditions are met.

UCCB:
Interest and dividends from investments cannot be taxed in the child's hands. The income is attributed back to the parent who received the UCCB.

Capital Gain is always taxed in a child's hand, no matter where it comes from.
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Post by brucecohen »

marty123 wrote:UCCB:
Interest and dividends from investments cannot be taxed in the child's hands. The income is attributed back to the parent who received the UCCB.
My understanding is that there is no attribution for UCCB. See the last sentence of CRA's Q1 reply here
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Post by marty123 »

brucecohen wrote:
marty123 wrote:UCCB:
Interest and dividends from investments cannot be taxed in the child's hands. The income is attributed back to the parent who received the UCCB.
My understanding is that there is no attribution for UCCB. See the last sentence of CRA's Q1 reply here
I stand corrected :oops:
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Post by ostrich »

I'm sure the answer to this includes "it depends", but how much would you generally expect it to cost to have a CA prepare a set of corporate tax returns? My father had a business open (which was a partnership with another person) at the time of his death - I gather this business was basically a venture to do some commodities investing. The venture never made any money (and the investments actually ended up in the red by the end).

We were able to track down the accountant who my dad had worked with in the past, and they are claiming that to prepare the tax returns for the business would cost approx $1000, which they said was agreed upon with my father prior to his death. That sounds like a huge amount for me, particularly since this business basically didn't do much of anything and any tax returns should have been quite simple to prepare. Are there any guidelines on how much this kind of tax preparation generally costs?
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Post by Bylo Selhi »

ostrich wrote:I'm sure the answer to this includes "it depends", but how much would you generally expect it to cost to have a CA prepare a set of corporate tax returns?
Well, it depends ;) on factors like the CA's level of experience, whether they're a sole practitioner or operate out of some fancy downtown office, the complexity of preparing the return, etc. You also mention "the tax returns" so presumably the $1,000 you were quoted covers more than one return. Perhaps it also includes work to wind down the business.

I would think that these days ~$150/hr is not unreasonable for someone with a few years of experience. That works out to only ~7 hours. Do you think that's unreasonable for the amount of work involved?
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Post by Dennis »

Run it over to Joanne. She'd be glad to do it with a pencil and paper :twisted:
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Post by Jo Anne »

Dennis wrote:Run it over to Joanne. She'd be glad to do it with a pencil and paper :twisted:
I haven't done a T2 in 20 years.

Perhaps this might be of some help to ostrich.
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Post by ostrich »

It might be reasonable - I have no experience with corporate accounting, so perhaps that is indeed fairly typical. I guess I'm mainly trying to get a feel for whether this sounds obviously way off. The complexity of the return *should* be pretty simple relatively speaking - my dad made some investments under the umbrella of this corporation that lost money, so effectively the business lost money. Other than that it basically had no employees or operations. Perhaps there is some extra stuff to be handled since the idea is to submit the final tax returns so that the company can then be dissolved.
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Tax Deductable Fees

Post by dougd »

I have three accounts with a fee-based financial advisor company - all of the accounts are RRSP or Spousal RRSP accounts. Are the management fees charged by the advisor tax deductable? The is a $100/yr admin fee for each of the accounts which I believe is not deductable, but are his management fees deductable? I am raising the question because I have been told because these are RRSP accounts, the management fees are not tax deductable. I don't agree, but would like any feedback/advice from the readers here. Thx

Doug
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Post by Jo Anne »

From the CGA Ontario 2007-2008 Personal Tax Planning Guide (page 64):
Taxpayers may be required to pay certain RRSP-related administrative or management fees outside of their plan. Such fees are not tax-deductible, even when paid outside of an RRSP.
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Post by dougd »

I see the admin fees here as being applicable to what you have stated, but not the management fee. I still see nothing in help file associated with line 221 of the income tax return or IT 238 that says it cannot be claimed.
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Post by Jo Anne »

dougd wrote:I see the admin fees here as being applicable to what you have stated, but not the management fee. I still see nothing in help file associated with line 221 of the income tax return or IT 238 that says it cannot be claimed.
I'm going out on a limb here, but I suspect that CRA deems "management fees" and "administrative fees" to be pretty much the same thing.

And now you've made me get out all my tax forms at 11:00 on Saturday night. Sheesh.

Look at Schedule 4, Statement of Investment Income (which is where you itemize your carrying charges). Carrying charges go at the bottom. Note that you are required to specify what the carrying charges are for. You'll have to specify that they are for your RRSPs.

Now look at the Guide, Line 221. The very last paragraph of that section (3/4 of the way down page 28) says that you have to have receipts for your carrying charges. You don't have to send them in with your return, but you need them anyway. Did your financial advisor give you receipts? What do they say?
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Post by dougd »

Sorry to make you drag out your income tax forms last night. My advisor distinguishes between admin fees and management fees on monthly statements. One arguement could be that I am paying for advice whether or not it is within an RRSP or not and is predicated on the amount under investment, not the type of investment. Not sure if that would wash, but I will give it a shot. The gov't regulations and guidance documents leave room for a lot of interpretation.
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Post by adrian2 »

Bottom line is: are the fees related to something that potentially can earn income - similar to the tax deductibility of interest paid - it does not matter what, if any, is pledged as security for the loan, what matters is what are the loan proceeds used for.

In this case, admin fees / management fees are both related to the RRSP. The RRSP is not something that can earn income; it's a tax-deferred vehicle. According to CRA rules, any fees related to an RRSP are not tax deductible. You can take your chances and claim it as a deduction, they may not catch you; but that doesn't change the fact that you are not right, according to current tax laws.
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