Attribution book summary
Income attribution
-Means that any income or loss arising from the trf prop will be taxed in the hands of the transferor of the prop
-May apply if individual transfers prop to a:
1. Spouse or common law partner
2. NAL minor, generally including children, grandchildren, nieces and nephews < 18 yrs old at the end of the yr
Attribution summary 2
-Electing out of 73 (1) means there are immediate tax consequences on the trf
a. attribution may still apply if FMV not paid
- Trf between spouses
- Attribution doesn’t apply of:
a.transferor elects out of ITA 73 1
b. FV consideration is paid by transferee (in form on cash or note) - Trf to a NAL minor
-Attribution does apply if
a.FV consideration is not paid by the NAL minor
b.Until yr in which the NAL turns 18
Trf to spouse
-ITA 73 results in trf of prop to a spouse taking place at the tax cost of the prop to the transferor, it automatically applies regardless of whether consideration is paid
- This results in tax-free trf since POD to transferor (tax cost) = ACB to transferee (tax cost)
- Applies to trf of spouse, former spouse, as part of a settlement, spousal trusts
- Electing out of ITA 73 will result in the trf being taxed
Material asset
-Trf on marital assets to a former spouse are tax free
- Dep capital prop on which CCA has been taken is transferred, the spouse takes both the capital cost and UCC
-If the transferor elects out of automatic transfer; POD of transferor = ACB of transferee = FV of prop transferred
When to elect out
- May be beneficial where there is an accrued capital gain o the prop transferred:
1. Non capital/capital loss that they may not be able to use- PRE may be claimed on the transfer of a personal residence providing higher base to the transferee spouse
- CGE may be claimed on QSBC shares
TRF of RRSPs
-RRSP/RRIF may be trf to a spousal RRSP or RRIF tax-free the following conditions are met:
1. Former spouses are living apart
2. Payment is req by the court or a written separation agreement
3. Trf is made directly between plans
Trf to NAL minor
- CG/CL from the trf of prop will be taxed in the hands of the transferor at the time of the transfer and the rules for NAL sales of prop will apply
- If attribution applies, prop income earned will be taxed at the hands of the transferor until the NAL minor turns 18
What is HST
- Tax on goods and services
- For simplicity purposes, the federal government has encouraged the
provinces to harmonize their sales tax system with the GST, and the
federal government would collect the provincial portion on their
behalf.
Who must collect HST
-Residents with taxable revenue > $30K.
1. In prev 4 quarters
2. In a single 1/4
Types of supplies
- Taxable suppliex (5% GST): includes all supplies that arent 0 rated or exempt
- Zero-rated supplies (0% HST/GST) : basic groceries, pres drugs, exported items, foreign travel
- Exempt supplies (0% HST/GST):
Why distinguish between 0 rate and exempt
-GST/HST paid on expenses incurred to earn income from taxable
or zero-rated sales is recoverable from the government (ITCs). If the
expenses are incurred to earn exempt sales, the GST/HST is not recoverable.
PLACE OF SUPPLY
-Moveable property including inventory: GST/HST is charged at the
rate in the province where the goods are purchased and taken.
-Real prop: GST/HST is charged at the rate in the province where the real property is situated, regardless of where the vendor or purchaser
reside).
-Services:GST/HST is charged at the rate in the province where the
services are used.
a. For example, a CPA does some accounting work in Mont on an Excel spreadsheet. The work is sent to the client in ON. As the services are used in ON, the CPA will bill HST at the ON rate of 13%.
ITCs
- Taxable and 0 rate supplies
- ITCs must be related to goods and services for use in commercial activities (ie Taxable and 0 rated supplies) - Exempt supplies
-Cant claim on expenses incurred on exempt supplies
-Restrictions on claiming ITCs
a. Club dues and memberships
b. ME @ 50%
c. Cars ITCs limited to first $34K
d. Car lease: ITCs based on max of $900/month
e. Personal or living exp: no ITCs
ITCs calc
- Bad debt: reverse HST recorded once bal been written off
- Allowances: ITCs can be claimed on reasoable payments
- Reim employer can claim HST poriton
- Volume rebate and volume discount: GST will be adjusted after refund
Filing deadlines & other req
-ITCs expire after 4 yrs
Death of taxpayer
-No election out of ITA 70 & spouse beneficiary:
1. No tax implication for the deceased, rollover of RRSP
-Election out of ITA 70 & spouse beneficiary:
1. Deemed to have disposed capital assets at FMV
2. RRIF taxed in spouse return
-Beneficiary not spouse:
1. Disposed prop at FMV
2. Tax unmatured RRSP and RRIF taxed on the terminal return
-If RRSP not trf to spouse, report full under T4RRSP=FMV
-No tax consequences on TSFA
Terminal return
-Filed from Jan 1 to date of death
-Can deduct capital losses on all kind of income
-Estate return
- May be required if any other income earned on by assets held in estate. Due 90 days after yr end
Right of things return
-Tax payer may die owing some:
1. Matured but unclipped bond coupons
2. Div declared before date of death
3. Salaries, commission, vac pay
-Options for treatmnent
1. Amount reported on terminal return
2. Election made to include in a seperate return
3. Trf to one or more beneificary
Other considerations for a will
- Impact on spouse: they need a residency, if they have no income how to survive?
- Guardinarship for a minor child
- Signiture on the will: could be changed if not signed
- Date of will: should be recent as to include all assets
- Consider death of executives
- Life insurance: non beneficial, can use to pay any tax payable
