Canadian Tax Podcast for the week of April 12, 2021. This week we cover:
- Tax consulting fees capped;
- Court case: Capital Expenditure vs. Repairs and Maintenance;
- Principal residence exemption – more tweaking?
- SK to hit electric vehicle owners with a fee;
- GME capital gains;
- Incorrectly-filed T5 and what to do;
- Dealing with foreign income on a T2;
“This is the Canadian Tax Podcast, Episode # 007, hosted by me, Cameron Ware. Good morning”
- “Happy Monday, it is the week of April 12, 2021. We’ll start with the news.
[ITEM 1] – Tax Consulting Fees Capped
- Bill C-462 Proposal to cap certain tax consulting fees at $100.
- This could affect firms that handle Disability Tax Credit applications etc.
- “The House unanimously passed my private member’s bill to limit the amount that tax credit promoters could charge,” Conservative MP Cheryl Gallant
- Details published April 14th
[ITEM 2] – Capital vs Repairs And Maintenance
- New tax case out of Vancouver (Dicaita)
- Help to detail what is Capital Improvement vs What is Repairs.
- “If something is created that did not exist before, the expense will tend to be a capital expenditure.”
- “…the work done to the interior of the unit was meant to restore the unit to its original condition and not to create a new asset. The work was meant to replace existing items that were worn out and had reached the end of their useful life. The repairs described by the Appellant appear to be a lot but they were done for less than $24,000; not a large amount of money considering the work done. The repairs did not require building permits or create any building code issues. The work did not involve any redesign of the unit and did not change, alter or increase the size, layout or functionality of the unit. Materials and items purchased were “like for like” products and involved no upgrades to better quality products or materials than what was there originally. The intention of the taxpayer was to keep the unit in a rentable condition; in other words make it suitable for its normal use.”
[ITEM 3] – Principal Residence Exemption
- Like I discussed last week, there is more commentary about messing with the Principal Residence Exemption
- Here is Allan Lanthier, a regular tax columnist, discussing the policy.
- Point here is that the 1966 Carter Commission said that a principal residence exemption should exist, but capped at $25,000. Because of politics, it was never capped.
ITEM  – SASKATOON – Fee on Electric Vehicles
- Interesting one out of Saskatchewan
- Fuel tax pays for road repairs. Because electric vehicles don’t pay the fuel tax (at the pump) the Sask govt levied a fee on electric vehicles.
- GME Capital gains
- “I earlier in 2021 I made some money selling Game Stop. How do I report this for next year?”
- Was it capital gains? Or business income?
- Annoying part is that CRA doesn’t really define this. I won’t get into details, look it up yourself. But the gist of it is did you make money on account of capital, or because of a business?
- Use discretion. If you planned to buy it and make money off dividends etc, that’s one thing. If you bought it to knowingly flip it, tough to argue that it’s capital.
- Dividend Gross Up error
- Gross-up rate for inelig divs in 2020 is 15%, not 17%
- So the textbook answer here would be amend the one you filed. (Or ask the accountant to fix the one the firm drafted)
- Shortcut would be just file your T1 with the correct amounts, as the error won’t matter for Corporate T2 purposes. CRA will likely force things to be correct anyway.
- T2 Foreign Income
- Sch 3 T2 is for dividends, but for Canadian dividends only.
- Foreign dividends are handled on the Sch 7. Important to go here, as this is where foreign tax credit calcs pull numbers from and populate the rest of the return.
- Part III, Line 019.
This is Canadian Tax Podcast, thanks for listening.