Canadian Tax Podcast for the week of 07 June 2021. This week we cover:
- TI 2020-086579 CEWS/Shareholder problem;
- CRA is “outgunned”
- CRA decreases volume of public company audits;
- G7 agrees to global minimum tax;
- Listener question: Taking a contract job vs staying employee;
- Listener question: Sale of US real estate;
- Listener question: T1135 and cost basis to use;
“This is the Canadian Tax Podcast, Episode # 013, hosted by me, Cameron Ware. Good morning”
- “Happy Monday, it is the week of June 7th, 2021. We’ll start with the news.
[ITEM 1] – CEWS Not Allowed
- Question was posed to CRA about whether or not certain employee wages qualify for CEWS
- TI 2020-086579
- CRA says “it depends” – In other words, no.
- Stated that if it’s just a retroactive journal entry posted to the shareholder loan (Dr salary, cr SH loan), they aren’t a fan.
- This is a mess for all sorts of technical reasons.
- Upload to TI here.
[ITEM 2] – CRA SAYS THEY ARE OUTGUNNED
- CRA says they are understaffed when it comes to “tax cheats”
- Debi Daviau says that “Their job is to go after individuals and entities that, in effect, have unlimited resources and can aggressively exploit legal and international grey areas for their own gain”
- Unlimited resources? CRA was just awarded another $300million in the 2021 budget. Total budget of $5.1 billion
- Maybe they should stop with the Poor Me routine, and actually do their jobs. Bullying average taxpayers with fishing expeditions and unreasonable paperwork requests (“sham” tactics anyone?) is not a decent way forward.
[ITEM 3] – Public Company Audits Dropped
- To listeners of podcast here, this is no surprise.
- Audits of large companies dropped from 6,281 in 2017, to 4,257.
- CRA says they are doing focused, targeted audits to bring in “Big Fish”
- These take longer, but bring in more revenue
- Counterpoint is that CRA has discovered that when you go after smart, sophisticated entities that have resources, you need to have your stuff squared away first. (Ties to above)
- Why bother with that, when you can chase small businesses instead…
ITEM  – Global Minimum Corporate Tax
- G7 has announced agreement on minimum global corporate tax
- Push to tax multinationals (transfer pricing / Big Tech)
- Supposed to end race-to-bottom in corp tax world
- 20% tax on profits of at least 10%
- ““The timing remains to be worked out, exactly, but there is broad agreement that these two things go hand in hand,” Yellen told reporters
- So, this is not a thing, but gives an idea of the direction that governments are going in the new Biden era.
- Contractor vs Employee offer
- $45/hr employee vs $50/hr contract basis
- Issue 1 is PSB vs actual contractor, but deal with that elsewhere
- Issue 2 is money. Short answer is you’re now stuck with CPP, lose EI, and have to pay accountants and lawyers, and headache.
- My experience on this is you need to be making at least 30% more to consider it. (Closer to 50%)
- Cross-Border US Real Estate
- Okay break this down:
- When you left US to enter Canada 9 yrs ago, FMV is your new basis for Cdn purposes
- US purposes is original ACB.
- You’ve been filing US tax returns for rental property, right? Depreciation and basis additions for US purposes.
- Under US $250k, no capital gain.
- Canada-side, maybe gain, also watch gain on forex.
- T1135 Cost Basis
- So the issue here is math being used.
- Cost Base means what you bought the asset for. Full stop. If over $100k, have to report.
- It’s not based on profits/cash flow, but the actual cost of the asset.
This is Canadian Tax Podcast, thanks for listening.