Case: 2019 TCC 205 — Paletta et al. v. The Queen
Paletta et al. v. The Queen. Tax Court of Canada, October 1, 2019 (Amended October 7, 2019). Neutral Cite: 2019 TCC 205. Court File Nos. 2013-225(IT)G, 2013-2420(IT)G, 2013-4837(IT)G. Hogan J. Tax shelters — Appeal from Minister’s disallowance of losses claimed by taxpayer — The individual and corporate taxpayers entered into two separate arrangements which they characterized as investments in the film industry and they subsequently claimed $96 million in losses arising from those investments.
The Minister disallowed all such loss claims on the basis that some of the transactions entered into by the parties were a sham and that the partnership interests acquired by the appellants were unregistered tax shelters. The taxpayers appealed from those characterizations and their appeals were dismissed. The Tax Court of Canada reviewed the terms of the agreements entered into by both the individual and corporate appellants, and held that each such agreement was properly characterized as a sham.
The Court concluded that the parties to the agreements had agreed from the start that the film company would reacquire the films made before their commercial release by exercising its option to acquire all of the partnership interests. Consequently, in the Court’s view, the appellants and the partners knew that they would never generate income from the films. The Court concluded that each such Option Agreement was therefore a sham. The appellants were not entitled to the loss claims made, and their appeals from the Minister’s disallowance of such claims were dismissed. — Income Tax Act, RSC 1985, c. 1 (5th Supp.), s. 237.1.
Film and Media Tax Credits tax refunds
Planning to invest in the film industry. There are risks of disallowance of losses within structures that are not acceptable to CRA. Call us before you invest at 514-954-8789 or visit our Contact-us page.
Canadian and Provincial Film or Video Production Tax Credits, and the Film or Video Production Services Tax Credits provide refundable income tax credits to eligible productions. If you are funding stage or starting a production call us at 1-514-954-8789 or Contact-us for free consultation.
Resolutions 76 to 78
Under the current Scientific Research & Experimental Development (SR&ED) program, qualifying expenditure deductions are fully deductible in the year they are incurred and eligible for an investment tax credit. This credit is larger and refundable for corporations that are Canadian-controlled private corporations (CCPCs) for the first $3 million in eligible expenditures. However, the amount eligible for the enhanced credit is reduced once a CCPC’s taxable income for the previous year reaches $500,000 (before being eliminated at $800,000) and once a CCPC’s taxable capital employed in Canada reaches $10 million (before being eliminated at $50 million).
Budget 2019 proposes to eliminate the taxable income reductions currently set out in 127(10.2) of the ITA. Under the new regime, CCPCs claiming SR&ED credits will only be subject to reductions in their enhanced SR&ED credits based on their taxable capital employed in Canada. The purpose of this amendment is to provide a more predictable reduction in the enhanced SR&ED credit for CCPCs.
This amendment will apply to taxation years ending on or after March 19, 2019.
Applies to taxation years ending on or after March 19, 2019
About W.J. Oliver and Associates
W.J. Oliver and Associates provides Canadian and international income tax recovery services to individuals, businesses, and trusts.
If you want to take advantage of our services. Give us a call at 514-954-8789, or visit our Contact Tax Experts page.
2018 Fall Economic Statement announced several tax goodies that will hopefully benefit Canadian businesses.
- The most notable among them is the Accelerated Investment Incentive for capital cost allowance (“CCA”). Full CCA write-offs for manufacturing and process property and eligible clean energy property.
- Mineral exploration tax credit will be extended for five years, until March 31, 2024.
- The Canadian government is promising several tax incentives to support the Canadian media. They will provide more clarity in Budget 2019. Specifically, the government is proposing a refundable tax credit for labour costs incurred by Canadian news organizations, a temporary non-refundable tax credit for eligible digital news media subscriptions, and to give non-profit news organizations qualified donee status.
The Quebec government will follow the accelerated capital cost allowance rules announced by the Department of Finance Canada announced in its Fall Economic Statement 2018 on November 21, namely to:
- allow taxpayers to write off the full cost of machinery or equipment used in manufacturing or processing and clean energy generation equipment, for the taxation year in which the property becomes available for use, where such property becomes available for use before 2024, with a gradual reduction afterwards;
- introduce an accelerated investment incentive, namely, an accelerated capital cost allowance making it possible to claim up to three times the amount that could otherwise be deducted for nearly all other types of assets, for the taxation year in which the property becomes available for use.
Ontario Minister of Finance, Vic Fedeli, announced on December 10, 2018, that the province will “match the federal capital cost allowance”. This statement presumably refers to the Accelerated Investment Incentive that was announced in the federal 2018 Fall Economic Statement last month.
- Although the computation of income for provincial purposes mostly relies on income computed for federal income tax purposes, capital cost allowance for Ontario purposes is slightly different. The CCA deduction from income is not the amount that is deducted under the federal Income Tax Act, but it is rather prescribed by regulation. That regulation, however, provides that the provincial CCA deduction is nearly identical to the federal computation, but with a few very minor differences, such as different rates applicable to certain farming equipment.
- As a result of this announcement, the government will ensure that its CCA rules harmonize with the Accelerated Investment Allowance for federal purposes, so Ontario businesses will be able to accelerate their CCA deductions for newly-acquired assets for the purposes of computing both federal and provincial income tax.
If you are looking to acquire manufacturing and processing or clean energy property or interested in Canadian media incentives contact us to save your tax.
New Residential Rental Property Rebate
If you are a landlord of a new residential rental property, it is important to know about the New Residential Rental Property Rebate. When you purchase a residential rental property, depending on your province of residence, you have to pay goods and services tax/harmonized sales tax, or GST/HST/QST. To address the situation and level the playing field, the government introduced the NRRP Rebate. You do not need to be a GST/HST/QST registrant to apply. Individuals may also qualify.
For more information http://www.canadian-tax-refund.net/new-residential-rental-property-rebates/
Most Small Businesses Spend $1000 or More on Tax Administration Alone
- US Small businesses are spending way too much time and money on federal taxes, a new survey has found.
- According to the National Small Business Association Tax-Survey-2017 (PDF), federal tax burden is one of the biggest challenges facing small businesses. The report finds the majority of small businesses (67 percent) are spending more than $1,000 each year on just the administration of federal taxes.
- It reveals one in three small businesses are spending more than 80 hours each year on federal taxes.
- It also reveals (61 percent) of small business are using a external tax professional.
NSBA 2017 Small Business Taxation Survey
Administrative Burden Continues to be an Issue
There’s also evidence this administrative burden weighs heavy on small business owners.
According to the survey, 58 percent of small businesses find the administrative burden of handling taxes a bigger issue than the actual financial cost of federal taxes (38 percent).
Businesses Want Tax Reform
What’s worth noting is that for most small business owners, the possible elimination of deductions and credits without an offsetting reduction in tax rates is the top concern.
Not surprisingly, most surveyed small business owners support tax reform that would reduce taxes and deductions for both corporations and individuals.
“The need for broad tax reform — and not just a tinkering here and there — is a real need for millions of American small businesses,” said NSBA Chair Pedro Alfonso of Dynamic Concepts, Inc. in Washington, D.C.
The 2017 NSBA Small Business Taxation Survey was conducted online March 8-30 with responses from 950 small business owners.
2015 September report by the Quebec ombudsman recently accused Revenue Quebec of becoming more intransigent and less respectful towards taxpayers, prompting an immediate reaction from the provincial finance minister who ordered the tax department to come up with a “concrete action plan” to remedy the “unacceptable” situation.
Revenue Quebec “frequently failed” to apply the principles of natural justice or the fundamental rules of procedural fairness while recovering tax dollars, rigidly interpreted fiscal laws which often resulted in needless court action to resolve tax disputes, and “employed inadequate, and even abusive” auditing methods, according to the latest report marking the second year in a row that the ombudsman has castigated the tax collector.
Here is the full report : annual-report-protecteur-2014-2015
If you are in the agri-food business, you could get funding to explore export markets, develop strategies, and seize business opportunities.
You could get a refund of up to 30% of the cost of activities related to exporting products outside of Quebec.
Eligible activities include:
- Market exploration
- Market validation
- Hosting buyers in Quebec
- Participation in trade shows
- Conduct processing and packaging activities in Quebec
- Have processed or marketed agri-food products predominantly from Québec for at least 2 years
- Be able to provide a three-year export business plan.
For most Canadian taxpayers, the normal reassessment period for income tax is three years. This means that the CRA has three years from the date that your tax return for a particular year is initially assessed to reassess.
After that normal reassessment period has expired, you can argue that a reassessment is not valid and should be vacated. After the normal reassessment period has expired for a given year, we refer to an assessment of that year as being “statute-barred”.
Generally you can ask for a change to a return for a tax year ending in any of the 10 previous calendar years. For example, a request made in 2016 must relate to the 2006 or a later tax year to be considered.
If you have a adjustment to be made in the 2006 calendar year, just contact us…
If you are a non-resident visitor to Canada, you cannot claim a rebate of the goods and services tax/harmonized sales tax (GST/HST) that you paid for all purchases made in Canada. The visitor rebate program for GST/HST was replaced on April 1, 2007, with the Foreign Convention and Tour Incentive Program (FCTIP). A non-resident visitor to Canada may be eligible to claim a GST/HST rebate on certain purchases related to conventions or for tour packages under the FCTIP.
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