Corporations – Page 11 – Loukidelis PC

Section 84.1

The following article on section 84.1 of the Income Tax Act (Canada) appeared in the latest edition of the Hamilton Law Association Law Journal.

1 Accountants will tell you that mistakes involving section 84.1 of the Income Tax Act (Canada) (the “Act”)[1] are at or near the top of the list of reasons why members of that profession must report themselves to their insurers. Of course, clients typically look to their accountants for tax advice, and a lawyer who implements a reorganization further to instructions received from an accountant, and in reliance upon his or her tax expertise, should not be liable for any tax mistakes. But the key word in that last sentence is “should”. A deemed dividend under section 84.1 will be a nasty surprise for a client, and he or she might not be so willing to recognize the division of labour between the lawyer and the accountant after the CRA hands out a reassessment. In any case, if you can recognize some of the section 84.1 danger signs and prevent an error by asking questions, you might earn the undying gratitude of the referring accountant.

A Mind Bender

How do subsection 55(2) and Part IV of the Income Tax Act (Canada) work together? The Tax Court considered this question recently in Ottawa Air Cargo Centre Ltd. v. The Queen, 2007 TCC 193 (“Air Cargo”).

LLCs

Last week’s CCH Tax Topics has an interesting article on limited liability companies (LLCs) in light of the B.C. Supreme Court’s decision in Boliden Westmin Ltd. et al. v. The Queen, 2007 BCSC 351.

Eligible dividends

Joe and I prepared a presentation for some area accountants on the new eligible dividend rules. You can download a copy here.

Property

Every now and then a taxpayer proposes to transfer an intangible “something” to a corporation for valuable consideration. The taxpayer, or his or her advisers, would do well to read Tri Pacific Gas Corporation v. Canada, 2007 FCA 38, before proceeding.

Eligible dividends

Joe and I will be giving a presentation on the new eligible dividend rules on Thursday, March 1, at noon at the Hamilton Chamber of Commerce. We will provide an overview of these rather complex rules and present some planning ideas and issues to consider.

De facto directors

An individual, even though not elected as a director by a corporation’s shareholders or shown as such in government records, can still be held liable for unremitted source deductions as a de facto director.

OBCA Amendments

In a post I wrote about stock dividends last fall, I mentioned that the Ontario government had tabled a bill to amend the Business Corporations Act to clarify that a nominal amount could be added to the stated capital of shares issued in satisfaction of a dividend.

Eligible dividends

The new eligible dividend rules require corporations “to designate each eligible dividend that they pay and notify shareholders in writing that the dividend is eligible.” The CRA issued a release just before Christmas that provides guidelines on how the designation…

Ontario simplifies

You have all read that the Ontario government plans to turn over the administration of its corporate income tax regime to the CRA. The government introduced draft legislation today to make that a reality. Now, when will the government muster…

Category: Corporations (page 11)