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Drache LLP Summer 2007 Newsletter

   Drache LLP Summer 2007 Newsletter
   Employee Profit Sharing Plans - New Support from the Tax Court
   Divorce and Estate Planning
   CPP Payments Not Always Required
   BOOKS AND RECORD KEEPING: The who, what, where, when, why and how of document retention
   Joint Bank Accounts and the Presumption of Advancement
   Powers and Duties of an Attorney for Property
   All in!
   The Perplexing Guide

Drache LLP Summer 2007 Newsletter
As many of you have pointed out, it has been some time since we sent out our regular newsletter. We have had some staff changes and some website problems, but things are back on track. This issue includes an article from Shlomo Friedman, a summer associate who has just completed first year law school. We also have an article from Elizabeth Lockhart, who has recently left our firm, and the practice of law. Elizabeth has joined Scotiabank, Private Client Group, as a Will and Estate Planner. But we will impose upon her to provide articles from time to time. As always, we hope that you find the information that we provide to be useful and we look forward to meeting with you to see how these ideas can help you in your tax and estate planning.
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Employee Profit Sharing Plans - New Support from the Tax Court - Charles Rotenberg
For those clients who generally pay out large bonuses in order to bring their corporate income down to low tax rate levels, there may be an alternative. Employee Profit Sharing Plans (EPSP) have been around for a long time, but are worth looking at anew. We have been advocating the use of EPSP's for many years as an alternative to bonusing and as a means to defer the payment of tax installments for a full year, allowing the client the use of the money, without interest or penalties. Now, the Tax Court of Canada has endorsed the use of EPSP's and confirmed that the payments to the EPSP do not require withholding of taxes or CPP contributions. For the many professionals who are now incorporating professional corporations, the EPSP is one more tool in the tax planning process.
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Divorce and Estate Planning - Douglas Buchmayer
Perhaps it would be trite to state that divorce has an adverse effect on your financial well-being. But when “matrimonial bliss” turns to “matrimonial miss”, people all too often get caught up with the invidious haggling over the here and now without paying much attention to the hereafter. As a result, few consider the effect a divorce may have on their estate planning objectives.
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CPP Payments Not Always Required - Arthur Drache
With the gradual abolition of mandatory retirement, we believe that more and more “older” Canadians will continue to work. One difference from the past is that self-employed people often worked well past the age of (say) 65 whereas mandatory retirement was a hallmark of employment status. Now we are likely to see more employees who are working into their “golden years”. Our experience has been that institutional human resource departments are particularly prone to a cookie cutter approach when it comes to employees…often taking the position that legislation requires this or that approach. Often, they defer to the CRA’s interpretation of laws which may not be accurate. This is often the case in making a determination as to whether a wqorker is an employee or independent contractor.
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BOOKS AND RECORD KEEPING: The who, what, where, when, why and how of document retention - Steven Szilagyi
I have not been practicing law for many years and already I have come across an alarming number of taxpayers who are unfamiliar with their obligation to retain and properly store their personal documents for income tax purposes. The former Chief Justice of the Tax Court of Canada, Justice Donald Christie, once said regarding the taxpayer’s obligation to keep adequate records: Failure to comply [with the Income Tax Act’s book keeping requirements] will not, of itself, result in the dismissal of an appeal against a reassessment of liability to income tax. But it could interfere with an appellant's ability to discharge the burden of proof on him of showing that, on a balance of probability, the reassessment is in error. … …[I]f on an appeal to this Court the circumstances are such that because of failure to keep records of business transactions or to keep reasonably comprehensible records the onus on the appellant cannot be discharged then, I think, the appellant can only be regarded as the author of his own misfortune. (J. Kay v. Canada [1995] 1 C.T.C. 2310D)
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Joint Bank Accounts and the Presumption of Advancement - Shlomo Friedman
As the Canadian population ages, certain estate-planning strategies are becoming increasingly popular. In one of the more widespread arrangements, an elderly parent transfers assets into joint ownership with an adult son or daughter. Among other benefits, it is generally believed that the existence of a joint bank account will allow the departed parent’s estate to avoid probate fees. According to the common wisdom, upon the death of the parent, the child who held joint ownership of the bank accounts will automatically take sole control over the assets by right of survivorship. We have generally advised our clients against this strategy. First, it has always been our belief that this is not effective to avoid probate, unless there is a true gift of an interest in the property. If there is a true gift, then the property is available for creditors of the child. If assets other than cash are being transferred, capital gains will be triggered. If an interest in the parent’s house is being transferred, the transferred interest will no longer be treated as a principal residence, and thus exempt from capital gains taxes. In addition, from an ongoing income tax point of view, it may be beneficial to pay some probate fees to derive large tax savings in the estate on an ongoing basis.
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Powers and Duties of an Attorney for Property - Elizabeth Lockhart
An Attorney under a Continuing Power of Attorney for Property, like a court-appointed Guardian of Property, is a fiduciary. As such, she must exercise and perform her powers and duties with honesty and integrity and in good faith, for an incapable individual’s benefit. An Attorney is liable for damages that result from a breach of her duty.
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All in! - Sebastien Desmarais
Au cours des dernières années, l’émergence du poker Texas Hold’em est devenue une activité à laquelle plusieurs adeptes se sont joints; certains jouent pour le plaisir alors que d’autres visent la compétition et les tournois aux bourses considérables. Récemment, on m’a demandé si un joueur ayant gagné une somme considérable au poker Hold’em avait l’obligation de déclarer ses gains à son revenu d’impôt. Question banale à première vue mais après quelques réflexions, elle s’avère intéressante. L’interprétation générale que l’on attribue aux gains de poker est identique à celle des gains de loterie ou aux jeux de hasard; c’est-à-dire qu’ils sont exempts d’impôts. Mais est-ce vraiment le cas pour les gains de poker? Est-ce qu’un joueur de poker jouant quotidiennement aux tournois sur l’internet, qui participe à plusieurs tournois organisés ou qui voyage trois ou quatre fois par année à Las Vegas peut vraiment considérer ses gains comme étant exempts d’impôts?
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The Perplexing Guide - Adam Aptowitzer
The Canada Revenue Agency has finally released the guidelines by which it intends to apply the ‘new’ intermediate sanctions rules to charities. I have written before about the intermediate sanctions rules and the legislative regime under which they will be applied. In those articles I mentioned that the application of the intermediate sanctions was at the discretion of the CRA as technically the CRA has the ability to impose the relevant new penalty, revoke or suspend the charity’s registration, or do nothing. These new guidelines are intended to help the CRA choose when to do each action.
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