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The effective repeal of the flow-through share regime for the oil and gas industry in Western Canada

“We will fulfill our G20 commitment and phase out subsidies for the fossil fuel industry over the medium-term.” – Liberal Party of Canada Platform

You can’t say Justin Trudeau didn’t warn us. He made it very clear during his campaign to become Prime Minister that he planned to introduce legislation that would be damaging to the Western Canadian oil and gas industry.

The flow-through share regime has been a crucial element in the capital markets of Western Canada for oil and gas exploration and production companies (E&P companies). By issuing flow-through shares, and transferring corporate tax benefits of drilling from the corporation to the subscribing shareholders, E&P companies have, firstly, been able to issue shares in this highly risky business to arm’s length investors and, secondly, been able to reduce their cost of capital.

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Triple Canadian taxation possible with subsection 55(2)

The recent Tax Court of Canada’s decision in 101139810 Saskatchewan Ltd. v Queen (2017 TCC 3) did not cover any new ground with respect to subsection 55(2), but it was a useful reminder of the pitfalls one could encounter for running afoul of that provision. This short blog highlights what went wrong, and the court’s indifference to the taxpayer’s predicament.

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Whip that WIP: Canada’s proposed tax repeal of a professional’s WIP exclusion election

Earlier this week, we provided our summary of the 2017 federal budget released on March 22, 2017. The Budget contained a little-publicized but important tax change for how Canadian professionals will report their taxable income going forward. Effective for taxation years beginning after March 21, 2017, every professional must include its year-end work-in-progress (WIP) in its taxable income. For professionals, WIP generally represents unbilled time and supplies incurred in the rendering of services to clients. This blog will attempt to explain the current rules governing the recording of WIP and the history behind these rules, illustrate the impact of the proposed measures, and the practical challenges professionals will face. We will also provide a few tax policy comments to close.

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Renouncing US Citizenship Or Giving Up A Green Card: Why And How To Consider It

Israel and the United States share a strong bond, and U.S. citizenship or permanent resident status allows access to the largest economy in the world. Why would a dual Israeli-U.S. citizen, or an Israeli who has been granted a U.S. “green card,” ever consider giving that up? Increasingly, the answer is one word: tax.

Unique among global powers, the United States taxes the worldwide income of its citizens and permanent resident status holders no matter where they live. Additionally, the requirement that an Israeli-U.S. citizen or green card holder file an annual U.S. income tax return is not waived by the fact that the United States grants a credit for taxes paid to Israel. In fact, many U.S. citizens living abroad do not actually owe U.S. tax, but they can face very stiff monetary penalties for failing to file required disclosures about non-U.S. assets in a timely manner.

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The 2017 federal budget: what’s changed, what hasn’t

On March 22, 2017, the federal Liberal government released their 2nd budget. This blog provides an executive summary, in-depth analysis, and commentary on the tax measures announced by the federal government that will impact taxpayers.

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The “Super” reason Australians are renouncing their US citizenship

Many US citizens living in Australia and elsewhere around the world have found themselves faced with the difficult decision of whether to keep or renounce their US citizenship. A decade ago, the idea of renouncing one’s US citizenship was, for most, unthinkable. Currently, however, record numbers of individuals renounce every quarter and many US consulates are booking appointments 18 months in advance.[1] While people choose to renounce their US citizenship for many reasons, a common reason Australian residents choose to do so is because of the lack of clear guidance on the US tax consequences of Australian Superannuation funds (Super).

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Renouncing your US citizenship: Failed amendment may signal that now is the time to get out!

If you are one of the many US citizens contemplating renouncing your US citizenship, Congress recently sent a fairly clear message that now, as opposed to later, may be the right time to get out of the club. On June 12, 2013, US Senators Jack Reed (D-RI) and Chuck Schumer (D-NY) attempted to add yet another hurdle in the ongoing saga for those individuals looking to renounce their US citizenship in filing an amendment to the immigration reform bill, which attempted to ensure that the US Department of Homeland Security could exclude certain individuals from re-entry into the US forever. The proposed amendment was never voted on in the House and died before reaching the floor.

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Renouncing your US citizenship: Is divorcing Uncle Sam right for you?

The billionaire co-founder of Facebook, the only American member of Monty Python, a Civil Rights Leader with a Ph.D. from Harvard, the founder of Carnival Cruise Lines and owner of the Miami Heat NBA franchise, and arguably the best chess mind to ever live have more in common than you might think. So what do Eduardo Saverin, Terry Gilliam,1 W.E.B. Du Bois, Ted Arison, Bobby Fischer and thousands of U.S. citizens living abroad have in common? The answer is all five have renounced their U.S. citizenship. These individuals are not alone, record numbers of U.S. citizens living in Canada and across the world are in the process of renouncing. Why would a country with a seven to ten year wait list to acquire citizenship have so many citizens headed for the exit? The reason is that three letter word no one likes to hear: TAX.

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Challenges Canadians face when transferring US retirement plans to an RRSP

Canada and the US share many similarities including the longest international border between two countries. Due to the proximity of the two countries, many Canadians find themselves living and working in the US and contributing pre-tax dollars into employer-sponsored retirement plans such as the 401(k) and Individual Retirement Account or IRA (collectively, US-based retirement plans). Once their US employment ends, many Canadian workers returning to their home country must eventually undertake the task of determining what to do with their US-based retirement plans as retirement age draws near (the Canadian retirees).

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Alberta Investor Tax Credit program – even more bad news

On January 17, 2017, I published a blog about the new Alberta Investor Tax Credit programs. For those of you who read my original blog, you’ll know that I was and remain very critical about the new programs. Subsequent to the publishing of my article, some astute readers in the Alberta business and technology industry brought two potential deal killers for the Alberta Investor Tax Credit (AITC) to my attention. A third item, discovered on another read-through of the regulations enacted to implement the many prescribed rules related to the AITC, concerns overreaching Ministerial discretion which, in my view, too easily lends itself to politically motivated denial of the credit. Accordingly, the purpose of this follow-up article is to bring the two deal killer issues to your attention and raise the concern of the overreach that I have subsequently identified.

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Trump’s NAFTA pledge threatens U.S. expats in Canada

Donald Trump infamously called the North American Free Trade Agreement (NAFTA) “the single worst trade deal ever approved by [the United States]”[1] and vowed to withdraw from the deal once elected. This policy was such a core plank of his platform that as soon as it become abundantly clear that Trump would win the U.S. election, the value of Mexican Peso relative to U.S. dollar dropped precipitously under the expectation that the U.S. would likely withdraw from NAFTA.[2]

Since then, much has been written about the potential economic fallout caused by Trumps pledge. However, little has been written about what might happen to Americans who are working in Canada.

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