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Unlimited Liability Corporations (“ULCs”) and other flow through entities – The new Fifth Protocol to the Canada-United States Income Tax Convention

In the recent past, US taxpayers who wanted to invest in Canada would often do so with structures that would avoid inefficient tax results on both sides of the border.  One of the common structures that was employed in the corporate context was to utilize certain Canadian corporations that were fiscally transparent for US purposes.  In Canada, such corporations only existed in Nova Scotia (as a Nova Scotia Unlimited Liability Corporation) or in Alberta (as an Alberta Unlimited Liability Corporation).  To the extent that a US taxpayer owned, say 100% of the shares of the ULC, all of the profits of the ULC would generally be fiscally transparent for US tax purposes (meaning that the US would not respect the ULC as being a separate legal entity and would require the profits of the ULC to be included in the US taxpayer’s income directly). For Canadian purposes, the ULC was treated as a “normal” corporation for taxation purposes and thus the profits were subject to Canadian tax with such tax generally being creditable against the US tax on the ULC’s profits.  The result was the avoidance of potential inefficient tax results on an overall basis.  To the extent that the profits of the ULC were repatriated to the US parent by way of a dividend, such dividends would often be subject to “treaty benefits” which would result in a reduced withholding tax rate.

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Changes to Alberta eligible dividend tax rates

by Faizal Valli CA and Jeff Hlynski CA, CFP, TEP

On June 4, 2009 the government of Alberta quietly passed Bill 40, which contained amendments to the Alberta Personal Income Tax Act. The amendments provided for decreases to eligible dividend tax rates for individuals resident in Alberta, for 2010 and later years.

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Commissions earned on the sale of life insurance policies to self employed life insurance salespersons

By Nicolas F. Baass LL.B., LL.M. (Tax)

On May 11, 2009 the Tax Court of Canada released Justice Lucie Lamarre’s judgement in Jacques Bilodeau v. The Queen. 1 As of the time of the writing of this blog the decision was only available in French. The case dealt with the deductibility of commissions received by a life insurance salesperson on the acquisition of a life insurance policy by that salesperson.

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Recent Canada Revenue Agency administrative announcements – Home renovation tax credit, prescribed loan rate and charity guidelines

In these lazy, hazy days of summer, the tax world does not stop. The court cases, Canada Revenue Agency (“CRA”) administrative announcements and speculated policy changes continue to be announced and/or rumored. We thought you would be interested in three of the more relevant recent CRA announcements:

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GST on investment management fees

By Nicolas F. Baass  LL.B., LL.M.(Tax)

The Federal Court of Appeal decision in Canadian Medical Protective Assn. v. R. released April 16, 2009 deals with the GST status of investment management fees. 

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Recent GAAR Decision – Collins

By Marissa L Halil  LLB, BCL

A new case on the General Anti-Avoidance Rule (“GAAR”), Collins & Aikman Products Co. v. The Queen (“Collins“), was released by the Tax Court of Canada on June 3, 2009. The issue in Collins was whether the GAAR should apply to a reorganization which increased the paid-up capital (“PUC”) of shares.

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New chair of STEP Canada

Well, I arrived home this week after attending The Society of Trust and Estate Practitioners’ (“STEP”) 11th National Conference.  The conference contained many leading edge technical topics that dealt with tax and estate planning for the private client.  Membership in STEP, for me personally, has proved to be invaluable over the years given the tremendous worldwide membership that STEP has and the depth of knowledge of such members. 

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Tax conferences

Well … ’tis the season for professional development and education.  Every year, around this time, the professional tax conference season begins in earnest.  I had the pleasure of recently co-chairing the Canadian Tax Foundation Prairie Provinces Tax Conference which was held in Calgary on May 25 and 26, 2009.  What an outstanding group of tax professionals that gathered to listen to prominent speakers on relevant current tax topics.

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Prevost Car Inc. v. The Queen

By Nicolas Baas, LL.B., LL.M. (Tax)

On May 12, 2008 we posted a blog entry commenting on the Tax Court decision of Prevost Car Inc. v. The Queen TCC 231.  On February 26, 2009 the Federal Court of Appeal released its appeal decision in this case.The FCA endorsed the Tax Court’s decision in its entirety.  The facts of this case are straightforward and can be found in our May 12, 2008 blog.

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Opportunities in challenging economic times

Notwithstanding that financial markets and the economy continue to take a beating, there are significant tax planning opportunities that have not existed for quite some time.

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