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2016 federal budget summary and comments

The new Liberal government introduced its first federal budget (the budget) today. This blog provides an executive summary, in-depth analysis, and commentary on the tax measures announced by the federal government that will significantly impact taxpayers.

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The end of the tax return?

Could the end of tax return preparation — or so-called “tax season” for accountants — really happen? Or to paraphrase Mark Twain, is the demise of the income tax return greatly exaggerated? Technology is an amazing thing. As governments continue to expand data collection and improve their use of technology, it is not beyond the realm of possibility that the tax return could evolve into something very different than it is today. So, while the income tax return certainly isn’t dead yet, its demise may be in the not-so-distant future.

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Twelve Canada-US tax tips for 2016

By now the 2015 holiday season is a distant memory, as are most of those well-meaning 2016 resolutions. For those individuals with both Canada and US tax issues, tax filing season is a few months away; however, there are several steps you can take that will ease your burden in the next few months… or at least ease it next year.

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2016 Canadian federal budget predictions

In what’s becoming our firm’s annual tradition, the purpose of this blog is to gaze into the crystal ball to predict what the tax goodies might look like when the 2016 federal budget is released. The timing of such a release is anyone’s guess, but some prognosticators are suggesting the third week of March 2016. We certainly can’t add any credibility to that guess since the timing of the budget release is usually a carefully guarded secret – and rightly so.

With the above in mind, here are our predictions and a bit of a wish list.

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New legislative proposals for trusts – dealing with the subsection 104(13.4) problem

On Nov. 16, 2015, I wrote about the ongoing saga regarding subsection 104(13.4) and some good news that was released by the Department of Finance. Today, the Department of Finance released legislative proposals as a follow-up and are seeking comments on such proposals no later than Feb. 15, 2016. While we are still absorbing some of the material, here are the very quick observations.

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Half a loaf is better than none!

The Federal Court of Appeal’s (FCA) recent French language decision in the appeal of Gervais considered the use of a sale structure commonly referred to as the “half loaf.” In general, this planning technique provides an opportunity to spouses to increase the use of the capital gains deduction (CGD) in cases where only one spouse owns property (and a disposition of which would give rise to an opportunity for use of the CGD). The Tax Court decision in Gervais of Jorre J. was largely based on the finding that a transfer of capital property from one spouse to another, that was immediately resold to an unrelated party, was on account of income and not capital.

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US citizenship renunciation – inheritance tax proposal update

On Dec. 9, 2015, Roy Berg, Paul Barba, and Kevin Kirkpatrick submitted our firm’s comments to the IRS regarding the proposed regulations to section 2801 and will be providing oral comments to the IRS at a hearing in Washington, D.C., on Jan. 6, 2016.

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Canada Revenue Agency releases new Form T1135 to report foreign property

On Dec. 9, 2015, the Canada Revenue Agency (CRA) released a new version of prescribed Form T1135 for taxpayers who own specified foreign property (SFP). The new form allows taxpayers who own SFP that have a total cost between $100,000 and $250,000 a more simplified reporting option.

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Federal tax rate increases for Canadians

On December 7, 2015, Canada’s new Finance Minister, Bill Morneau, tabled measures to reduce the federal individual income tax rate for the $45,282 to $90,563 tax bracket from 22% to 20.5%, and introduced a new 33% top rate bracket for taxable income over $200,000, effective Jan. 1, 2016. Additionally, the Tax-Free Savings Account (TFSA) annual contribution limit will be rolled back to $5,500 after 2015. While these amendments were not unexpected as they were part of the Liberal’s election platform, the proposal also includes subtle but important consequential amendments affecting tax rates/credits for trusts and estates, “kiddie tax”, charitable donations, corporate refundable taxes on investment income for Canadian-controlled private corporations (CCPCs), and Part IV tax. This short blog summarizes these changes and offers some thoughts.

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CRA comments on proposed amendments to subsection 55(2): a new planning era and new opportunities

It is no surprise that the proposed legislation on subsection 55(2) released on July 31, 2015 was a hot-button topic at the Canadian Tax Foundation’s 67th Annual Tax Conference last week in Montreal. What is a surprise was the Canada Revenue Agency’s (CRA) increasing willingness to comment on this draft legislation in Round Table sessions (both at this conference and the APFF Conference on October 9, 2015), when they have largely refrained from doing so with proposed legislation in the past. Accordingly, we will discuss these invaluable comments from the CRA, as well as some insights and planning ideas with respect to proposed subsection 55(2).

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Good news update from the Department of Finance regarding subsection 104(13.4)

On November 4, 2015, I wrote a short blog on the status of the discussions that the CBA/CPA Canada Joint Committee on Taxation, STEP, and CALU (the “Working Group”) have had with the Department of Finance regarding significant issues of concern raised by many tax, trust, and estate practitioners regarding subsection 104(13.4) of the Income Tax Act.

Today, I’m pleased to share with you a letter that the Department of Finance just released. In short, it states the Department of Finance has heard our concerns and is prepared to continue further discussions relating to specific recommendations made by the Working Group to amend subsection 104(13.4) to deal with the misplaced tax liability and charitable donation mismatch concerns.

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