There’s a new government incentive that your company might be able to take advantage of (started May 2, 2006). Timing: you have 1 year from your fiscal year end to file. The link is below for you to read through. In a nutshell, you get an ITC (Investment Tax Credit) on the corporate tax return for up to $2,000 per apprentice (for their first 2 years of apprenticeship) if they are in a qualifying trade.
The link is pretty well laid out. The most difficult part is to get your employees registered as apprentices. We can then claim the ITC on the tax returns.
We just put through a claim for a hair stylist working at one of our clients’ salon. The company is getting $1900 back.
The formula is Wage paid to the individual in the year (from May 2, 2006) * 10%.
Here’s the link
http://www.cra-arc.gc.ca/whatsnew/apprenticeship-e.html#q4
Wednesday, June 6, 2007
Wednesday, April 25, 2007
Allowable Home Office Expenses:
These claimable expenses include:
home mortgage interest
property taxes
home insurance
utilities
business phone
landscaping costs
The claimable percentage of these expenses is based on your dedicated home office space divided by the total square footage of your liveable home area space.
home mortgage interest
property taxes
home insurance
utilities
business phone
landscaping costs
The claimable percentage of these expenses is based on your dedicated home office space divided by the total square footage of your liveable home area space.
Thursday, April 19, 2007
Testamentary Trust Planning
This type of trust (testamentary: included in the will) is very useful for a family with young children. The survivors benefit from this in future tax savings. The tax savings result from the trust earnings being taxed in the child's hands. Since the children make little or no income, no taxes are incurred.
Here's an example of how this testamentary trust works: When the insured dies, his/her life insurance proceeds are transferred into this trust, with the remaining property going to the surviving spouse.
In the trust documentation, it is indicated that the beneficiaries are the children and spouse, the spouse is also the trustee. The spouse is now able to spend the trust money in the interests of the children. These expenditures such as camps, computer purchases, and any other purchase that aids in the progress or enrichment of the children's life are eligible.
Here's an example of how this testamentary trust works: When the insured dies, his/her life insurance proceeds are transferred into this trust, with the remaining property going to the surviving spouse.
In the trust documentation, it is indicated that the beneficiaries are the children and spouse, the spouse is also the trustee. The spouse is now able to spend the trust money in the interests of the children. These expenditures such as camps, computer purchases, and any other purchase that aids in the progress or enrichment of the children's life are eligible.
Sunday, April 15, 2007
Reasons to Incorporate Your Business:
1)Qualified Small Business Exemption: If the owner of this business ultimately sells the shares of the business, they may qualify for up to a $750,00 lifetime capital gains exemption. There are 4 criteria that need to be met to qualify for this tax-free capital gain. See February blog notes for these 4 rules.
2) Income splitting: You may pay a reasonable salary, and /or bonus and to your family members. This compensation is for the services they have provided to the business.
It's best to document a list of each person's responsibilities performed within the business.
The 'reasonableness' test does not apply to dividends paid. This means that the owner of the business can pay any amount of dividend to a shareholder who doesn't provide any services to the company.
3)Tax deferral opportunities: such as,
a) if your company's year-end is established between July 1 and Dec. 31, employee bonuses payable can be paid up to 180 days, resulting in the individual declaring his/her bonus in the next calendar year and
b) retaining income within the company when not needed personally. This would save you an amount that you would have otherwise paid in personal taxes owing, had this amount been withdrawn and declared personally.
4) Private Health Services Plan (PHSP): This plan recognized by CRA under bulletin IT-339R2 was introduced as a cost efficient and tax effective means of providing health and dental benefits for small and medium sized businesses. This plan is an inexpensive way for incorporated employers and sole proprietors to provide tax free health and dental services for themselves and their dependents, their employees and their dependents. These services are 100% tax deductible to the corporation or the sole proprietor, but not taxable as benefits to the individuals.
We (Elliott & Company CMAs, http://www.ellco.ca/) have an alliance with a Benefit Plan company that offers our clients a special rate due to the referrals that we are providing to this company. If you are currently under a plan (i.e. Shield, London Life, etc.), this alliance will waive the $150 one-time sign up fee. If you are not with an existing plan, your sign up fee will be reduced to $75. A 5% admin fee will be charged, rather than the 10% admin fee that you may be used to for medical/dental claims put through your plan. Those of you that are sole proprietors, you should talk to our associate company about eligibility. If you have employees, you may still be able to use this.
5) Universal Life Insurance: This allows for tax-sheltered growth of the company's retained earnings. One condition is that the premiums of this policy are not deductible within the company. The owner can use these insurance funds for his/her business or personal needs, if a collateral policy is arranged through bank loans. Appropriate documentation and steps need to be taken to ensure that these funds used for personally aren't later deemed from CRA as a personal benefit.
6) Corporate limited liability.
7) Corporate image presence.
COSTS: Being incorporated does come with other costs such as: incorporation fees, annual corporate tax return preparation and financial statement preparation (Elliott & Company CMAs: http://www.ellco.ca/ year-end (notice-to-reader) cost ranges between $500-$800/year).
Also, you may have no choice but to incorporate, if the companies you contract to require you to do so for liability purposes.
2) Income splitting: You may pay a reasonable salary, and /or bonus and to your family members. This compensation is for the services they have provided to the business.
It's best to document a list of each person's responsibilities performed within the business.
The 'reasonableness' test does not apply to dividends paid. This means that the owner of the business can pay any amount of dividend to a shareholder who doesn't provide any services to the company.
3)Tax deferral opportunities: such as,
a) if your company's year-end is established between July 1 and Dec. 31, employee bonuses payable can be paid up to 180 days, resulting in the individual declaring his/her bonus in the next calendar year and
b) retaining income within the company when not needed personally. This would save you an amount that you would have otherwise paid in personal taxes owing, had this amount been withdrawn and declared personally.
4) Private Health Services Plan (PHSP): This plan recognized by CRA under bulletin IT-339R2 was introduced as a cost efficient and tax effective means of providing health and dental benefits for small and medium sized businesses. This plan is an inexpensive way for incorporated employers and sole proprietors to provide tax free health and dental services for themselves and their dependents, their employees and their dependents. These services are 100% tax deductible to the corporation or the sole proprietor, but not taxable as benefits to the individuals.
We (Elliott & Company CMAs, http://www.ellco.ca/) have an alliance with a Benefit Plan company that offers our clients a special rate due to the referrals that we are providing to this company. If you are currently under a plan (i.e. Shield, London Life, etc.), this alliance will waive the $150 one-time sign up fee. If you are not with an existing plan, your sign up fee will be reduced to $75. A 5% admin fee will be charged, rather than the 10% admin fee that you may be used to for medical/dental claims put through your plan. Those of you that are sole proprietors, you should talk to our associate company about eligibility. If you have employees, you may still be able to use this.
5) Universal Life Insurance: This allows for tax-sheltered growth of the company's retained earnings. One condition is that the premiums of this policy are not deductible within the company. The owner can use these insurance funds for his/her business or personal needs, if a collateral policy is arranged through bank loans. Appropriate documentation and steps need to be taken to ensure that these funds used for personally aren't later deemed from CRA as a personal benefit.
6) Corporate limited liability.
7) Corporate image presence.
COSTS: Being incorporated does come with other costs such as: incorporation fees, annual corporate tax return preparation and financial statement preparation (Elliott & Company CMAs: http://www.ellco.ca/ year-end (notice-to-reader) cost ranges between $500-$800/year).
Also, you may have no choice but to incorporate, if the companies you contract to require you to do so for liability purposes.
Tuesday, March 20, 2007
2007 Federal Budget Business Tax Updates
Business Tax Updates:
Increased Capital Cost Allowance ("CCA") for Buildings - Non-residential buildings are eligible for a CCA rate of 4% under Class I of Schedule II to the Income Tax Regulations. The Federal Budget proposes that the CCA rate for buildings used for manufacturing or processing in Canada of goods for sale or lease be increased to 10% and that the CCA rate for other non-residential buildings be increased to 6%. Eligibility requirements for either of the 2 new classes:
1.) the building must be placed into a separate class, and
2.) at least 90% of the building (measured by square footage) must be used for the designated purpose at the end of the taxation year. These new rules apply for properties acquired on or after March 19, 2007 or where the building was under construction on or after March 19, 2007.
Increased CCA Rate for Computers - Class 45 is presently eligible for a CCA rate of 45%. This rate will increase to 55% for assets acquired on or after March 19, 2007.
Increased Installment Threshold - The Federal Budget proposes to increase the minimum threshold from $1,000 (based on the prior year's corporate income tax liability) to $3,000 beginning for taxation years that commence in 2008. For Canadian Controlled Private Corporations, the Budget proposes that the installment frequency be reduced from monthly installments to quarterly installments to the extent that the taxable income of the Canadian Controlled Private Corporation for either the current or previous year does not exceed $400,000, the corporation qualifies for the small business deduction for either the current or previous year, the taxable capital employed in Canada of the corporation does not exceed $10 million in either the current or previous year and the corporation has no compliance irregularities under the Income Tax Act and the Excise Tax Act for the preceding 12 months.
GST Filing for Small Businesses - Currently, GST registrants with taxable supplies that do not exceed $500,000 in a fiscal year may elect to have reporting periods that are fiscal years which enables them to file an annual GST return and make quarterly installment payments. The Federal Budget proposes to triple the taxable supplies threshold to $1,500,000.
Budget 2007 proposes a new Vehicle Efficiency Incentive (VEI) structure that will cover the full range of passenger vehicles available today. The VEI will have three distinct components and come into effect March 20, 2007:
1. A performance-based rebate program offering up to $2,000 for the purchase of a new fuel-efficient vehicle.
2. Neutral treatment of a broad range of vehicles with average fuel efficiency that are widely purchased by Canadians.
3. A new Green Levy on fuel-inefficient vehicles. These measures, together with a new initiative to encourage Canadians to retire older, more polluting vehicles, will be broadly revenue-neutral.
New Rebate for Fuel-Efficient Vehicles Manufacturers now offer a number of vehicles that are eligible for the performance-based rebate program. Current models qualifying for the rebate will include hybrid electric vehicles, conventional fuel efficient vehicles and the most efficient of the E-85 fuel and flex fuel vehicles. The list of eligible vehicles will be established by Transport Canada by combining the city and highway fuel-efficiency ratings.The thresholds will be based on a combined 55 per cent city and 45 per cent highway rating. Initially, new automobiles with a combined fuel consumption rating of 6.5 L/100 km or less and minivans, sport utility vehicles (SUVs) and other light trucks with fuel consumption of 8.3 L/100 km or less will be eligible for a rebate. These thresholds will be reviewed periodically. The basic rebate amount will be $1,000, and an additional $500 will be added for each half litre per 100 km improvement in the combined fuel-efficiency rating of the vehicle below these thresholds. The maximum rebate value will be $2,000. Efficient E-85 fuel vehicles will be eligible for a rebate of $1,000. Eligible new vehicle purchases or leases as of March 20, 2007, will qualify for the rebate.More information on the program, including the vehicles eligible for the rebate, will be published on Transport Canada’s website (www.tc.gc.ca). The lists of eligible vehicles will be updated as information on new vehicle fuel-efficiency ratings becomes available. Consumers purchasing or leasing (long-term leasing for a period of at least 12 months) an eligible vehicle should keep a proof of purchase or a copy of the lease agreement. Consumers will be asked to show proof of registration, in Canada, of the new vehicle. While the introduction of rebates for eligible fuel-efficient vehicles is proposed to take effect March 20, 2007, the payment of rebates will be made once administration and delivery systems have been put in place. The Government is aiming to make rebate payments by fall 2007. Budget 2007 commits $160 million over the next two years to provide the performance-based rebate.
New Green Levy on Fuel-Inefficient Vehicles For new passenger vehicles (excluding trucks) with fuel-efficiency ratings of 13.0 L/100 km or more, the incentive structure will include a new Green Levy on these vehicles, payable by the manufacturer or importer when vehicles are delivered into the Canadian market. The fuel-efficiency rating will be based on the same combination of city (55 per cent) and highway (45 per cent) fuel consumption ratings used to establish the parameters for the rebate. The new Green Levy will start at $1,000 for passenger vehicles with combined fuel-efficiency ratings of at least 13.0 L/100 km but less than 14.0 L/100 km. The rate will increase in $1,000 increments for each full litre per 100 km increase in the combined fuel-efficiency rating above the 13.0 L/100 km floor, to a maximum of $4,000, for vehicles with ratings of 16.0 L/100 km or more. The levy will apply to new vehicles delivered by a manufacturer or importer to a purchaser (usually a dealer) after March 19, 2007. Inventories of vehicles held by dealerships will not be subject to the new Green Levy. Certain consumer purchase contracts entered into before March 20, 2007, will also be grandfathered. With the introduction of the new levy, the existing excise tax on heavy vehicles will be eliminated effective March 20, 2007. It is expected that this measure will increase federal revenues by $110 million in 2007/08 and $105 million in 2008/09.
Increased Capital Cost Allowance ("CCA") for Buildings - Non-residential buildings are eligible for a CCA rate of 4% under Class I of Schedule II to the Income Tax Regulations. The Federal Budget proposes that the CCA rate for buildings used for manufacturing or processing in Canada of goods for sale or lease be increased to 10% and that the CCA rate for other non-residential buildings be increased to 6%. Eligibility requirements for either of the 2 new classes:
1.) the building must be placed into a separate class, and
2.) at least 90% of the building (measured by square footage) must be used for the designated purpose at the end of the taxation year. These new rules apply for properties acquired on or after March 19, 2007 or where the building was under construction on or after March 19, 2007.
Increased CCA Rate for Computers - Class 45 is presently eligible for a CCA rate of 45%. This rate will increase to 55% for assets acquired on or after March 19, 2007.
Increased Installment Threshold - The Federal Budget proposes to increase the minimum threshold from $1,000 (based on the prior year's corporate income tax liability) to $3,000 beginning for taxation years that commence in 2008. For Canadian Controlled Private Corporations, the Budget proposes that the installment frequency be reduced from monthly installments to quarterly installments to the extent that the taxable income of the Canadian Controlled Private Corporation for either the current or previous year does not exceed $400,000, the corporation qualifies for the small business deduction for either the current or previous year, the taxable capital employed in Canada of the corporation does not exceed $10 million in either the current or previous year and the corporation has no compliance irregularities under the Income Tax Act and the Excise Tax Act for the preceding 12 months.
GST Filing for Small Businesses - Currently, GST registrants with taxable supplies that do not exceed $500,000 in a fiscal year may elect to have reporting periods that are fiscal years which enables them to file an annual GST return and make quarterly installment payments. The Federal Budget proposes to triple the taxable supplies threshold to $1,500,000.
Budget 2007 proposes a new Vehicle Efficiency Incentive (VEI) structure that will cover the full range of passenger vehicles available today. The VEI will have three distinct components and come into effect March 20, 2007:
1. A performance-based rebate program offering up to $2,000 for the purchase of a new fuel-efficient vehicle.
2. Neutral treatment of a broad range of vehicles with average fuel efficiency that are widely purchased by Canadians.
3. A new Green Levy on fuel-inefficient vehicles. These measures, together with a new initiative to encourage Canadians to retire older, more polluting vehicles, will be broadly revenue-neutral.
New Rebate for Fuel-Efficient Vehicles Manufacturers now offer a number of vehicles that are eligible for the performance-based rebate program. Current models qualifying for the rebate will include hybrid electric vehicles, conventional fuel efficient vehicles and the most efficient of the E-85 fuel and flex fuel vehicles. The list of eligible vehicles will be established by Transport Canada by combining the city and highway fuel-efficiency ratings.The thresholds will be based on a combined 55 per cent city and 45 per cent highway rating. Initially, new automobiles with a combined fuel consumption rating of 6.5 L/100 km or less and minivans, sport utility vehicles (SUVs) and other light trucks with fuel consumption of 8.3 L/100 km or less will be eligible for a rebate. These thresholds will be reviewed periodically. The basic rebate amount will be $1,000, and an additional $500 will be added for each half litre per 100 km improvement in the combined fuel-efficiency rating of the vehicle below these thresholds. The maximum rebate value will be $2,000. Efficient E-85 fuel vehicles will be eligible for a rebate of $1,000. Eligible new vehicle purchases or leases as of March 20, 2007, will qualify for the rebate.More information on the program, including the vehicles eligible for the rebate, will be published on Transport Canada’s website (www.tc.gc.ca). The lists of eligible vehicles will be updated as information on new vehicle fuel-efficiency ratings becomes available. Consumers purchasing or leasing (long-term leasing for a period of at least 12 months) an eligible vehicle should keep a proof of purchase or a copy of the lease agreement. Consumers will be asked to show proof of registration, in Canada, of the new vehicle. While the introduction of rebates for eligible fuel-efficient vehicles is proposed to take effect March 20, 2007, the payment of rebates will be made once administration and delivery systems have been put in place. The Government is aiming to make rebate payments by fall 2007. Budget 2007 commits $160 million over the next two years to provide the performance-based rebate.
New Green Levy on Fuel-Inefficient Vehicles For new passenger vehicles (excluding trucks) with fuel-efficiency ratings of 13.0 L/100 km or more, the incentive structure will include a new Green Levy on these vehicles, payable by the manufacturer or importer when vehicles are delivered into the Canadian market. The fuel-efficiency rating will be based on the same combination of city (55 per cent) and highway (45 per cent) fuel consumption ratings used to establish the parameters for the rebate. The new Green Levy will start at $1,000 for passenger vehicles with combined fuel-efficiency ratings of at least 13.0 L/100 km but less than 14.0 L/100 km. The rate will increase in $1,000 increments for each full litre per 100 km increase in the combined fuel-efficiency rating above the 13.0 L/100 km floor, to a maximum of $4,000, for vehicles with ratings of 16.0 L/100 km or more. The levy will apply to new vehicles delivered by a manufacturer or importer to a purchaser (usually a dealer) after March 19, 2007. Inventories of vehicles held by dealerships will not be subject to the new Green Levy. Certain consumer purchase contracts entered into before March 20, 2007, will also be grandfathered. With the introduction of the new levy, the existing excise tax on heavy vehicles will be eliminated effective March 20, 2007. It is expected that this measure will increase federal revenues by $110 million in 2007/08 and $105 million in 2008/09.
2007 Federal Budget Personal Tax Updates
Personal Income Tax Updates:
New Child Tax Credit - This is a new non-refundable child tax credit for parents in the amount of $2,000 (indexed) for each child under the age of 18 years at the end of a taxation year. Conditions: a child resides together with the child's parents throughout the year, either of those parents may claim the credit. In other cases, the credit will be claimable in respect of a child by the parent who is eligible to claim the wholly dependent person credit for the year in respect of the child. Each $2,000 tax credit will amount to $310 of Federal tax savings. If Alberta introduces this same tax savings rule, each Alberta parent of a child under the age of 18 would receive a combined tax reduction in the amount of $510 per child.
Spousal amounts - The proposal is to slightly increase the income thresholds from what a spouse can currently earn from $7,581 to $8,929 for 2007. A high income earner does not benefit from this credit as these spousal income thresholds are set very low.
Public Transit Tax Credit Expansion - extending the tax credit for public transit passes to innovative fare products, such as electronic fare cards and weekly passes."
Increase to the Lifetime Capital Gains Deduction - The current maximum capital gains deduction on qualified farm, fishing and smll business corporation shares is $500,000. The Budget proposes to increase the maximum to $750,000. The capital gains exemption will increase to $625,000 for dispositions from March 19 2007 to Dec 31 2007. The $750,000 limit will become effective for dispositions from January 1 2008 onwards.
RRSPs - Contribution and conversion age from a RRSP to a RRIF: the Budget proposes to increase the age limit to age 71 from the current age limit of 69.
Introduction of "Registered Disability Savings Plan - This plan will be introduced to assist parents and others to save for the long-term financial security of a child with a severe disability. This will have similar principles as those of a Registered Education Savings Plan.
Donations to Private Foundations - Donations of publicly listed securities to public charities have been eligible for a reduced inclusion rate on capital gains since 1997 and a complete exemption since May 2, 2006. The Federal Budget proposes to eliminate the taxation of capital gains arising from donations of publicly listed securities to private foundations for gifts made on or after March 19, 2007. These proposals have significant tests that must be met and include an anti-avoidance measure to prevent inappropriate planning.
Registered Education Savings Plans (RESP)- Federal budget 2007 proposes to:
1.) Eliminate the $4,000 annual RESP contribution limit and increase the lifetime contribution limit to $50,000 from $42,000
2.) Increase the annual maximum contribution that qualifies for the 20 per cent Canada Education Savings Grant (CESG) incentive to $2,500 from $2,000 - for a yearly maximum CESG of $500, up from $400.
The maximum CESG for a year will increase to $1,000 from $800 if there is unused grant room from previous years - The lifetime CESG limit remains at $7,200.
Increased Income Tax Installment Threshold - Currently, individuals are required to make quarterly installment payments in respect of income taxes if the estimated income tax payable for the current year or the actual income tax payable for either of the two preceding years (that exceeds the amounts withheld at source) is greater than $2,000. The Federal Budget proposes to increase this installment threshold amount to $3,000 starting with the 2008 taxation year.
· Working Income Tax Benefit - The Federal Budget announced a new refundable tax credit for low income working Canadians. This credit will be a maximum of $500 for single individuals and $1,000 for families. It will be computed as 20% of earned income in excess of $3,000 to the maximums mentioned. The credit is reduced by 15% of net family income in excess of $9,500 for single persons and $14,500 for families.
Scholarships/Bursaries - The proposal is to recognize all amounts received in the taxation year on account of scholarships and bursaries related to the individual's enrollment in an elementary or secondary school as exempt income (not reported as income).
New Child Tax Credit - This is a new non-refundable child tax credit for parents in the amount of $2,000 (indexed) for each child under the age of 18 years at the end of a taxation year. Conditions: a child resides together with the child's parents throughout the year, either of those parents may claim the credit. In other cases, the credit will be claimable in respect of a child by the parent who is eligible to claim the wholly dependent person credit for the year in respect of the child. Each $2,000 tax credit will amount to $310 of Federal tax savings. If Alberta introduces this same tax savings rule, each Alberta parent of a child under the age of 18 would receive a combined tax reduction in the amount of $510 per child.
Spousal amounts - The proposal is to slightly increase the income thresholds from what a spouse can currently earn from $7,581 to $8,929 for 2007. A high income earner does not benefit from this credit as these spousal income thresholds are set very low.
Public Transit Tax Credit Expansion - extending the tax credit for public transit passes to innovative fare products, such as electronic fare cards and weekly passes."
Increase to the Lifetime Capital Gains Deduction - The current maximum capital gains deduction on qualified farm, fishing and smll business corporation shares is $500,000. The Budget proposes to increase the maximum to $750,000. The capital gains exemption will increase to $625,000 for dispositions from March 19 2007 to Dec 31 2007. The $750,000 limit will become effective for dispositions from January 1 2008 onwards.
RRSPs - Contribution and conversion age from a RRSP to a RRIF: the Budget proposes to increase the age limit to age 71 from the current age limit of 69.
Introduction of "Registered Disability Savings Plan - This plan will be introduced to assist parents and others to save for the long-term financial security of a child with a severe disability. This will have similar principles as those of a Registered Education Savings Plan.
Donations to Private Foundations - Donations of publicly listed securities to public charities have been eligible for a reduced inclusion rate on capital gains since 1997 and a complete exemption since May 2, 2006. The Federal Budget proposes to eliminate the taxation of capital gains arising from donations of publicly listed securities to private foundations for gifts made on or after March 19, 2007. These proposals have significant tests that must be met and include an anti-avoidance measure to prevent inappropriate planning.
Registered Education Savings Plans (RESP)- Federal budget 2007 proposes to:
1.) Eliminate the $4,000 annual RESP contribution limit and increase the lifetime contribution limit to $50,000 from $42,000
2.) Increase the annual maximum contribution that qualifies for the 20 per cent Canada Education Savings Grant (CESG) incentive to $2,500 from $2,000 - for a yearly maximum CESG of $500, up from $400.
The maximum CESG for a year will increase to $1,000 from $800 if there is unused grant room from previous years - The lifetime CESG limit remains at $7,200.
Increased Income Tax Installment Threshold - Currently, individuals are required to make quarterly installment payments in respect of income taxes if the estimated income tax payable for the current year or the actual income tax payable for either of the two preceding years (that exceeds the amounts withheld at source) is greater than $2,000. The Federal Budget proposes to increase this installment threshold amount to $3,000 starting with the 2008 taxation year.
· Working Income Tax Benefit - The Federal Budget announced a new refundable tax credit for low income working Canadians. This credit will be a maximum of $500 for single individuals and $1,000 for families. It will be computed as 20% of earned income in excess of $3,000 to the maximums mentioned. The credit is reduced by 15% of net family income in excess of $9,500 for single persons and $14,500 for families.
Scholarships/Bursaries - The proposal is to recognize all amounts received in the taxation year on account of scholarships and bursaries related to the individual's enrollment in an elementary or secondary school as exempt income (not reported as income).
Tuesday, March 13, 2007
Qualified Small Business Corporation Criteria
Individuals can still claim a $500,000 exemption against capital gains from qualifying shares of a small business corporation.
To qualify for this exemption, individuals must meet the following conditions:
1) Determination test - The corporation must be an SBC at the time of the sale, all or substantially all (greater than 90%) of its assets must be business assets.
2) Ownership period test - The shares must not have been owned by anyone other than the taxpayer or someone related to the taxpayer during the 2 month period immediately before the sale.
3) Holding period asset test - More than 50% of the corporation's assets (on the basis of fair market value) must have been used in an active business carried on primarily in Canada throughout the 24 month period immediately before the sale.
Full details are described under the Income tax act (ITA) subsections within 110.6.
To qualify for this exemption, individuals must meet the following conditions:
1) Determination test - The corporation must be an SBC at the time of the sale, all or substantially all (greater than 90%) of its assets must be business assets.
2) Ownership period test - The shares must not have been owned by anyone other than the taxpayer or someone related to the taxpayer during the 2 month period immediately before the sale.
3) Holding period asset test - More than 50% of the corporation's assets (on the basis of fair market value) must have been used in an active business carried on primarily in Canada throughout the 24 month period immediately before the sale.
Full details are described under the Income tax act (ITA) subsections within 110.6.
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