CRA answers taxpayer questions: STEP

Advisor.ca continues to live-tweet from the 15th annual STEP Conference today via @advisorca.

A morning session featuring a CRA roundtable was voted best 2013 session. It endeavored to answer taxpayers’ questions.

Here’s a selection of our tweets:

First up today: CRA roundtable feat. @Moodystax, Michael Cadesky, Paul LeBreux, Steve Fron, Phil Kohnen #STEP

Income attribution ceases when contributor dies or become non resident. But for kiddie tax, not the case? #STEP

Kiddie tax rules operate differently from income attribution rules. may be payable if kid has a parent resident in Canada anytime in a given year.

Read: Beware the kiddie tax

Deemed disposition under 48.1.1 is not subject to kiddie tax. #STEP

Prescribed rate loans are @ 1%. Is there a time limit on term of loan? No. Fixed term not required. Loan needs to be payable on demand. But interest must be paid within 30 days of year. No exemption available if that window missed. Don’t miss it! #STEP

Is reassessment period extension on T1135 for whole return or just incomplete sections? (3 yr to 6 yr) CRA says for all purposes, whole form.

Preparers and clients are uncertain how to complete T1135. Should a US investment in a UK brokerage acct be coded US or UK? Don’t want to tick wrong box and trigger a 3 year assessment. #STEP

Answer: residence of corporation that issued the securities relevant for T1135. So US resident. Foreign investments in Cdn acct = foreign.

Read: CRA beefs up foreign property disclosure requirements

Supposed to disclose amount of income on T1135. What if gains foreign, losses Cdn and net to 0? Should they net? No. Should be segregating

Lots of questions from audience on T1135. #STEP will collect and send to CRA since they are redesigning form.

Why does CRA approve tax prep software that doesn’t specify T1135 must be filed separately? @Moodystax jokes that’s a whiny question. #STEP

Read: A late T1135 can be costly

Price adjustment clauses: CRA will honor if certain conditions met, including that people notify CRA. But we’ve never notified because scared of audit. CRA says failure to notify of price adjustment clause will not preclude CRA from accepting clause as valid. Confirmed in 95-27-537. Folio S4 F3 C1 confirms notification not required. #STEP “So we were right all along!”

Listed personal property: Cost per item deemed $1000. But if a set, must be taken together as one property. What is a set? (Dishes, stamps) CRA says it’s a “question of fact”. A set is not defined in the Tax Act. Items should belong together and be related to each other. #STEP

Sommerer case: Federal Court of Appeal says it didn’t intend for 75(2) to apply to property acquired from a beneficiary in a bona fire transaction. 75(2) applies if settlor transfers $100 to trust and trust goes and buys shares, for example. #STEP

“In taxation, only the paranoid survive.” Lots of tax provisions use “if,” not “when.” #STEP

Can probate fees and related costs be added to the ACB or taken as cost of disposal? Generally no. But in Brosamler Estate, the Tax Court of Canada informally said yes. Argued legal fees and probate were perquisite to selling rental properties. Informal TCC decision added them to ACB. Does CRA agree? #STEP

Answer: CRA didn’t appeal that decision to add fees to ACB, but don’t treat that as precedent. This was specific to facts of the Brosamler case. #STEP

Read: Should your client dodge probate?

CRA has suggested it might offer #tax consultation for a fee. That’s called outsourcing, jokes panelist. #STEP

Associations want to partner with CRA on folios. They plan to issue 19 within next 6 mths. Here are the ones they have now. #STEP

Tax refunds denied when corporate tax return filed 3+ years late. There’s been no progress on changing that situation. #STEP

40 audience questions on T1135. So make sure to tell clients the form is changing. #STEP