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1. TAX COMPLIANCE
IN AN ERA OF CHANGE

2. Damian Laflamme
Director of Tax Compliance,
Principal
Welch LLP
dlaflamme@welchllp.com
Don Scott, FCPA, FCA
Director of Tax Services,
Partner
Welch LLP
dscott@welchllp.com
Shiraz Mawani, CPA, CA
Personal Tax Specialist
Welch LLP
smawani@welchllp.com
PRESENTERS

3. AGENDA
• Expansion of 55(2) rules
• Extending Tax on Split Income (TOSI) rules to adults
• Introduction of ERDTOH/NERDTOH
• Repeal of the eligible capital property regime
• Investment income grind on the Small Business
Deduction
• Specified corporate income rules
• Testamentary trust taxation and introduction of GRE’s
• Donations made on death
• T1135 reporting changes
• Principal residence reporting

4. • The last 5 years have seen a lot of
significant tax changes
• Tax compliance has become a
challenging task
• Top 10 risk areas including corporate,
trust and personal tax issues
• High level review, additional
resources available
INTRODUCTION

5. 55(2) Reporting Issues
• Expanding the scope of 55(2)
• Calculating safe income
• T2 reporting of dividends subject to 55(2)
• The Part IV tax reporting dilemma
• Resource: Blog “We Scare Because We Care”

6. Tax on Split Income (TOSI)
• Expanding the rules – no longer limited to minors
• Need to confirm TOSI does not apply for T2’s and T3’s
• T2 reporting for the “payor”
• T1 reporting for the “recipient”
• Resource: Webinar “Tax on Split Income: How Do the New Rules Impact You?”

7. Changes to the Refundable Dividend
Tax on Hand (RDTOH) rules
• Rationale for changes
• ERDTOH versus NERDTOH
• T2 reporting
• Potential planning
• For tax years commencing after December 31, 2018

8. Repeal of Eligible Capital Property Rules
• Includes goodwill, client lists, trademarks, patents, quotas
• Rationale: Old rules too complicated
• Eligible property now depreciable property – Class 14.1
• Changes to depreciation and capital gains
• First $3,000 of incorporation costs deductible in the year
• Accelerated CCA for old balances
• Do not delete Class 14.1 – potential recapture in future

9. Small Business
Deduction (SBD) &
Passive Investment
Income
• Background and potential compromise?
• Adjusted aggregate investment income
(AAII) – new concept
• SBD grind based on AAII of associated group
• Grind starts at $50K, fully ground down at
$150K
• Bias to reduce passive income in – planning
opportunities?
• For tax years commencing after December
31, 2018

10. Small Business Deduction Denial Rules
• Background and impact on existing structures
• Effects both partnership and corporate structures
• Income caught by rules not eligible for SBD (90% exception)
• Ability to assign SBD to the entity earning income
• Schedule 7 completed by the entity earning income
• SBD assigned by the payor on the jacket of T2

11. Taxation of Testamentary Trusts
• End of graduated tax rates, except for Graduated Rate Estates (GRE) and Qualified Disability
Trusts (QDT)
• New, flexible rules for estate donations
• Watch out for 36 month deemed year-end for GRE’s
• Testamentary trusts may still have tax benefits (i.e. Grandchildren’s Trust?)

12. Increased Trust Reporting
• CRA seems more interested in inter vivos trusts in recent years
• Trusts must now disclose ownership of private company shares and indebtedness
with non-arms’ length persons
• In 2021, additional disclosure of settlor, trustees, and beneficiaries
• In most cases, T3 return will need to be filed, even if no activity
• Harsh penalties for failure to provide information or file T3

13. Increased Reporting of Principal Residence
Exemption (PRE)
• Previous CRA policy and reason for change
• In 2016, disclosure was potentially limited to Schedule 3
• Subsequent changes in 2017 included limited disclosure on T2091
• If T2091 not filed, capital gain may result
• May be able to file T2091 late, penalty = $100/month (max $8K)
• If property owned jointly, both spouses may have penalty
• Cannot use a Voluntary Disclosure to avoid penalty

14. Simplified
Reporting for
T1135 – Foreign
Income
Verification
• Req’d d disclosure if foreign specified property
ACB > $100K CDN
• Includes foreign securities held in a CDN
brokerage account (???)
• Many iterations of T1135 for over last 10 years
• Most recent change provides simplified
reporting if ACB < $250K
• Late filing penalty = $25/day, maximum $2,500
• Voluntary Disclosure may be an option to avoid
penalties

15. Damian Laflamme
Director of Tax Compliance,
Principal
Welch LLP
dlaflamme@welchllp.com
Don Scott, FCPA, FCA
Director of Tax Services,
Partner
Welch LLP
dscott@welchllp.com
Shiraz Mawani, CPA, CA
Personal Tax Specialist
Welch LLP
smawani@welchllp.com
PRESENTERS

16. QUESTIONS?
Thank you for listening.