Alexander Marino is quoted in an article titled “Trump bump: U.S. citizenship renunciation inquiries surge in Canada, lawyers say” on CBC News, January 28, 2025.
Alexander Marino is quoted in an article titled “‘Scary’: Why US expats are tossing their citizenships – and it’s not just Trump” in The Sydney Morning Herald, November 1, 2024
Kenneth Keung is quoted in the Investment Executive article titled “Quirk in capital gains tax rules raises risks for incorporated clients,” published on July 24, 2024.
Kenneth Keung is quoted in the Investment Executive article titled “How should trusts flow out capital gains to beneficiaries in 2024?”, July 5, 2024.
Kim G C Moody, Kenneth Keung, and Christopher Ellett are quoted in the Investment Executive article titled “When is the latest clients can sell assets prior to June 25?”, published on May 17, 2024.
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The end of the Small Business Deduction?
On June 13, 2016, the Organisation for Economic Co-operation and Development (OECD) released its Economic Survey of Canada. There were some interesting comments and criticisms about Canada’s overall economy. However, as it relates to small business taxation, the following quote should be noteworthy for Canadian private client tax advisors.
Think the new small business deduction rules don’t affect you? Think again!
Proposed amendments to the Income Tax Act introduced in the 2016 Federal Budget will significantly alter the Small Business Deduction (SBD) scheme for taxation years that begin following March 21, 2016. An admittedly over-simplification of the complexities of these amendments is that they aim to restrict the multiplication of the SBD in which unassociated corporations provide services to a partnership or corporation a partner or shareholder of which is not arm’s length with the service-providing corporation. A simple example of this is HusbandCo providing services to WifeCo. There has been much discussion, and there is sure to be more, on the application of these amendments to the structures they are intended to effect; however, that is not the subject of this blog.
The breadth of these amendments reaches the most basic of planning and circumstances, and all practitioners should be aware – as we’ll describe in the following two situations.
CRA confirms US LLLPs and LLPs are indeed corporations
At the International Fiscal Association conference held in Montréal on May 26, 2016, the CRA orally announced its conclusion that US limited liability limited partnerships (LLLPs) and US limited liability partnerships (LLPs) would be classified as corporations for Canadian tax purposes. In light of similar classification of US limited liability companies (LLCs), the CRA’s conclusion is not too surprising. We applaud the CRA’s announcement that it will allow transitional relief for at least some affected taxpayers as we advocated in our April 22, 2016, publication and we await the further details on the relief measures when the CRA releases its written responses in the coming weeks.
Fort McMurray Fires – Alberta Strong
This morning, Albertans woke up to an assessment of the damage that has been inflicted on the city of Fort McMurray. The damage caused to this beautiful city is shocking. Thankfully, and somewhat miraculously, the positive is that no one was hurt. Let’s hope the worst is over.
Canadian Tax Free Savings Accounts – Canada Revenue Agency Audit Project
As we have previously written, the Canada Revenue Agency (“CRA”) is aggressively reviewing certain Tax Free Savings Accounts (“TFSAs”). Subsection 146.2(6) of the Canadian Income Tax Act provides that if a TFSA “carries on one or more businesses,” then Part I tax is payable on its business income. This provision, little noticed until recently, has been the basis for a wave of CRA tax assessments issued to TFSAs in respect of income allegedly earned from carrying on a securities trading business inside the TFSA. Generally, the assessments are issued to TFSAs with high balances whose annuitants are investment advisors or have significant knowledge and experience in the securities industry, particularly (but not always) where the TFSA has traded frequently in speculative stocks. There is usually no limitation period for the CRA to assess because TFSAs generally do not file a tax return under Part I of the Act.
United States Limited Liability Limited Partnerships – Are you ready for the Canada Revenue Agency’s new hybrid creation?
Canadians who thought they had invested in a partnership when they invested in a US Limited Liability Limited Partnership (LLLP) may be surprised in the coming weeks to find they actually own a “hybrid entity”. No, this isn’t some new genetically modified plant or Frankenstein monster. It’s, for example, an entity which is treated as a partnership in one country, but taxed like a corporation in the other country. Another common hybrid entity Canadians may be familiar with is the US Limited Liability Corporation (LLC). Basically, a hybrid entity is one that is fiscally transparent in one country and not in another. An entity is fiscally transparent if profits are taxable directly in the owners’ hands, regardless of whether any distributions were made to the owners. Based on Canada Revenue Agency (CRA) comments, it appears the CRA is soon going to decree that a US LLLP is a corporation for Canadian tax purposes, thus turning US LLLP interests held by Canadians into investments in hybrid entities. Does our firm agree with the CRA’s comments? No… but we will not debate that conclusion here. Instead, we discuss the challenge that Canadians will face if the CRA’s position is correct.
Alexander Marino is quoted in an article titled “Trump bump: U.S. citizenship renunciation inquiries surge in Canada, lawyers say” on CBC News, January 28, 2025.
Alexander Marino is quoted in an article titled “‘Scary’: Why US expats are tossing their citizenships – and it’s not just Trump” in The Sydney Morning Herald, November 1, 2024
Kenneth Keung is quoted in the Investment Executive article titled “Quirk in capital gains tax rules raises risks for incorporated clients,” published on July 24, 2024.
Kenneth Keung is quoted in the Investment Executive article titled “How should trusts flow out capital gains to beneficiaries in 2024?”, July 5, 2024.
Kim G C Moody, Kenneth Keung, and Christopher Ellett are quoted in the Investment Executive article titled “When is the latest clients can sell assets prior to June 25?”, published on May 17, 2024.
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