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Tomorrow marks the second anniversary of the establishment of Moodys LLP Tax Advisors!  While the last year has certainly provided economic challenges for our clients, we are extremely pleased with the services, clients and growth that our firm has had.  A special thank you to the Moodys’ teammates and Shea Nerland Calnan LLP (our fantastic legal partner).  A special thank you also to all of our great service providers.  Moodys has some exciting new plans and service offerings that we will share with you soon!

For those of you who enjoy reading our blogs, we are pleased to announce our new blogsite at www.taxandestateplanning.com which hosts all of our blogs and has a link to a whole host of other interesting blogs.  We encourage you to visit this website.

As a tax specialist firm, we work with many private corporations and their accounting and legal advisors. We see a lot of opportunities for planning and take great pleasure in working with the fabulous advisors that serve our clients. 

Unfortunately, however, we often come across plans that could perhaps have been better thought out. One of the common strategies that we trip across is the use of “management fees” to reduce income of one corporation and increase the income of another corporation. Often times the payor corporation and the recipient corporation have different taxation year ends and therefore the plan is a loose attempt to try and get an income tax deferral.  In some cases, advisors will recommend the use of a disassociated “Management Co” (owned by a related person) to receive management fees in an attempt to multiply access to the small business deduction (with the result being lower income tax rates on retained profits).  There are a host of income tax issues that need to be considered with the use of management fees between related corporations. For example, are the management fees legitimate, are they reasonable, were they incurred for the purpose of earning from a business or property, are the management fees earned over the course of the year (and, if so, is the resulting deferral eliminated or reduced) and are GST issues  properly considered? 

By Nicolas F. Baass  LL.B., LL.M. (Tax)

According to government statistics there are approximately 161,000 not-for-profit organizations in Canada, of which 19,000 are federally incorporated.  Up until now these non-profit corporations were predominantly incorporated pursuant to Part II of the Canadian Corporations Act (“CCA”).¹   The CCA is largely unchanged from the date of its enactment in 1917, and as such it is cumbersome and lacks adequate provisions for corporate governance and other provisions which one would expect to find in an act regulating corporations in Canada.  Bill C-4, the Canada Not-for-Profit Corporations Act (“NPCA”), provides for an overhaul of non-profit corporate law with the phased repeal of the CCA and the continuance of CCA non-profit corporations into NPCA not-for-profit corporations.