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Moodys Gartner musings

Blog

Government of Alberta announces a newsworthy budget for 2015

Budget announcements from the Government of Alberta for the last number of years have generally been humdrum events. Unfortunately, with declining oil prices and market uncertainty, the Government of Alberta is now in a position where it can no longer rely on resource royalties to smooth out its revenue stream. Through Budget 2015, the Government of Alberta is proposing changes that will impact many Albertans in a significant way.

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The loss restriction event rules for trusts are broader than you think

Loss carryforwards and other tax attributes are valuable assets because they can shelter taxes. As such, loss utilization has always been a staple of good tax planning. The Income Tax Act and the CRA’s administrative policies have generally accepted loss utilization planning within affiliated and related parties. On the other hand, the Act has always had provisions against arm’s length loss trading transactions whereby one taxpayer in effect makes use of another’s unused tax attributes. Prior to March 21, 2013, these rules were referred to as the “acquisition of control” rules and they applied only to corporations. However, in recent years, there are a proliferation of non-corporate vehicles that carry on substantial activities traditionally undertaken only by corporations. In response, the Department of Finance introduced a new “loss restriction event” concept in new section 251.2, effective March 21, 2013, that essentially expands the old acquisition of control regime to partnerships and trusts. At first glance, the rules in section 251.2 appears to be of limited relevance to ordinary trust and estate planning due to the affiliated person exceptions provided. However, there are traps for the unwary contained in these rules.

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Another turn at Cheek: Willfulness and non-US residents

Since 2012, US citizens living in Canada (and elsewhere outside the US) have had two options to address income tax non-compliance issues: the Offshore Voluntary Disclosure Program (“OVDP”) and the Streamlined filing procedure (“Streamlined”). The more comprehensive OVDP program offers criminal amnesty after pre-clearance, extensive disclosures, and a mandatory penalty payment. Streamlined presents a less onerous path of fewer filings and reduced (or eliminated) penalty. Originally, Streamlined was available only to nonresident taxpayers as defined by the terms of the program. On June 18, 2014, the IRS announced modifications to the streamlined filing procedure. One modification was the establishment of the “Streamlined Domestic Offshore Procedures.” This program opens the Streamlined filing procedures to US resident taxpayers, and was intended for US resident taxpayers who had failed to disclose offshore assets, but whose failure to disclose had been “non-willful.”

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Supreme Court of Canada rules that FINTRAC requirements do not apply to law firms: Solicitor-client privilege remains strong in Canada

The Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) is a government agency tasked with facilitating the detection, prevention, and deterrence of money laundering and the financing of terrorist activities. FINTRAC operates under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17 (the “Act”) and collects information on financial transactions relying upon certain provisions of the Act.

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Can Canadian taxpayers defer a gain on a disposition of property by reinvesting the sale proceeds like US taxpayers can?

The recent case of Livingston v The Queen from the Tax Court of Canada has once again thrust the replacement property rules in section 44 of the Income Tax Act (the “Act”) in the spotlight. Since numerous commentators have already discussed the case and debated whether the Tax Court was correct in its narrow interpretation of the legislation, we will take another approach and use this as an opportunity to highlight a common misconception about the Canadian replacement property rules that we frequently encounter in our practice.

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The OECD’s Base Erosion and Profit Shifting (“BEPS”) Project

For tax geeks like me, the OECD’s BEPS project has been fascinating to watch and participate in the debate. On February 12, 2015, I attended 2015 BEPS Symposium – A Canadian Perspective, jointly presented by the Canadian Tax Foundation and International Fiscal Association Canada. The session was very interesting, exceptionally well presented, and a reminder that it is a great time to be a tax advisor despite (or because of) the crush of new developments.

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