mnp 2009-2010 guide to personal tax planning final · 2015-06-25 · capital gains and losses ......

2009 - 2010GUIDE TO PERSONAL TAX PLANNING

INTRODUCTION

If there’s one constant in life, it’s taxes. Strategic tax planning is an essential step that helps individuals

achieve their personal and business goals.

Your lifestyle and the ability to meet your current and future needs is affected by the amount of tax you pay.

Planning for taxes due today and in the years to come is important. Tax laws change, so may your personal

situation. In response, we put together this Personal Tax Planning Guide. Our aim is to help you keep up-to-

date with tax strategies that could have a real and beneficial impact on the amount of tax you pay this year

and in the future.

Moreover, our view is global. As part of the Praxity network, we are well-positioned to assist you with tax

issues both in Canada and throughout the world. Our goal is to design strategies that take into account your

unique needs and objectives.

Unless otherwise indicated, the tax rates mentioned in this planner represent the combined 2009 Federal

and Provincial top marginal rate for residents of Alberta (39.00%); British Columbia (43.70%); Manitoba

(46.40%); New Brunswick (46.00%); Newfoundland and Labrador (44.50%); Nova Scotia (48.25%); Ontario

(46.41%); Prince Edward Island (47.37%); Quebec (48.22%); and Saskatchewan (44.00%).

The comments contained in this tax planning guide are not intended to replace specific professional advice

or a reference to actual legislation. For additional information on Canadian or international tax matters,

please contact your MNP advisor.

NEW FOR 2009 AND 2010

Home Renovation Tax Credit (“HRTC”) – introduction of a temporary non-refundable credit (Page

32)

Home Buyers Plan (“HBP”) – increase in maximum eligible withdrawal (Page 19)

First Time Home Buyers’ Tax Credit – introduction of a new non-refundable tax credit for the first-

time home buyers (3)

RRSP/RRIF Losses after Death – introduction of an income tax provision to recognize a decrease

in RRSP/RRIF value (Page 20)

TABLE OF CONTENTS

1. TAX ON NET INCOME...................................................................................................... 5

2. CAPITAL GAINS AND LOSSES ....................................................................................... 5

CAPITAL GAINS INCLUSION RATE ................................................................................. 5

CAPITAL GAINS ROLLOVER............................................................................................ 5

CAPITAL GAINS EXEMPTION .......................................................................................... 5

TOP MARGINAL RATES ON CAPITAL GAINS.................................................................. 6

CAPITAL GAINS RESERVE.............................................................................................. 7

ALLOWABLE BUSINESS INVESTMENT LOSSES............................................................ 7

3. INCOME SPLITTING......................................................................................................... 8

BENEFITS ELIMINATED ................................................................................................... 8

TAX ON SPLIT INCOME ................................................................................................... 8

REGISTERED EDUCATION SAVINGS PLAN (RESP) AND CANADA EDUCATIONSAVINGS GRANT (CESG) ................................................................................................ 9

REGISTERED DISABILITY SAVINGS PLAN (RDSP) .......................................................10

TAX FREE SAVINGS ACCOUNT (TFSA) .........................................................................11

4. INTEREST VS. DIVIDENDS VS. CAPITAL GAINS...........................................................11

5. STOCK OPTION BENEFITS ............................................................................................14

SHARES ACQUIRED UNDER AN OPTION AGREEMENT...............................................15

6. UNIVERSAL CHILD CARE BENEFIT (UCCB) .................................................................15

7. SHAREHOLDER/MANAGER PLANNING........................................................................15

EMPLOYEE AND SHAREHOLDER LOANS .....................................................................16

INDIVIDUAL PENSION PLANS ........................................................................................16

8. PROFESSIONAL INCORPORATION...............................................................................17

9. OTHER INCOME..............................................................................................................17

LUMP-SUM PAYMENTS ..................................................................................................17

SCHOLARSHIPS..............................................................................................................17

APPRENTICESHIP GRANT .............................................................................................17

PENSION INCOME - PHASED RETIREMENT .................................................................18

10. DEDUCTIONS..................................................................................................................18

REGISTERED RETIREMENT SAVINGS PLANS..............................................................18

THE RRSP HOME BUYER’S PLAN (HBP) .......................................................................19

REGISTERED RETIREMENT SAVINGS PLAN LOSSES AFTER DEATH ........................20

AUTOMOBILES................................................................................................................21

ENTERTAINMENT EXPENSES........................................................................................22

HOME OFFICE EXPENSES.............................................................................................22

PRIVATE HEALTH PLAN PREMIUMS..............................................................................22

CHILD CARE EXPENSES ................................................................................................22

LEGAL EXPENSES..........................................................................................................23

MOVING AND RELOCATION EXPENSES .......................................................................23

ALIMONY AND CHILD SUPPORT....................................................................................24

TAX SHELTERS...............................................................................................................24

INTEREST EXPENSES....................................................................................................25

APPRENTICE VEHICLE MECHANICS’ TOOL DEDUCTION ............................................25

TRADES-PEOPLE’S TOOL EXPENSE.............................................................................26

NORTHERN RESIDENTS DEDUCTION...........................................................................26

OTHER DEDUCTIONS.....................................................................................................26

11. TAX CREDITS..................................................................................................................26

CHARITABLE DONATIONS .............................................................................................28

POLITICAL CONTRIBUTIONS .........................................................................................28

MEDICAL EXPENSES......................................................................................................29

PENSION INCOME AMOUNT ..........................................................................................30

EDUCATION AND TUITION .............................................................................................30

TEXTBOOKS....................................................................................................................31

STUDENT LOANS............................................................................................................31

DISABILITY AMOUNT ......................................................................................................31

CAREGIVER CREDIT ......................................................................................................31

ADOPTION CREDIT.........................................................................................................31

PUBLIC TRANSIT PASS ..................................................................................................32

CANADA EMPLOYMENT .................................................................................................32

CHILDREN’S FITNESS ....................................................................................................32

CHILDREN UNDER THE AGE OF 18...............................................................................32

WORKING INCOME TAX BENEFIT (WITB)......................................................................32

HOME RENOVATION TAX CREDIT (HRTC)....................................................................32

FIRST TIME HOME BUYER’S TAX CREDIT ....................................................................33

12. FOREIGN TAX CREDITS.................................................................................................33

13. ALTERNATIVE MINIMUM TAX (AMT) .............................................................................33

14. INCOME TAX INSTALLMENTS .......................................................................................34

INTEREST ON TAX..........................................................................................................35

15. TAXPAYER RELIEF (FORMERLY FAIRNESS) ...............................................................35

16. EMIGRATION FROM CANADA .......................................................................................35

INFORMATION REPORTING...........................................................................................36

DEPARTURE TAX............................................................................................................36

SECTION 116 CERTIFICATE...........................................................................................36

INTERNATIONAL TAX .....................................................................................................36

17. FOREIGN PROPERTY REPORTING REQUIREMENTS ..................................................36

18. UNITED STATES TAXES.................................................................................................37

RESIDENCY RULES........................................................................................................37

US CITIZENS ...................................................................................................................38

DEDUCTION FOR DEPENDANTS ...................................................................................38

RRSP REPORTING..........................................................................................................38

ESTATE TAXES...............................................................................................................38

DISCLOSURE REQUIREMENT........................................................................................39

19. MNP QUICK TAX FACTS 2009 (SEE ATTACHMENT) ....................................................40

1. TAX ON NET INCOME

All provinces use the Tax on Net Income (“TONI”) system to calculate Provincial personal income tax. Under

a TONI system, Provincial tax is calculated on taxable income rather than as a percentage of basic Federal

tax. Accordingly, provinces have flexibility in determining personal income tax revenues and are not

impacted by changes to Federal individual income tax rates. Provinces also have the ability to implement

fiscal policies to stimulate local economies, as they deem appropriate.

2. CAPITAL GAINS AND LOSSES

CAPITAL GAINS INCLUSION RATE

The capital gains inclusion rate is 50%. Net capital losses incurred in prior years and applied against capital

gains in 2009 will be adjusted to the 50% inclusion rate.

Capital gains on donations of publicly traded securities, unlisted securities, and ecologically sensitive land

are not subject to tax. Donations of shares acquired under stock option plans receive parallel treatment.

The same treatment has been extended to unlisted securities for donations made after February 26, 2008.

CAPITAL GAINS ROLLOVER

You may be able to defer taxation on the disposition of an eligible small business investment where you

used the proceeds of disposition to invest in another eligible small business. The amount of the capital gain

deferred will reduce the adjusted cost base of your new investment, instead of being subject to tax.

To qualify, an eligible small business investment must have certain characteristics including:

it must be an investment in common shares issued from treasury of a Canadian Controlled Private

Corporation (“CCPC”),

the investment must be held for more than 6 months

the CCPC must use all or substantially all (more than 90%) of its assets in an active business

carried on primarily in Canada, and

the total carrying value of the assets of the corporation and related corporations may not exceed

$50 million immediately before and after the investment

Only individuals (other than trusts) can use these provisions. The reinvestment must be made within 120

days of the end of the year in which the disposition took place.

CAPITAL GAINS EXEMPTION

The Capital Gains Exemption (“CGE”) for shares of a Small Business Corporation (“SBC”) or farm and

fishing property is $750,000 for gains realized on dispositions after March 18, 2007 (previously $500,000).

The increased exemption may benefit individuals who own qualifying property, whether or not they have

previously used any of their CGE. All tax accounts associated with the CGE such as the Annual and

Cumulative Gains Limit and Cumulative Net Investment Losses (“CNIL”) will continue to be a factor when

determining the CGE for SBC shares and farm property.

For more information on how you may avail yourself of the CGE, please contact your professional advisor at

one of our offices.

Fishing properties (in addition to farming properties) are now eligible for a tax free intergenerational transfer.

The 1994 election must be considered when computing capital gains or losses. A taxpayer was able to

make an election for property held on February 22, 1994 in order to take advantage of a phased out life-time

general capital gains exemption. For those who made the election on property held on February 22, 1994,

the capital gain or loss realized on a disposition of those properties will be affected by the election. The gain

or loss on disposition will not be measured from the original cost of the property but must instead reflect the

elected amount.

Tax Tip

If the CNIL is limiting your ability to claim the CGE, consider generating investment income in excess

of losses to reduce or eliminate the CNIL problem.

TOP MARGINAL RATES ON CAPITAL GAINS

The top marginal rates on capital gains included in income in 2009 are:

RESIDENTS OF %

Alberta 19.50

British Columbia 21.85

Manitoba 23.20

New Brunswick 23.00

Newfoundland and Labrador 22.25

Nova Scotia 24.13

Ontario 23.21

Prince Edward Island 23.69

Quebec 24.11

Saskatchewan 22.00

CAPITAL GAINS RESERVE

You may be eligible to claim a capital gains reserve on the disposition of capital property where you have

not received 100% of the proceeds of disposition in the year of sale. The allowable reserve is proportionate

to the uncollected amount of the sale proceeds, but a minimum of 20% per year of the gain, on a cumulative

basis, must be included in income. The gain will be fully taxed within a maximum of five years.

The reserve is extended to ten years on the disposition of farming or fishing properties.

Tax Tips

When structuring a sale of appreciated assets, consider deferring the receipt of proceeds to defer the

related taxes on the sale. Be sure that the payment structure will provide you with proceeds to pay the

taxes as they come due. The maximum tax deferral is 20% per year on a cumulative basis over 5

years.

Consider “crystallizing” the CGE for SBCs to take advantage of the exemption while it exists.

Have family members or a family trust subscribe for shares in your SBC. When the shares are sold,

each individual or income beneficiaries of the trust may benefit from the CGE of $750,000.

Consider triggering the CGE for SBCs by selling to a family member at fair market value.

Once you have used the CGE for SBCs, consider the capital gains rollover to defer the tax on a

disposition of SBC shares.

If the CGE election was used in 1994, the adjusted cost base of any assets disposed should be

increased accordingly. Remember to take into account your elected capital gains balance on the

disposition of mutual fund units.

Consider realizing potential capital losses to reduce capital gains realized during the year. Do not re-

acquire such assets within 30 days of disposition or the loss will be denied.

ALLOWABLE BUSINESS INVESTMENT LOSSES

Allowable Business Investment Losses (“ABILs”) are losses incurred on shares of, and certain loans to,

SBCs, which may be realized and deducted against other income.

Shares of insolvent SBCs do not have to be sold to trigger an ABIL. It is possible to claim an ABIL if a

corporation, and any corporation controlled by it, is inactive and it is reasonable to expect that the

corporation will be dissolved or wound up and will not commence to carry on a business.

The amount of the ABIL that may be deducted against other income is reduced by the amount of the CGE

claimed in prior years. This reduction in the ABIL reverts to a net capital loss which may be carried back

three years and forward indefinitely to reduce capital gains. ABILs not utilized during the non-capital loss

carry-back and carry-forward period become net-capital losses.

Note also that any ABILs claimed will reduce capital gains eligible for the CGE.

Tax Tips

Defer, if possible, claiming an ABIL, if you intend to elect to utilize your $750,000 CGE.

Review your portfolio to ensure that all possible ABILs have been claimed.

Review dispositions of shares to see if any losses qualify as ABILs.

3. INCOME SPLITTING

For many years, income splitting thrived as a basic tax planning technique by reducing a family’s overall tax

burden, thus increasing disposable income. Income splitting creates a tax advantage because individuals in

Canada are taxed separately at graduated tax rates. For example, the tax on a single taxable income of

$80,000 is significantly higher than the tax on two taxable incomes of $40,000. Income splitting, therefore,

attempts to shift income which might be highly taxed in one individual’s hands to someone who will pay less

tax.

Seniors may now allocate up to half of their qualified pension income to be taxed in the hands of their

spouse or common-law partner. See on page 30 for payments that qualify as pension income. This may

result in tax savings where the spouse or common-law partner is in a lower tax bracket. An annual

agreement will be required between both the taxpayer and the spouse/common-law partner agreeing to the

transfer.

Income splitting can also mitigate the effect of the Old Age Security “claw-back”. Taxpayers with income

over $66,335 are required to repay all or part of these benefits. The effect of the claw-back may be reduced

by lowering an individual’s total income and spreading this income to other family members. Old Age

Security Benefits are paid to recipients based on the individual’s income for the preceding year. Lowering

income in one year potentially eliminates the claw-back in the next year.

BENEFITS ELIMINATED

Over the years, the Federal government has introduced income attribution rules that have eliminated many

of the possibilities for income splitting. In particular, these rules eliminate the immediate benefit a taxpayer

may achieve by transferring property to a spouse, to a person who subsequently becomes a spouse, to a

child under 18 years of age, or to a niece or nephew. Note that the definition of a spouse includes a

common-law spouse of the same or opposite sex. Certain loans to related parties over 18 years of age are

also restricted. The income attribution rules cause the income generated from the transferred property to

revert to the transferor for tax purposes. However, despite the government’s efforts, a number of income

splitting techniques continue to be available. The applicability of each one is limited to specific family

situations and objectives.

TAX ON SPLIT INCOME

Tax on split income or the “kiddie tax” is imposed at the top marginal tax rate on certain income received by

individuals under the age of 18. The income subject to this kiddie tax includes:

Taxable dividends and other shareholder benefits on unlisted shares of Canadian and foreign

companies (received directly or indirectly).

Income from a partnership or trust where the income is derived by the partnership or trust from the

business of providing property or services to a business carried on by a relative of the child or in

which the relative participates.

Income subject to this tax is not eligible for any deductions other than dividend tax credits and foreign tax

credits. This measure effectively eliminates income splitting plans which utilize family trusts to sprinkle

dividends out of a family-owned business to minor children. Depending on your personal family scenario,

however, there may be alternative planning that can take place.

Tax Tips

Consider splitting growth investments with children of any age as the attribution rules do not apply to

capital gains.

Gift investments to adult children. Note that such gifts are treated as a disposition at fair market value

and any accrued gains will be taxed in your hands. Gifts of money do not have this same

consequence.

Deposit child tax benefits and Universal Child Care Benefit (“UCCB”) receipts in trust for children.

Have the higher income spouse pay all living expenses including their spouse’s taxes and let the

lower income spouse accumulate capital.

If a principal residence is owned by the lower income spouse, consider a transfer to the higher income

spouse to move capital into the hands of the lower income earner.

Loan funds to your spouse to finance a business venture. Business income is not attributable to the

lender.

Maximize the use of spousal RRSPs. These use up your individual RRSP room but can enable future

income splitting with your spouse.

You should consider using RESPs to save for a child’s education.

Consider paying a reasonable salary to a spouse or child for work performed in a family business.

Consider splitting CPP or QPP and RPP benefits with a lower income spouse.

REGISTERED EDUCATION SAVINGS PLAN (RESP) AND CANADAEDUCATION SAVINGS GRANT (CESG)

The Registered Education Savings Plan (“RESP”) is a tax-deferral vehicle which can be used to accumulate

income for a child’s post-secondary education while achieving income splitting. The RESP rules were

expanded for 2007 and subsequent years to allow qualifying part-time programs which do not meet the

current 10 hour per week requirement to be spent on courses or work to draw Education Assistance

Payments (EAPs) from their RESPs. The new rules allow EAPs to be paid from RESPs if the educational

program requires at least 12 hours per month of courses. Based on this change, students 16 or over are

entitled to receive up to $2,500 of EAPs for each 13-week semester of part-time study. There is a lifetime

contribution of $50,000 with no annual limit on contributions for each beneficiary of an RESP.

In 2007 and prior years, EAPs were paid to RESP beneficiaries only if they are enrolled as a student in a

qualifying post-secondary program. In order to provide more accessibility to the RESP savings, 2008

changes allow RESP beneficiaries eligible to receive EAPs for up to six months after ceasing to be enrolled

in a qualifying program. This applies to 2008 and subsequent years.

Contributions may be made for 31 years after the year the plan was set up. The RESP must be wound-up in

the year that includes the 35th

anniversary of the plan. These limits are increased to 35 and 40 years

respectively where a beneficiary qualifies for the disability tax credit. The annual contributions are not

deductible for tax purposes, but the income is accumulated on a tax deferred basis and ultimately taxed in

the hands of a child once distributed.

Since 1998, the government has provided additional assistance through the Canada Education Savings

Grant (“CESG”) equal to 20% of annual contributions made to the RESP for children up to age 18. The

CESG payable on annual contributions is $500 per child per year. Any unused CESG contribution room is

carried forward for use in future years. CESG contributions must be repaid if the proceeds of the RESP are

not used for educational purposes.

The CESG is 40% for families with income less that $40,726 and 30% for families with incomes between

$40,726 and $81,452. These increased rates apply to the first $500 contributed to an RESP. The enhanced

CESG will not be eligible for carry-forward.

Children born on or after January 1, 2004 may also qualify for a Canada Learning Bond (“CLB”) in each year

that the child’s family is entitled to the National Child Benefit (“NCB”) supplement up to and including the

year in which the child turns 15 years of age. An initial CLB of $500 is paid in the first year of entitlement.

Any subsequent CLB is $100 per eligible year up to a lifetime maximum of $2,000. The CLB must be

transferred to an RESP and is not be eligible for the CESG.

The CESG, CLB and the investment income in the RESP are available as EAPs when the beneficiary

enrolls in a qualifying educational program at a recognized institution. EAPs are taxable in the hand of the

student.

Tax Tips

If you have an RESP and it appears that no beneficiary will use the plan before the mandatory

expiration date, begin to forgo RRSP contributions, if necessary, to ensure enough RRSP room

exists to absorb a contribution of the earnings from the RESP.

Capital contributions made to the RESP are withdrawn without tax consequence. See RRSPs on

page 18.

Consider establishing an RDSP for children who qualify for the disability tax credit.

REGISTERED DISABILITY SAVINGS PLAN (RDSP)

Effective 2008, the Registered Disability Savings Plan (RDSP) was introduced and generally modeled after

the RESP, with a corresponding Canada Disability Savings Grant (CDSG) program and a Canada Disability

Savings Bond (CDSB) program. RDSPs can be established by any Canadian resident eligible for the

disability tax credit (DTC) or his parent or other legal representative.

Lifetime contributions to an RDSP are limited to a maximum of $200,000 with no annual contribution limit.

Contributions for a beneficiary may be made until the age of 59. RDSP contributions are not deductible,

however the plan will be permitted to grow tax-free. The lifetime limit of CDSG is $70,000 until the

beneficiary’s 49th

birthday. The CDSG grants may be as high as 300% of RDSP contributions if family net

income is less than $81,452 in 2009. If family net income exceeds the above threshold, the CDSG grant is

100% of RDSP. The maximum CDSG receipts in any one year is $1,000.

TAX FREE SAVINGS ACCOUNT (TFSA)

TFSA is a new registered savings option effective January 2009. A taxpayer may earn investment income

and capital gains that are not subject to income tax. Any individual aged 18 or over will be allowed to

contribute up to $5,000 per year to a TFSA regardless of income level. TFSA contributions will not be tax

deductible and any withdrawals made will be non-taxable. Interest on money borrowed to invest in a TFSA

will not be tax deductible. A TFSA will lose its tax exempt status upon the death of an individual. As a result,

income earned within the TFSA accrued after the death of individual will be taxable.

Tax Tip

Consider contributing to a TFSA after RRSP contributions have been maximized.

CRA will advise taxpayers of their TFSA contribution room.

Withdrawals from a TFSA in one tax year may only be recontributed to the TFSA in subsequent tax

years.

4. INTEREST VS. DIVIDENDS VS. CAPITAL GAINS

Interest, dividends and capital gains are each taxed differently. Investors would be wise to consider these

differences in setting out their investment strategy. Dividends from Canadian corporations are generally

eligible for a dividend tax credit (DTC). The amount of credit depends on whether the dividends qualify as

eligible dividends. There is no credit on the earning of interest income. As for capital gains, only 50% of such

gains are taxable (see Capital Gains and Losses on page 5).

The lowest Federal tax rate is paid on capital gains (14.50%) and eligible dividends (14.55%), as compared

with the tax rate on interest, assuming the top tax bracket. Depending on your province of residence you

may have a preference to the receipt of capital gains over eligible dividends or vice versa. In 2009 it is still

advantageous to earn capital gains in Manitoba, Newfoundland and Labrador, Nova Scotia, Prince Edward

Island and Quebec. While in Alberta, British Columbia, New Brunswick, Ontario and Saskatchewan it is

more advantageous to earn eligible dividends. In certain cases, however, the spread between the rate

applicable to capital gains and eligible dividends is minimal.

Eligible dividends are subject to a gross up of 45%, as opposed to 25% applicable to non-eligible dividends,

received from taxable Canadian corporations. The Federal dividend tax credit is 27.5% of the actual

dividend for eligible dividends and 16.67% of the actual dividend for non-eligible dividends.

An eligible dividend is any taxable dividend the payer corporation designates to be an eligible dividend. The

payor corporation must notify the recipient in writing that the dividend is an eligible dividend at the time the

dividend is paid. The dividend recipient can rely on the written notice from the corporation, and need not

know anything about the tax status of the corporation.

Eligible dividends generally include dividends paid after December 31, 2005 by:

Public corporations or other Canadian resident corporations that are not CCPCs, which are subject

to the Federal general corporate income tax rate (19.00% - 2009); or

CCPCs to the extent that the CCPCs income is:

o Not investment income (other than eligible dividends received from other corporations), and

o Subject to the Federal general corporate income tax rate.

As a general rule of thumb, most dividends paid by a Canadian public company should qualify as eligible.

Whether a dividend paid by a CCPC is eligible will depend on the tax rate paid by the CCPC and the type of

income it earns.

Effective 2010, the dividend gross-up and DTC for eligible dividends will be adjusted to reflect the reduction

of the general corporate tax rate to 15% by 2012.

The gross-up of eligible dividends will be reduced from 45% to 44% effective January 1, 2010; to 41%

effective January 1, 2011 and to 38% effective January 1, 2012. As a result, the DTC will also change

moving from 27.5% of the actual dividend to 25.88%, 23.17% and 20.73% respectively.

The purpose of these adjustments is to ensure that the net after-tax dividend remains at about the current

level.

The chart below illustrates the equivalent pre-tax investment yield for taxpayers earning interest, non-eligible

Canadian dividends, eligible dividends and capital gains at the top marginal tax rate.

Province Interest % Non-Eligible Dividends (%) Capital Gains (%) Eligible Dividends (%)

Alberta 2 1.69 1.52 1.43

4 3.38 3.03 2.86

6 5.06 4.55 4.28

8 6.75 6.06 5.71

10 8.44 7.58 7.14

British Columbia 2 1.67 1.44 1.41

4 3.35 2.88 2.81

6 5.02 4.32 4.22

8 6.69 5.76 5.6210 8.37 7.20 7.03

Manitoba 2 1.73 1.40 1.41

4 3.47 2.79 2.81

6 5.20 4.19 4.22

8 6.94 5.58 5.6310 8.67 6.98 7.04

New Brunswick 2 1.64 1.39 1.38

4 3.28 2.77 2.76

6 4.93 4.14 4.14

8 6.57 5.52 5.52

10 8.21 6.90 6.90

2 1.65 1.43 1.44

4 3.30 2.86 2.88

6 4.95 4.28 4.32

8 6.60 5.71 5.76

10 8.25 7.14 7.20

Nova Scotia 2 1.55 1.36 1.44

4 3.09 2.73 2.89

6 4.64 4.09 4.33

8 6.18 5.46 5.7810 7.73 6.82 7.22

Ontario 2 1.56 1.40 1.39

4 3.12 2.79 2.79

6 4.68 4.19 4.18

8 6.24 5.58 5.57

10 7.81 6.98 6.96

Quebec 2 1.63 1.36 1.47

4 3.25 2.73 2.95

6 4.88 4.09 4.42

8 6.51 5.46 5.89

10 8.14 6.82 7.37

Prince Edward Island 2 1.70 1.38 1.39

4 3.40 2.76 2.79

6 5.11 4.14 4.18

8 6.81 5.52 5.57

10 8.51 6.90 6.96

Saskatchewan 2 1.62 1.44 1.41

4 3.24 2.87 2.81

6 4.86 4.31 4.22

8 6.48 5.74 5.6210 8.10 7.18 7.03

Newfoundland and

Labrador

Pre-Tax Equivalent Yield

A comparison of Federal gross up and tax credits for eligible and non-eligible dividends for 2009 is reflected

below:

Eligible Dividends

$

Non-Eligible Dividends

$

Cash Dividend $ 100.00 $ 100.00

Taxable Dividend 145.00 125.00

Federal Income Tax at Top Marginal Rate 42.05 36.25

Federal Dividend Tax Credit (27.50) (16.67)

Federal Tax Payable $ 14.55 $ 19.58

All provinces have harmonized with the Federal legislation. The effective combined rates of tax on both

eligible and ineligible cash dividends in 2009 in these jurisdictions are reflected below:

Top Combined Rate Eligible Dividends

%

Non-Eligible Dividends

%

Alberta 14.56 27.73

British Columbia 19.92 32.71

Manitoba 23.83 38.21

New Brunswick 21.80 34.21

Newfoundland and Labrador 22.89 32.71

Nova Scotia 28.35 33.06

Ontario 23.06 31.34

Prince Edward Island 24.44 38.15

Quebec 29.69 36.38

Saskatchewan 20.35 30.83

Tax Tips

Where possible ensure that investment income is taxed in the hands of the spouse or the child with

the lowest marginal tax rate. An individual with no other income can earn approximately $40,500 of

non-eligible cash dividends on a tax-free basis in 2009.

The same individual can receive about $73,000 of eligible dividends without attracting Federal income

tax but an AMT liability of about $3,700 will result. If eligible dividends are limited to about $50,500 no

AMT should arise.

If possible, short-term investment contracts should be renewed to January 2010 to defer income

recognition to 2010.

Consider purchasing an “exempt” life insurance policy which allows you to accumulate cash tax-free.

Consider acquiring a prescribed annuity from a life insurance company which pays a blended payment

of capital and interest. It provides a better after-tax return compared to a term deposit.

Consider investing in preferred shares to convert interest income into dividends.

5. STOCK OPTION BENEFITS

The tax treatment of employee stock options results in a taxable benefit equal to the difference between the

fair market value of the shares acquired at the time the option was exercised and the amount paid by the

employee. Under certain circumstances the benefit may be reduced such that only half of the benefit is

taxed, similar to capital gains. The benefit is included in income in the year the option is exercised, unless

the option is issued by a CCPC in which case the benefit is deferred to the year of disposition.

An employee may elect to defer the benefit to the year of disposition where the issuer of the security is a

qualifying non-CCPC. Qualifying non-CCPCs include certain publicly listed companies and mutual fund

trusts. The deferral for options in these entities is subject to an annual vesting limit of $100,000. Further

qualifying criteria are as follows:

Eligible employees must be dealing at arm’s length with their employer and related corporations

and not own more than 10% of the shares of the company

An eligible option is an option to acquire an ordinary common share, traded on a Canadian or

foreign stock exchange

The exercise price of the option must not be less than the fair market value of the share at the time

the option is granted

Employees must not have the right to redeem or re-acquire the underlying shares at less than fair

market value

The $100,000 limit is measured against the aggregate fair market value of the underlying share at

the options’ grant date.

Employees must advise employers by January 15, 2010 of the amount of any 2009 benefit they wish to

defer.

Tax Tips

Consider extending ownership in a CCPC to a key employee by granting the employee an option at

less than fair market value.

When exercising options in public companies, consider exercising and selling the underlying shares

on the same date to avoid a potential capital loss that cannot be applied against the resulting

employment benefit.

Where you have exercised options to acquire publicly traded shares or units and the acquired

securities will not be sold by December 31, consider whether you qualify for deferral of all or part of

the employment benefit.

If you hold identical securities that have been acquired by various means (e.g. employment options,

open market), be aware of the ordering provisions that dictate which securities are disposed of first.

If you hold a security and acquire more under an employee option agreement, consider using specific

identification to determine the capital gain or loss on a disposition of shares that occurs within 30 days

of exercise.

SHARES ACQUIRED UNDER AN OPTION AGREEMENT

Taxpayers are permitted to use specific identification in determining the cost of securities where shares

under an employee option agreement are disposed of no later than 30 days after the date of their

acquisition. There can be no other acquisitions or dispositions of that security in the intervening period.

6. UNIVERSAL CHILD CARE BENEFIT (UCCB)

The UCCB provides families with $100/month ($1,200/year) for each child under the age of 6 years. The

UCCB is taxable to the lower income spouse and is not taken into account in computing other income

benefits. Also Old Age Security, Employment Insurance benefits and claimable childcare expenses will not

be reduced for the UCCB purposes.

7. SHAREHOLDER/MANAGER PLANNING

If you are a shareholder/manager, you have considerable flexibility in planning your personal tax position.

You should consider the following suggested planning ideas:

Determine the appropriate mix of salary and dividends prior to the end of the year. Declare and pay

the necessary dividends and pay or accrue the required salaries or bonuses. Canada Revenue

Agency (“CRA”) will only permit the deduction of accrued salaries or bonuses if sufficient and

appropriate documentation is in place at year-end, establishing the existence of a genuine liability

for such salaries or bonuses. The salary/dividend mix has become more complicated with the

introduction of the concept of eligible and non-eligible dividends and should be carefully reviewed.

Any accrued salary or bonus must actually be paid within 179 days of the company’s year-end. The

related payroll taxes must be remitted within CRA’s deadlines.

A deferral of tax may be achieved as the shareholder/manager is taxed in the year they receive the

bonus, while the corporation receives a deduction in a potentially earlier taxation year.

Assess the contribution of family members to the business and pay a reasonable salary. By doing

this you will not only reduce your overall tax burden, but it will also enable them to contribute to the

CPP or QPP, an RRSP and (in some cases) towards employment insurance.

Consider whether family members should pay employment insurance. You may apply for a refund

of premiums paid for up to three prior years where appropriate.

If your company has realized taxable capital gains, consider paying a tax-free dividend out of the

Capital Dividend Account (“CDA”). This account represents the accumulated tax-free portion of

capital gains, net of capital losses, realized by your company. Prior to realizing any significant

capital losses, consider paying out the accumulated tax-free CDA.

Prior to implementing any of the above-mentioned strategies, contact your MNP advisor to assist

you in maximizing your after-tax return.

EMPLOYEE AND SHAREHOLDER LOANS

Where any person received a loan or otherwise incurred a debt by virtue of an individual’s employment or

intended employment, the employee is deemed to have received a benefit in the taxation year. The benefit

is measured as the difference between the amount of interest calculated on the loan or debt at the

prescribed rate, and the amount of interest actually paid in the year or within 30 days after the end of the

year.

A similar rule applies to indebtedness extended to a shareholder, or a person related to the shareholder of a

corporation. Where the loan or indebtedness resulted from such shareholdings, a benefit is deemed to be

received by the debtor. The benefit is measured in essentially the same manner as for an employee.

In addition, where an individual shareholder or a related person borrows money or otherwise becomes

indebted to a corporation, the loan or indebtedness must be repaid by the end of the corporation’s fiscal

period following the fiscal period in which the loan or indebtedness was made or the amount of the loan or

indebtedness will be included in the income of the shareholder.

There are certain specific exceptions to this rule. For loans or indebtedness arising after April 25, 1995,

these exceptions only apply to shareholders who are also employees, and where the indebtedness arose by

virtue of the shareholder’s employment. Generally, this means that similar loans and conditions must be

available to all employees.

Tax Tips

Use the proceeds of a company loan for investment purposes. The benefit will be considered interest

paid for the purpose of earning income and therefore will be deductible.

Contact our offices to utilize the exceptions to the shareholder loan rules.

INDIVIDUAL PENSION PLANS

A shareholder/manager may be eligible to set up a personal pension plan called an Individual Pension Plan

(“IPP”) to provide for retirement. This plan may be funded entirely by the company on a tax-deductible basis.

IPPs are generally suitable for individuals who are in their late forties (at minimum), have salaries greater

than $117,000 per year and have maximized RRSP contributions since 1991. In such circumstances the

benefits of an IPP are significantly higher than an RRSP.

8. PROFESSIONAL INCORPORATION

In recent years many professionals, including doctors, dentists, accountants and lawyers, gained the right to

incorporate and carry on professions through professional corporations. The greatest benefit of incorporating

arises where a professional does not require the entire net income from the business to support family

needs. Any excess can be left in a corporation to be taxed at either the general corporate of about 30% or

the small business rate of approximately 20%. This represents a huge opportunity to defer between about

20% to 30% of tax per year. Alternatively, if the professional requires all net income earned, incorporation

may provide the benefit of allowing an IPP to be established in the future. This may result in a significant

benefit to professionals who are in their mid 30’s. Consult your MNP advisor to determine if incorporation will

be beneficial to you.

9. OTHER INCOME

LUMP-SUM PAYMENTS

Taxpayers who receive lump-sum payments in a year that pertain to one or more previous tax years may be

able to reduce their overall tax liability. With the filing of their tax returns, taxpayers must supply information

on the years to which the payment applies. If the resulting notional tax liability is less than the tax in the year

of receipt, the taxpayer will be entitled to a tax credit for the difference.

Qualifying lump-sum receipts must be in excess of $3,000 and the right to receive the income must have

existed in prior years. Eligible income includes:

Income from office or employment including termination awards

Superannuation or pension benefits

Spousal or child support amounts

Employment insurance and other prescribed benefits

Any interest on a lump-sum payment will be taxed in the year received.

SCHOLARSHIPS

Students in elementary and secondary schools are exempt on the receipt of scholarship, fellowship or

bursary income. This builds on the exemption introduced in 2006 for scholarship income received from

eligible Canadian and US post-secondary institutions with respect to post-secondary education or

occupational training.

APPRENTICESHIP GRANT

The apprenticeship grant must be included in computing the apprentice’s income for the taxation year in

which it is received.

PENSION INCOME - PHASED RETIREMENT

Effective for 2008 and subsequent years, an employee can receive pension benefits from a defined benefit

RPP of up to 60% of their accrued defined benefit pension, while accruing additional pension benefits on a

current services basis.

Qualifying employees must be at least 55 years old and eligible to receive a pension without incurring an

early retirement reduction. No restrictions apply in terms of employment, part-time or full-time, after the

commencement of the pension.

An Individual Pension Plan (IPP) will be prohibited from accruing additional benefits while paying a pension.

This should be considered before triggering early pension payments.

10. DEDUCTIONS

With each successive budget it appears that tax laws become more restrictive. However, certain deductions

continue to be available. Some of these deductions are discussed below.

REGISTERED RETIREMENT SAVINGS PLANS

The dollar limits on deductible contributions to Registered Pension Plans (“RPPs”) and Registered

Retirement Savings Plans (“RRSPs”) are reflected in the chart.

Money Purchase RPP*

($)

RRSP**

($)

2009 22,000 21,000

2010 22,450 22,000

2011 indexed 22,450

* Maximum of 18% of pensionable earnings

** Maximum 18% of earned income for the prior year

*** Indexed

The deadline for making deductible 2009 RRSP contributions is March 1, 2010. CRA has informed

taxpayers of their 2009 contribution limit with their 2008 Notice of Assessment as well as any unused RRSP

contributions carried forward. However, CRA’s notices may sometimes be incorrect.

You should verify all 2009 contribution limits prior to making your contributions. Remember to take into

account undeducted RRSP contributions carried forward in determining the total of your 2009 contributions.

For 2009, a member of an RPP or a Deferred Profit Sharing Plan (“DPSP”) may contribute to an RRSP up to

18% of 2008 earned income, to a maximum of $21,000 less the Pension Adjustment (“PA”). The PA for

money purchase plans will be equal to the value of contributions made in 2008 by you and your employer.

For defined benefit RPPs, the PA is determined by a prescribed formula and must be provided by the

employer.

Retiring allowances (subject to certain annual limitations) may be transferred to an RRSP. However, years

of service after 1995 are no longer eligible in determining the amount of retiring allowance eligible for

transfer. RRSP rollovers and regular contributions, as well as contributions to RPPs, are exempt from the

Alternative Minimum Tax (“AMT”).

There is a cumulative RRSP over-contribution limit of $2,000. Any excess contributions over that limit will be

subject to a penalty tax of 1% per month.

The RRSP rules include a provision that allows for an indefinite carry-forward of unused RRSP deduction

room accumulated since 1991. Individuals may utilize their accumulated unused RRSP room for years when

they have excess discretionary cash.

The age at which you must collapse your RPPs, RRSPs and DPSPs is 71. A RRIF annuitant, 71 years of

age or younger will be able to reconvert a RRIF to an RRSP as long the RRSP is converted back to a RRIF

before the end of the year in which the annuitant turns 71.

Earnings returned to a subscriber from an RESP are subject to a 20% penalty. However, RESP earnings of

up to $50,000 may be transferred to an RRSP to the extent the subscriber has sufficient unused RRSP

contribution room. This transfer counts as a normal RRSP contribution which will offset any income inclusion

and eliminate the penalty (see RESPs and CESGs on page 9).

Pension Adjustment Reversals (“PARs”) help restore lost RRSP contribution room for those individuals who

leave RPPs and DPSPs before retirement or upon termination of employment. Where an individual leaves

the plan before retirement, the termination benefits paid by the plan could be less than the total PAs

reported while the individual was a member. The PAR will increase the individual’s RRSP deduction limit by

the amount by which the PAs exceed the termination benefit, thereby restoring the RRSP room that would

otherwise be lost permanently. After 2000, PARs are added to an RRSPs deduction room for the year of

termination.

THE RRSP HOME BUYER’S PLAN (HBP)

The HBP permits individuals to make tax-free withdrawals from an RRSP for the purpose of purchasing a

home. The 2009 Budget increased the maximum eligible withdrawal after January 27, 2009 to $25,000

(previously $20,000). The maximum withdrawal for each individual must be repaid over fifteen years. To

utilize the plan, an individual must be a “first-time home buyer”, defined as an individual who, along with their

spouse, has not lived in an owned home at any time in the four calendar years prior to the time of

withdrawal. A qualifying home must be purchased prior to October 1 of the year following the year of

withdrawal.

Repayments to an HBP must commence by the end of the second year following the year of withdrawal. If

repayments are not made as required, the amount required to be repaid will be included in the taxpayer’s

income. Contributions made to an RRSP in the first 60 days of a calendar year may be treated as

repayments under the HBP for the preceding year. Finally, any contribution made to an RRSP less than 90

days before a withdrawal under a HBP will generally not be deductible to the extent that the contribution is

greater than the balance in the RRSP after the withdrawal.

Individuals may also make tax-free withdrawals from an RRSP to fund full-time training in a qualifying

educational program. The withdrawals cannot exceed $10,000 per year or $20,000 over a four year period.

Repayments must be made in equal annual installments over ten years. Any amount not repaid as required

will be included in income for the year.

There is no longer a limit on foreign content in a RRSP or RRIF. Qualified RRSP investments were further

expanded effective March 18, 2007, to include any debt obligation that has an investment-grade rating and

is part of an issuance that exceeds $25 million. Also included is any security, other than a futures contract,

listed on a designated stock exchange. These changes will provide RRSP investors with possibilities to

invest in foreign-listed trusts, partnership units and Canadian dollar bonds issued by foreign entities.

REGISTERED RETIREMENT SAVINGS PLAN LOSSES AFTER DEATH

At the time of an annuitant’s death, the fair market value of investments held in an RRSP or RRIF is

generally included in the income of the deceased for the year of death in the absence of a spouse or

dependant rollover. Any subsequent increase in the value of the investments is generally included in the

income of the beneficiaries when the RRSP or RRIF is distributed.

Before the 2009 Budget, there were no provisions to allow for a decrease in the value of RRSP/RRIF

investments that occurs after the annuitant’s death and before distribution to beneficiaries.

The 2009 Budget allows for a deduction for such a decrease. This deduction would be carried back and

deducted against the RRSP/RRIF income inclusions in the final return of the deceased. This measure

applies where the final distribution from the RRSP/RRIF occurs after 2008.

Tax Tips

Consider receiving a salary, or other earned income, of at least $122,300 this year to maximize your

2010 RRSP contribution.

Consider whether an IPP is more beneficial than an RRSP.

Remember you may carry forward your unused RRSP contribution limit indefinitely. Contributions made

in a year need not be deducted in the year. Deductions may be carried forward to a subsequent year

when tax savings could be at a higher marginal rate.

Consider making spousal contributions to split retirement income and save taxes. Ensure such

contributions are made to a separate RRSP.

Ensure that spousal RRSPs are not withdrawn for three years after the last contribution otherwise the

withdrawal will be taxable in the contributor’s hands.

Make contributions to RRSPs early in the year so that the related investment income earned will be

sheltered from tax throughout the year.

Consider making a final contribution to an RRSP immediately prior to annuitizing if contribution room is

available.

Consider making a one-time over-contribution of $2,000 to your RRSP without being subject to the

RRSP penalty tax.

If certain conditions are met, shares of small and medium-sized Canadian active businesses that are

not listed on a prescribed stock exchange may be purchased in a self-directed RRSP.

Children with earned income should file tax returns to accumulate available RRSP contribution room.

If you are 65 or over and do not have income eligible for the pension credit, consider purchasing an

annuity with your own capital. The interest component of the annuity payments will qualify for the

pension credit.

If you are 65 or over and have not annuitized your RRSP or purchased a RRIF, consider doing so with a

portion of your RRSP so that $2,000 of pension income may be generated and sheltered from tax by

the pension credit.

Consider using the RRSP lifelong learning plans to fund educational costs.

If you are considering the purchase of a home, contact our offices to help determine if you qualify for the

Home Buyers’ Plan and to plan for timing of RRSP contributions in the year of an HBP withdrawal.

If you leave your job or are terminated and were a member of an RPP or DPSP, consider the effect of a

PAR on your 2009 contribution limit.

AUTOMOBILES

The limits on the deduction of expenses relating to automobiles are detailed below.

The maximum capital cost eligible for capital cost allowance is $30,000 plus GST/HST and

Provincial sales tax (“PST”). This limit applies for automobiles acquired after January 1, 2001.

The monthly lease limit for automobiles leased after January 1, 2001 is $800 plus GST/HST and

PST.

However, the actual lease cost may not be deductible even where the lease cost is less than these

specified limits. A complex formula limits the deductibility of leasing costs to the equivalent lease for

the appropriate capital cost. This formula uses the manufacturer’s list price as well as any

refundable deposits to determine what portion of the actual lease costs will be deductible.

For automobiles acquired after January 1, 2001 the maximum monthly interest deduction is $300.

All costs associated with owning or leasing an automobile (subject to the above limitations) are

deductible based on the portion of business use.

For employees who have personal use of a company car, the stand-by charge is 2% per month

times the original capital cost of the car or 2/3 of the total lease cost (excluding any insurance

costs). The stand-by charge is based on the capital cost or leasing cost which includes the GST,

HST and PST. A reduction of the stand-by charge is possible if you use the car 50% or more for

business purposes and you drive less than 20,000 personal kilometers a year, or if you pay an

amount to your employer for the personal use of the car.

In addition to the stand-by charge, if the company pays operating expenses, the employee will be

taxed on an operating benefit equal to $0.24 per kilometer of personal use in 2009. This amount

includes the GST and HST benefit. Any amounts paid by an employee to an employer to cover

operating costs will reduce the operating benefit.

A “reasonable” allowance received (i.e., one based solely on business kilometers driven) is not

included in an employee’s income. If the allowance is received in addition to other reimbursements

of auto costs, other than reimbursements of supplementary business insurance, parking, or tolls

that are not already reflected in the determination of the allowance, the allowance is deemed not to

be reasonable and is included in income.

Tax Tips

Keep a proper mileage log with detailed dates, places and people visited reasons and mileage.

In order to deduct car expenses which exceed the amount of an allowance received, ensure that you

receive an allowance that is not “reasonable” and is, therefore, included in income.

Consider buying an older company car from your employer at current fair market value to eliminate the

stand-by charge, which is based on the original cost of the car to your employer.

Consider leaving the company car at work each night, when out of town and on holidays instead of

driving it home. There will be no personal use, and therefore, no stand-by charge or operating benefit

if the car is not available.

If expensive second-hand vehicles are used for business purposes, owning may be preferable to

leasing. This is because the deductibility of the lease payments is adversely impacted by the

manufacturer’s original list price.

For an automobile purchase, if the funds are available, make a large down payment to ensure that the

interest expense is less than $300 per month.

Consider refurbishing expensive cars instead of buying new ones. Refurbishing, which is generally

considered repairs and maintenance, is tax deductible as an operating expense.

Employees who incur deductible automobile and other employment expenses may be able to claim a

GST rebate in addition to their employment expense deductions. Claims for the preceding year are

required to be added into income.

ENTERTAINMENT EXPENSES

Only 50% of the cost of business meals and entertainment is deductible. To the extent that a taxpayer is

reimbursed for these expenses, the limitation will apply to the person making the reimbursement. This

limitation relates to expenses on such items as food and beverages, meals while traveling or attending

seminars, executive dining rooms and tickets for the theatre, concerts and athletic events. It excludes meals

or events for the general benefit of all employees and charitable events.

Tax Tip

Maintain detailed records to support the amount of entertainment expenses claimed.

HOME OFFICE EXPENSES

Deductions claimed for home office costs by self-employed individuals, including professionals, are

permitted only to the extent that the work space is either the individual’s principal place of business or used

exclusively as an office and used on a regular and continuous basis for the purpose of earning business

income.

Home office costs are limited to income from that business. However, any unutilized expenses may be

carried forward. These unutilized expenses will be considered current year expenses at the beginning of the

next year. Thus, there is no limitation to the carry-forward period.

PRIVATE HEALTH PLAN PREMIUMS

Premiums paid to a private health service plan are a deductible business expense to an incorporated

business. Self-employed individuals, who work alone or in partnership, can deduct any amounts paid as

premiums for a private health service plan to a maximum amount of $1,500 for each individual and spouse,

and $750 for each child. However, the amount will not be eligible for the medical expense tax credit.

CHILD CARE EXPENSES

For Federal purposes, child care expenses are deductible by the parent with the lower income or the parent

with the higher income if the other parent is separated or the other parent is infirm, confined to a bed or

wheelchair, in prison or in attendance at a secondary school or designated educational institution.

For children under seven at December 31, the maximum that may be claimed federally as annual child care

costs is $7,000 per child. For each child seven years old and over, but not yet seventeen at December 31,

the annual limit is $4,000. Up to $10,000 of child care expenses may be claimed for a child who is under the

age of seventeen on December 31 where the disability credit may be claimed in respect of the child.

The maximum deductible/creditable amount is the lesser of:

a) Actual child care expenses paid,

b) 2/3 of the taxpayer’s earned income,

c) The aggregate allowed for the taxpayer’s eligible children as described above.

Eligible child care expenses also include those expenses incurred by a single parent to allow the parent to

attend school. To qualify, a student must be in attendance at a secondary school or designated educational

institution and enrolled in a qualified course. In addition to the above-noted limits, the maximum deductible

amount per week that the parent may claim while in attendance at school is $175 per child under seven,

$100 per child under seventeen at December 31. For a child with a severe or prolonged impairment, under

the age of seventeen, a claim of $250 per week may be claimed. This also applies to families where both

parents are attending school at the same time.

Parents of school-age children do not benefit from a reduced contribution for the care of their children during

the spring break.

Tax Tip

Ensure child care expenses are paid before the end of 2009 to obtain tax relief this year.

LEGAL EXPENSES

Legal fees incurred and paid in the year to collect salary and wages or establish the right

to salary and wages from an employer or former employer are deductible.

A deduction from taxable income is allowed for legal expenses incurred to collect or establish a right to

taxable retiring allowances (including wrongful dismissal) or pension benefits. These expenses can be

carried forward up to seven years from the year in which they were incurred to facilitate deductibility against

taxable retiring allowances or pension benefits received as a result of the legal action.

Legal fees incurred and paid to collect delinquent alimony or maintenance payments, as well as to establish

the right to child support payments, are deductible.

Tax Tips

Claim this deduction for prior years by writing to your District Taxation Office.

Consider whether any legal fees paid qualify to be deducted.

MOVING AND RELOCATION EXPENSES

There are various qualifying moving and relocation expenses incurred by a taxpayer which are deductible

from income earned at a new work location in Canada. The moving expenses include traveling costs from

the former to the new residence; meals and lodging expenses for the taxpayers and their families for a

maximum of 15 days; transportation, storage and insurance costs; legal and other fees related to the sale of

the former residence and costs related to canceling an unexpired lease, etc.

Certain costs incurred relating to maintaining a former residence, including mortgage interest and property

taxes will be deductible as moving expenses to a maximum amount of $5,000.

An employee will be required to include in income any reimbursement or compensation in respect of the

financing of their residence, and one-half of the amount in excess of $15,000 paid by the employer in

respect of a decrease in value or impairment of proceeds of disposition of a former residence.

Generally, no moving expenses are deductible for moves into and out of Canada. Exceptions to this rule

include students, certain deemed residents and factual residents.

Tax Tip

Prior to contemplating a move to a new work location, consult a tax advisor at one of our offices to

assess the tax implications of any relocation package offered by the employer.

ALIMONY AND CHILD SUPPORT

Since May 1, 1997, child support, paid pursuant to a written agreement or court order made on or after that

date, is not deductible to the payor nor included in income of the recipient. Spousal support, however, is not

subject to this rule. Child support awards are generally determined using Federal child support guidelines.

These rules do not apply to child support payments paid pursuant to a court order or written agreement

made before May 1, 1997, unless the agreement is varied after April 30, 1997 or the parties jointly agree

that child support payments are neither deductible nor included in income.

Tax Tip

For settlements after April 30, 1997, ensure that awards are properly allocated between alimony and

child support and duly noted in the agreement or court order. This is important as spousal alimony

continues to be deductible to the payor and included in the income of the recipient.

TAX SHELTERS

Tax shelters are investments that are promoted on the basis that they offer income tax savings. These

investments achieve a number of different results. Some produce large initial deductions in excess of their

initial income. The deductions are then claimed against other income to reduce current tax liabilities. Other

types generate not only current losses, but also tax credits. These credits may then be used as a dollar-for-

dollar reduction of taxes. A third kind generates a stream of income with an offsetting stream of deductions.

Tax shelters are generally required to obtain identification numbers that are issued by CRA. No deduction

will be allowed to a taxpayer if the tax shelter does not have an identification number.

There have been several plans that have tried to take advantage of rules with respect to charitable

donations. Originally these plans focused on the donation of cultural property and art. Recently plans have

surfaced whereby a large portion of a donation is financed by an interest-free loan. You must be aware of

valuation issues and whether a donation was willingly made.

During the past few years, the government has launched a multi-faceted attack on tax shelters in order to

eliminate some shelters and restrict the benefit of others. However, some tax shelters are still available.

The Federal budget proposed to extend for another year, the 15% mineral exploration tax credit effective for

flow-through share agreements entered into before April 1, 2010 for expenditures incurred before the end of

2011.

Tax Tips

As with all investments, carefully assess the economic merit of tax shelters and not just the tax

savings.

Consider the impact of tax shelters on CNIL calculations to determine if the tax shelter will impair your

ability to claim the $750,000 CGE on qualified small business shares or farm property.

Consider having a corporation invest in tax shelters (other than those which offer enhanced benefits to

individuals only) to avoid the possible application of minimum tax and CNIL implications.

INTEREST EXPENSES

Interest is generally deductible under the following conditions:

It must be paid or payable in the year,

There must be a legal obligation to pay interest, and

The borrowed money must be used directly to earn income from business or property.

Where a source of income has disappeared, there are provisions that may allow the interest on the lost

portion of borrowed funds to continue to be deductible. This relieving provision does not apply to a

disposition of real property or depreciable property. Interest on the “surviving” borrowed funds, being the

amount realized on the disposition, will continue to be deductible only if the funds are reinvested to earn

income.

The Federal Department of Finance continues to study the issue of interest deductibility. Draft legislation

that will limit interest deductibility in some cases was introduced on October 31, 2003. The Federal

government had announced its intention to release a more modest version of the legislation.

Tax Tips

Borrow for the purpose of investing and earning income, and not to fund personal living expenses.

Always maintain clear records tracing borrowed funds to assets purchased.

If you have non-deductible interest on personal assets and fully paid investments on hand, you should

review your situation with a professional advisor to see if the interest can be converted to a deductible

expense.

APPRENTICE VEHICLE MECHANICS’ TOOL DEDUCTION

An apprentice mechanic, licensed to repair cars, airplanes and other motorized vehicles, is allowed to

deduct the cost of new tools. The deduction will be the cost of tools less the greater of: i) $1,000, or ii) 5% of

apprenticeship income for the year. Any undeducted portion may be carried forward and deducted in a

subsequent year. The cost of the related tools will be accordingly reduced and any sale in excess of the

reduced cost will result in income.

TRADES-PEOPLE’S TOOL EXPENSE

An employed tradesperson may claim a deduction of up to $500, in a taxation year, on the cost of eligible

new tools acquired in excess of $1,000. The deduction applies to new tools acquired on or after May 2, 2006

and is limited to income earned from employment.

Apprentice vehicle mechanics are also eligible for this deduction.

NORTHERN RESIDENTS DEDUCTION

Individuals who live in prescribed areas in northern Canada for at least six consecutive months may claim

the deduction. The amount varies depending on northern residential zones. For 2009, if you lived in a

prescribed northern zone, you may deduct the lesser of 20% of your income or $8.25 per day for each day

you resided in the zone. Residents of a prescribed intermediate zone may deduct one-half of the northern

zone rate.

OTHER DEDUCTIONS

A number of expenses are specifically deductible only if paid in the year.

Examples of these expenses include:

Investment counseling fees

Professional fees

Union dues

Carrying charges related to your investment portfolio (including safety deposit box charges)

The artistic employment deduction

11. TAX CREDITS

The Federal and Provincial tax systems allow taxpayers numerous credits designed to recognize that a

certain minimum amount of income may be earned without incurring a tax liability. These credits are non-

refundable, i.e., they may reduce your tax liability otherwise payable, but they cannot result in a refund. The

rate used to arrive at the credit is 15% federally and 4% – 11% for the provinces and territories except

Quebec which is at 20%. The table below indicates the value of the most common Federal tax credits. A

brief discussion of some of the non-refundable credits follows.

2009 PERSONAL FEDERAL*

TAX CREDITS

Federal Amount

($)

Credit as a % of the amount1

($)

Basic personal 10,320 1,548

Spouse/ common-law partner 10,3202

1,548

Equivalent to spouse (dependant) 10,3202

1,548

Age 65 or over 6,4083,4

967

Disability 7,1965

1,079

Disability- under 18 supplement 4,1985

630

Infirm dependant (18 or over) 4,1986

630

Caregiver 4,1987

630

Pension income 2,0003

300

Child tax credit 2,0893,8

313

Adoption credit 10,909 1,636

Children’s fitness credit 5009

75

Education and Textbook

- Full-time (per Month)

- Part-time (per Month)

4655

1405

70

21

* The Provincial benefits of these credits will vary depending on the local legislation.

1. The rate currently set out in legislation for 2009 is 15%.

2. Base amount is reduced by the spouse’s/ dependant’s net income.

3. Any unused portion of this credit is transferable to the taxpayer’s spouse.

4. The age amount will be reduced by net income in excess of $32,312.

5. An individual may also claim that portion of this credit unused by his or her dependant, spouse, children orgrandchildren. The maximum Federal amount that may be transferred is $5,000 for the tuition, educationand textbook credits.

6. This credit amount will be reduced by the dependant’s net income in excess of $5,956.

7. The credit available to providers of in-home care for elderly or infirm relatives is reduced by 15% of theexcess of the dependant’s net income over $14,336.

8. Credit can be claimed for each child under 18.

9. Credit is higher for children under 18 who qualify for the disability tax credit.

CHARITABLE DONATIONS

Tax credits may be claimed for all charitable donations made during 2009 to qualifying organizations to a

maximum of 75% of net income. Charitable donations above this amount can be carried forward for 5 years.

The charitable donations tax credit applies to donations of RRSP, RRIF and insurance proceeds that are

made by direct beneficiary designations.

Capital gains on donations of marketable securities to private foundations were eliminated as of March 18,

2008. This builds on the previous elimination of capital gains on donations of publicly traded securities and

ecologically sensitive land that occur after May 2, 2006.

For donations made after February 26, 2008, the elimination of capital gains was extended to unlisted

securities that are shares or partnership interest (other than prescribed interest in a partnership) for publicly

traded securities that are donated. Donations of shares acquired under stock option plans receive parallel

treatment.

The Federal tax credit is computed as follows: 15% on the first $200 of annual donations and 29% on

donations over $200. An equivalent Provincial donation credit is also available.

Tax Tips

Donate publicly traded securities that have inherent capital gains.

If total donations for a family are less than 75% of the net income of one family member that family

member should claim all the donations.

Consider prepaying in 2009 those donations which you usually make in early 2010; prepaying

donations will allow you to obtain the tax benefit one year earlier.

Donate shares held by private companies. 100% of any capital gain increases the capital dividend

account and may be extracted as a tax-free dividend. Consult your MNP advisor.

POLITICAL CONTRIBUTIONS

A graduated tax credit is available for eligible political contributions made in the year. As your contributions

increase, the tax credit decreases. The maximum credit allowed is $650 per year. Note that the Canada

Elections Act has been amended (effective January 1, 2007) to limit the contributions an individual can make

to:

$1,100 in total in any calendar year to a particular registered party;

$1,100 in total in any calendar year to the registered associations, nomination contestants and

candidates of a particular registered party;

$1,100 in total to a candidate for a particular election who is not the candidate of a registered party;

and

$1,100 in total to the leadership contestants in a particular leadership contest.

Tax Tips

Ensure that political contributions are made before the end of 2009 to receive the credit this year.

If your contributions exceed $1,275 and your spouse has sufficient taxable income, split your

contributions to maximize the combined tax credit.

Consider making a request to reduce the amount of tax withheld from your employment income.

If you are only going to make one contribution between now and 2010, consider splitting it between

2009 and 2010 to maximize the tax credit available.

MEDICAL EXPENSES

A Federal tax credit for medical expenses paid in any 12 month period ending in 2009 may be claimed to the

extent the expenses exceed the lesser of $2,011 and 3% of your net income for 2009. You may not claim

medical or dental expenses for which you were or may be reimbursed. Medical expenses paid for either

spouse and certain qualifying dependants may be claimed by either spouse.

The refundable medical expense credit is available to low-income individuals with high medical expenses,

earning at least $3,116 of employment or business income. The refundable credit is the lesser of $1,067 or

25% of eligible medical expenses, and is reduced by 5% of family income in excess of $23,633. The

refundable credit will not preclude you from claiming the medical expense credit.

A maximum of $10,000 of eligible medical expenses may be claimed for a dependant who is 18 years of age

or older. Expenses must be reduced by the lesser of 3% of the dependant’s net income or the medical

threshold.

The list of medical expenses is extended on a continuous basis. Effective 2008 and subsequent years, the

cost of service animals specially trained to assist individuals who are severely affected by autism or epilepsy

will be considered an eligible medical expense.

Tax Tips

If you expect to incur significant medical expenses early in 2010, consider prepaying them before the

end of 2009 in order to obtain current tax relief.

Due to the 3% limitation, it is usually preferable for the lower income spouse to make the medical

expense claim.

When claiming medical expenses for dependants (not including a spouse), a multiple of the

dependant’s income in excess of the basic personal amount reduces all medical expenses claimed.

Consider whether it is at all beneficial to claim the medical expenses of these dependants.

Medical expenses include premiums paid to private health plans and for supplementary coverage

while outside Canada.

PENSION INCOME AMOUNT

You may be able to claim a credit on up to $2,000 of qualifying pension or annuity income. CPP and Old

Age Security benefits do not qualify for purposes of this credit. Qualifying pension income for those aged 65

or older generally include lifetime annuity payments under an RPP, annuity payments from a matured RRSP

or DPSP, payments from a RRIF and benefits received from foreign pension plans. For those under 65

years or age, eligible pension income includes lifetime annuity payments under an RPP and other plans, and

certain payments received upon the death of a spouse or common-law partner. Effective 2008, employees

aged 55 and older are able to receive pension benefits eligible for the credit.

Tax legislation allows seniors to allocate up to half of their qualified pension income to be taxed in the hands

of their spouses or common-law partners. This can result in tax savings where the spouse or common-law

partner is in a lower tax bracket. An annual agreement will be required between both the taxpayer and the

spouse/common-law partner agreeing to the transfer.

Tax Tips

If you are receiving amounts that appear to be pension benefits, please contact one of our offices to

discuss whether your benefits qualify as pension income.

If you are not currently receiving qualifying pension income, consider creating such income by

purchasing a qualifying annuity or pension.

Splitting pension income with a spouse or common law spouse may enable you to double your claim

for the pension income amount.

EDUCATION AND TUITION

The Federal education credit is $60 per month of full-time attendance at a qualifying post-secondary

educational institution. An education credit of $18 per month for part-time studies is also available.

The education credit was extended to include students who receive financial assistance under government

training programs for 2002 and later years.

The Federal credit is granted in respect of tuition fees paid in the year for qualifying post-secondary studies.

The aggregate of such fees paid to each qualifying institution must exceed $100. The education and tuition

credits can be transferred to a parent, grandparent, or spouse, to a total maximum of $750.

Students have the option to carry-forward the amount of any unused education and tuition credit that is not

needed to reduce taxes payable for the year.

Eligible tuition fees will include ancillary fees and charges (other than student association fees) paid in

respect of the individual’s enrolment at a post-secondary educational institution.

Tax Tips

If you moved to go to school, you may be able to claim a deduction for moving expenses to the extent

of any taxable scholarships or grants.

Ensure that tuition fees are paid before December 31, 2009 in order to claim the credit this year.

TEXTBOOKS

The textbook tax credit for 2009 is $10 per month of eligible full-time studies and $3 per month of eligible

part-time studies. Unused amounts can be carried forward to future years or can be used as part of the

amount transferred to a spouse/common-law partner, parent/grandparent.

STUDENT LOANS

A non-refundable credit is available for the interest portion of student loan payments made in the year on

new and outstanding approved student loans. The credit may be claimed in the year it is earned, or may be

carried forward up to five years. The credit is not transferable.

Tax Tip

Ensure that the credit for the interest on student loans is effectively utilized.

DISABILITY AMOUNT

You may be able to claim a disability amount (see “Disability” in table on page 27) if you have a severe

mental or physical impairment that restricts basic activities in your daily living and your impairment has

lasted, or is expected to last, for a continuous period of at least 12 months. To qualify, you have to be

markedly restricted all or almost all of the time. You cannot claim the disability amount if you or another

person claims medical expenses for a full-time attendant or for care in a nursing home because of your

mental or physical impairment. Eligibility for the disability tax credit was expanded in 2005. As a result,

individuals who did not qualify in the past should consider reapplying under the new proposals.

Tax Tips

If you meet the conditions required to claim the disability amount, have your doctor complete and

certify form T2201 and include it in your 2009 return.

If you have significant medical expenses for full-time attendant care and/or for care in a nursing

home, you should determine whether the medical or disability credit is more beneficial.

CAREGIVER CREDIT

You may claim a credit for a parent or grandparent aged 65 and over who lived with you during the year.

Children, grandchildren and blood relatives over the age of 18 who are dependant on you for support by

reason of a physical or mental infirmity will also qualify. This credit is phased out completely if the person

has net income in excess of $14,336.

ADOPTION CREDIT

For Federal purposes a 15% non-refundable tax credit for adoption expenses can be claimed on up to

$10,909 for a child under the age of 18. The credit must be claimed in the year the adoption occurred. Either

parent may claim the adoption credit.

PUBLIC TRANSIT PASS

A non-refundable tax credit allows individuals to claim the cost of public transit passes. Public transit

includes local bus, streetcar, subway, commuter train, commuter bus and local ferry. It can be claimed by

the individual for themselves, their spouse, common-law partner or their dependant children under 19.

Passes for monthly, four consecutive weekly and at least 32 one-way trips in a 31 day period will qualify for

the credit.

CANADA EMPLOYMENT

Effective July 1, 2006, the Federal government introduced the Canada employment credit to recognize work-

related expenses incurred by employees. The maximum annual base amount is $1,044 in 2009 and will be

indexed thereafter. The actual amount of the credit is $157 for 2009.

CHILDREN’S FITNESS

Starting with 2008, up to $500 in eligible fees for the enrolment of a child under the age of 16 in an eligible

program of physical activity can be claimed as a non-refundable tax credit. Eligible expenses will include

those for the operation and administration of the program, instruction, renting facilities, equipment used in

common, referees, judges and incidental supplies. Items purchased or rented for exclusive personal use,

travel, meals and accommodations will not qualify. Eligible programs should issue receipts that can be used

to claim this amount on personal tax returns.

CHILDREN UNDER THE AGE OF 18

For 2009, the base amount of the non-refundable tax credit for children under the age of 18 is $2,089. This

credit results in a reduction of income taxes payable of $313 per child in 2009.

WORKING INCOME TAX BENEFIT (WITB)

The WITB is a Federal refundable tax credit available to low income persons with either employment or

business income.

The credit is equal to 25% of earned income in excess of $3,000, to a maximum of $925 ($1,680 for couples

and single parents), and will be reduced by 15% of the adjusted net income in excess of $10,500 ($14,500

for couples and single parents).

A person with a disability can benefit from an additional credit equal to 25% of earned income in excess of

$1,150, to a maximum of $250.

The benefit is available to Canadian residents of at least 19 years of age. Persons who are full-time students

for more than three months do not qualify unless they have a dependant child.

Beginning in 2008, an application can be made to obtain 50% of the anticipated benefit.

HOME RENOVATION TAX CREDIT (HRTC)

The 2009 Budget introduced a non-refundable tax credit for eligible expenses in excess of $1,000, but not

more than $10,000 made on eligible dwellings. The maximum credit will be $1,350 ($9,000 x 15%). The

credit will be available for expenditures on goods acquired between January 28, 2009 and January 31, 2010.

It may be claimed in the taxpayer’s 2009 personal tax return even if qualifying expenses were incurred in

2010.

An eligible dwelling is considered to be a person’s personal residence. For condominiums and co-operative

housing corporations, eligible expenditures also represent the person’s share of the cost of renovating

common areas besides the cost to renovate the unit. For a renovation or alteration to be considered for the

HRTC, it has to be enduring in nature and integral to the dwelling. Expenditures for the cost of routine

repairs and maintenance performed on an annual or more frequent basis, appliances as well as related

financing costs will not qualify as an eligible expense associated with a renovation. Expenditures must be

supported by receipts.

FIRST TIME HOME BUYER’S TAX CREDIT

The 2009 Budget proposed a non-refundable tax credit for first time home buyers who acquire a qualifying

home after January 27, 2009. The credit can be claimed in the year in which the home is acquired and

equates to $750 for 2009 ($5,000 x 15%). An individual will be considered a first-time home buyer if neither

the individual nor the spouse/common-law partner owned and lived in another home in the year of purchase

or in any of the prior four years.

The individual or spouse/common-law partner must intend to occupy the home as their principal residence

within one year after its acquisition. Where a home is acquired jointly with a spouse/common-law partner,

any unused portion of the credit may be claimed by the spouse/common-law partner.

12. FOREIGN TAX CREDITS

If you earned or received income from a foreign source, you may be liable to tax or have had tax withheld

from your income in the foreign jurisdiction. In order to avoid double taxation, Canadian tax legislation allows

you to reduce Canadian taxes otherwise payable by the amount of foreign taxes paid or withheld. The

reduction cannot exceed the amount of Canadian tax on the particular income. In addition, the credit for

taxes on foreign investment income is generally limited to 15% of net income from the foreign property

(except real estate). If the foreign tax paid on foreign investment or non-business income exceeds the

applicable limit, the excess may be deducted from the income. If the foreign income was from a business,

any excess foreign tax can be carried back or forward within limits.

Tax Tip

Please consult your MNP advisor if you have earned foreign income during the year.

13. ALTERNATIVE MINIMUM TAX (AMT)

If you have more than $40,000 of tax preference items such as the non-taxable portion of capital gains, tax

shelter deductions, or certain losses, then the AMT may affect you. The AMT, if payable, is refundable

against your future regular tax liability when regular tax exceeds the annual AMT. The carry-forward period

for the AMT is seven years.

The AMT tax rate is 15% for 2009. AMT may apply to individual taxpayers who receive eligible cash

dividends only, in excess of approximately $50,500, when there is no other income.

Tax Tips

Consider withdrawing income from a corporation to utilize your AMT from previous years.

Consider accruing income on old long-term investment contracts to utilize your AMT from previous

years.

14. INCOME TAX INSTALLMENTS

Installment payments for 2009 may be based on either tax payable for 2008, estimated tax payable for 2009,

or on a combination of taxes payable for 2007 and 2008. The last method is the one CRA utilizes to inform

taxpayers of their required installments. Notices are sent out twice a year by CRA. Both taxation authorities

have indicated that if taxpayers make their installment payments on time and in accordance with the notices,

no interest or penalties will be charged if the installments are deficient. This method is usually best for first

time remitters and other remitters whose taxes are rising each year. In the case of remitters whose taxes are

decreasing, it is best to base installments on either an estimate of tax for the year or the tax payable for the

previous year.

Individuals were required to make Federal quarterly installments if the difference between tax payable and

amounts withheld at source was greater than $3,000, in both the current year, and either of the two

preceding years.

Failure to make installments will result in non-deductible interest charges. Federally, the interest rate on

insufficient installment and overdue taxes is 4% above the prescribed rate, compounded daily. The

prescribed rate is determined quarterly and is based on the 90-day yield of Canada Treasury Bills.

A penalty is also charged where installment interest exceeds $1,000 in the year. The penalty is equal to an

additional 50% on any interest over $1,000.

INTEREST RATE ON:

QUARTER

(IN 2009)

PRESCRIBED RATE OVERDUE TAXES INSUFFICIENT

INSTALMENTS

Federal

1st

2% 6% 6%

2nd

1% 5% 5%

3rd

1% 5% 5%

4th

1% 5% 5%

Alberta

1st

2% 5.5% 5.5%

2nd

1% 4.5% 4.5%

3rd

1% 4.5% 4.5%

4th

1% 4.5% 4.5%

Tax Tips

Reduce your December 15 installment if your 2009 estimated tax liability is lower than initially

anticipated.

If you have made late or deficient tax installment payments, consider prepaying your final installment.

These catch up payments will earn “contra-interest” and can reduce or eliminate otherwise non-

deductible interest expense on late or deficient tax installments.

Ensure that you make your first installment payment for 2010 by March 15, 2010 to avoid interest

charges.

INTEREST ON TAX

Individuals who earn interest on overpaid taxes are required to include this amount in income in the year the

interest is received. On the other hand, interest paid on taxes due to the governments is not deductible. It is

possible that an individual will both pay and receive interest in the same year. Refund interest accruing in a

year is taxable only to the extent that it exceeds arrears interest. The amount of interest to be included in

income is normally reflected in your Notice of Assessment or other correspondence issued by CRA.

15. TAXPAYER RELIEF (FORMERLY FAIRNESS)

A number of years ago the Federal government introduced taxpayer relief provisions to assist taxpayers

who, because of extraordinary circumstances, are unable to meet their tax obligations. These provisions

provide CRA the discretion to:

Cancel interest charges

Cancel penalties

Issue refunds beyond the normal three-year period

Accept late, amended or revoked elections.

Generally, CRA will consider the cancellation of penalties if circumstances beyond the taxpayer’s control

existed at the time of filing. For example:

o Natural disasters

o Disruptions in postal services

o Serious illness or accidents

o Serious emotional or mental distress

CRA will also consider the cancellation of interest or penalties if the interest or penalty arose primarily

because of actions of the department, such as:

Processing delays, resulting in the taxpayer not being informed within a reasonable time of

amounts owing

Material distributed by CRA that misled taxpayers

Errors in processing by CRA

Delays in providing information to the taxpayer preventing the taxpayer from making installments or

arrears payments

Tax Tip

If you have been assessed penalties or interest contact your MNP advisor to determine if an

application should be made under the fairness package for remission of the amounts.

16. EMIGRATION FROM CANADA

There are significant income tax implications to individuals who cease to be residents of Canada.

INFORMATION REPORTING

Individuals who cease to be residents of Canada must list in a prescribed form all property owned at the time

of departure if the total fair market value of the property, with certain exceptions, exceeds $25,000. The form

is filed with your income tax return for the year of departure.

DEPARTURE TAX

All property owned by you with the exception of Canadian real estate, capital property used in a Canadian

business and certain pensions such as RRSP’s, is subject to a deemed disposition at fair market value

immediately before you leave Canada. You will be allowed to post security with CRA and pay the capital

gains tax later (without interest) when the property is actually sold.

Tax Tip

If you are planning to sever residency ties with Canada, evaluate the overall income tax implication

and plan appropriately by contacting our experienced consultants.

SECTION 116 CERTIFICATE

Non-residents of Canada generally file a request for a Section 116 Certificate when they dispose of Taxable

Canadian Property (“TCP”) to reduce or eliminate the withholdings applied by a purchaser on the sale of

TCP. The need for a Section 116 Certificate after 2008 was eliminated where a non-resident is disposing of

treaty-protected property. If a purchaser concludes, based on evidence, that the TCP is treaty-protected and

that the vendor was resident in that treaty country, the purchaser will not be penalized for failing to withhold

from the purchase price. The transaction must be reported by the purchaser to CRA within 30 days after

disposition if they rely on this provision.

In addition, a non-resident will no longer be required to file a Canadian income tax return in certain cases if

no tax is payable for the year and no prior taxes are owed.

INTERNATIONAL TAX

On an ongoing basis, tax treaties with foreign countries are being negotiated and revised. For information on

a specific tax treaty and the related implications, contact your trusted tax professional.

17. FOREIGN PROPERTY REPORTING REQUIREMENTS

The foreign property reporting rules require Canadian taxpayers to report holdings of certain foreign

property. These reporting requirements cover four types of foreign property:

Taxpayers with an interest in specified foreign property where the total tax cost of the specified

foreign property exceeds Cdn $100,000. Specified foreign property generally includes property

which yields passive income such as foreign bank accounts, shares and real property (other than

personal use property)

Taxpayers who have loaned or transferred property to non-resident trusts

Taxpayers who have received a distribution or loan from a foreign trust

Taxpayers who have an interest in a foreign affiliate or a controlled foreign affiliate.

CRA streamlined the requirements so that a taxpayer is only required to indicate the range and location of

the foreign investment for certain categories of investment, without providing detailed descriptions.

The filing deadline for these information returns is April 30 annually when individual income tax returns are

due. There is a late filing penalty of $500 per month, to a maximum of $12,000; with the exception of

information returns in respect of distributions from foreign trusts, where the penalty is $25 per day, to a

maximum of 100 days. Additional penalties are imposed where the failure to file exceeds two years, and are

calculated at 5% of the total cost of the foreign property less the penalties imposed above.

Tax Tips

Consider whether your foreign holdings are subject to the foreign reporting requirements.

Begin to gather necessary information immediately.

Foreign source income must be reported whether or not you are required to file a foreign property

information return.

18. UNITED STATES TAXES

RESIDENCY RULES

Under current US income tax rules, a Canadian resident may be considered a US resident if he or she was

present in the US for 31 days or more in any one year and the sum of days present in the US for the current

and two preceding years aggregates at least 183 days. The 183-day period is based on the following

formula:

100% of current year’s days, plus

1/3 of the 1st immediately preceding year’s days, plus

1/6 of the 2nd immediately preceding year’s days

If you are deemed to be a resident of the US under these rules, you may be obliged to file US income tax

returns. Alternatively, you may be entitled to file for a Closer Connection Exemption where you have more

significant ties to Canada.

Tax Tip

Consider whether you may be deemed a resident of the US and discuss your obligations with your

MNP advisor.

US CITIZENS

US citizens and green card holders are required to file annual income tax returns with the IRS, regardless of

their residency status. US citizens who are resident in Canada should conduct their tax planning giving

consideration to US rules, in addition to Canadian rules.

DEDUCTION FOR DEPENDANTS

For US purposes, the IRS will not allow a deduction to be claimed for a dependant unless the dependant

has a US Social Security Number (“SSN”) or where the individual does not qualify for an SSN, an Individual

Tax Identification Number (“ITIN”). An individual can obtain an ITIN either by completing the prescribed W7

application form or through an authorized acceptance agent. The IRS has imposed restrictive provisions with

respect to the processing of ITIN applications. Generally, the ITIN application should be filed with a non-

resident’s tax return.

In addition to a deduction, you may qualify for a refundable additional child tax credit of up to $1,000 per

dependant. In order to qualify, it will be critical to obtain an identification number for your dependant.

Tax Tip

Consider whether an ITIN is required before the 2009 US filing deadline for a dependant spouse or

child who does not otherwise have a US SSN.

RRSP REPORTING

The Internal Revenue Code does not recognize an RRSP as a tax deferred plan. Income earned in an

RRSP is therefore subject to tax in the hands of a US citizen residing in Canada. This mismatch of income

reporting results in a potential for double taxation. The Canada – US Tax Convention provides relief in the

form of an election to defer taxation of income in an RRSP until a withdrawal is made.

In order to avail yourself of these relieving provisions, your US Individual Tax Return must have a statement

indicating your intent to elect to defer tax on income earned in your RRSP. In addition the RRSP Trustee

and the balance in plan at the end of the year must be disclosed.

Tax Tip

Contact your MNP advisor to ensure these obligations are satisfied.

ESTATE TAXES

Canadians who own US Real Property or other US situs assets may be subject to US estate taxes. The

1995 protocol to the Canada - US Tax Treaty may reduce or eliminate the problem of owning certain US

assets. Effective June 23, 2004, CRA revised its position with respect to single-purpose corporations holding

US real property. The administrative relief not to assess a shareholder benefit was reversed as a result of

the above-mentioned 1995 protocol. The new position will not apply to single purpose corporations that

existed prior to June 23, 2004.

Certain planning should be undertaken to reduce your exposure to US estate taxes. If one spouse is a US

citizen and the other is not, more complex planning may be required.

DISCLOSURE REQUIREMENT

If you have US income that is not taxable in the US because of a provision of the Canada-US Tax Treaty,

you are nevertheless required to file a US information return and a statement as to how you qualify for relief

under the Treaty.

Tax Tips

Consider transferring US portfolio holdings to a Canadian holding company on a tax deferred basis to

minimize and potentially eliminate US estate tax exposure.

Purchase US properties jointly or in co-ownership with family members to reduce exposure to US

estate taxes.

Contact your MNP advisor to explore minimizing your worldwide estate in order to maximize credits

permitted to non-resident aliens in computing US estate taxes.

Where one spouse is a US citizen, will a life interest in assets to that spouse (as opposed to willing

the assets) to reduce a US citizen spouse’s estate on death.

Hold life insurance on a US citizen spouse in a trust to reduce the US citizen spouse’s estate on

death.

If you own any US situs property, contact one of our offices to discuss possible US estate tax

exposure and what may be done to reduce or eliminate the exposure.

If you are considering the purchase of a retirement property in the US, consult your MNP advisor for

structures to minimize US estate taxes and probate.

19. MNP QUICK TAX FACTS 2009 (SEE ATTACHMENT)

This Guide contains a general overview of the subject matter and is current to October 31, 2009. The information should notbe regarded as a substitute for professional advice. MNP LLP accepts no responsibility for any loss or damage caused byyour reliance on information contained in this publication.

Qui

ck Ta

x Fa

cts 2

009

2009

Individual Tax Table 1,

2

Taxable

Federal

British

Alberta

Sask.

Manito

baOntario

8Quebec

New

Nova

PEI

Nfld

&

Yukon

NWT

9Nunavut

9

Income

Columbia

Brunsw

ick

Scotia

Labrador

$20,

000

1,452

1,9

90

1,775

2,1

92

2,73

4 2,1

25

2,32

1 2,

552

2,50

8 2,

657

2,39

3 2,1

33

1,473

1,3

86

$30,

000

2,95

2 3,

996

4,27

5 4,

792

5,31

4 4,

230

5,174

5,

017

4,91

3 5,1

37

4,66

3 4,

337

3,43

8 3,

086

$40,

000

4,45

2 6,

115

6,77

5 7,3

92

8,06

9 6,

432

8,09

1 7,6

90

7,908

7,9

37

7,389

6,

541

5,48

7 4,

786

$50,

000

6,60

1 9,

034

9,92

4 10

,839

11

,493

9,

497

11,8

86

11,2

89

11,5

52

11,4

66

10,8

18

9,63

9 8,

376

7,470

$6

0,00

0 8,

801

12,0

04

13,12

4 14

,339

14

,968

12

,612

15

,723

14

,939

15

,261

15

,046

14

,298

12

,807

11

,336

10

,170

$70,

000

11,0

01

14,9

74

16,3

24

17,8

39

18,5

83

15,8

20

19,5

60

18,5

89

19,12

8 18

,801

17

,991

15

,975

14

,336

13

,070

$8

0,00

0 13

,201

18

,184

19,5

24

21,3

39

22,5

23

19,4

14

23,5

26

22,3

68

22,9

95

22,6

71

21,74

1 19

,143

17,6

21

16,0

18

$90,

000

15,74

3 21

,919

23

,066

25

,181

26,8

04

23,6

96

28,0

49

26,5

10

27,3

50

26,8

83

25,8

33

22,8

58

21,3

83

19,4

60

$100

,000

18

,343

25

,757

26

,666

29

,081

31

,144

28,0

37

32,6

20

30,7

10

31,8

48

31,18

4 29

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26

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25

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22

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$1

10,0

00

20,9

43

29,8

27

30,2

66

32,9

81

35,4

84

32,3

78

37,19

1 34

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36

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35

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34

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30,4

60

29,0

23

26,4

60

$120

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23

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33

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33

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36

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39

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36

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41

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39

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40,8

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40,0

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38,2

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34,2

61

32,8

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29,9

60

$130

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26

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37

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41

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44

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41

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46,4

26

43,5

61

45,5

35

44,6

07

42,5

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38,2

26

36,9

60

33,6

65

$140

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29

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42,4

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41,4

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45,6

01

48,9

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51,2

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32,0

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53,5

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52,7

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58,8

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63,5

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43,6

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74,4

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73,0

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69,2

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63,6

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75,7

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77,7

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152,

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1,495

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6,01

5 Ra

te a

pplie

d to

addi

tiona

l 15

.00%

20.0

6%25

.00%

26.0

0%25

.80%

21.0

5%32

.53%

24.6

5%23

.79%

24.8

0%22

.70%

22.0

4%20

.90%

19.0

0%ta

x cre

dits

3

2009

Individual Top Marginal R

ates (%

)4

Regu

lar i

ncom

e

29.0

0%43

.70%

39.0

0%44

.00%

46.4

0%46

.41%

48.2

2%46

.00%

48.2

5%47

.37%

44.5

0%42

.40%

43.0

5%40

.50%

& In

tere

st In

com

e

Capi

tal G

ains

514

.50%

21.8

5%19

.50%

22.0

0%23

.20%

23.2

1%24

.11%

23.0

0%24

.13%

23.6

9%22

.50%

21.2

0%21

.53%

20.2

5%

Non

-Elig

ible

19

.58%

32.7

1%27

.73%

30.8

3%38

.21%

31.3

4%36

.35%

34.2

1%33

.06%

38.15

%32

.71%

30.4

9%29

.65%

28.9

6%Di

vide

nds 6

Elig

ible

Divi

dend

s 714

.55%

19.9

1%14

.56%

20.3

5%23

.83%

23.0

6%29

.69%

21.8

0%28

.35%

24.4

4%22

.89%

17.2

3%18

.25%

22.2

4%

British Colum

bia

Abbotsford

604.853.9471

Cam

pbell River

250.287.2131

Chilliwack

604.792.1915

Courtenay

250.338.5464

Duncan

250.748.3761

Fort St. John

250.785.8166

Hope

604.869.9599

Kelow

na

250.763.8919

Maple Ridge

604.463.8831

Nanaimo

250.753.8251

Port M

oody

604.949.2088

Surrey

604.591.7191

Vancouver

604.685.8504

Alberta

Brooks

403.362.8909

Calgary

403.263.3385

Drumheller

403.823.7800

Edmonton

780.462.8625

Fort M

cMurray

780.791.9000

Grande Prairie

780.831.1700

Lacombe

403.782.7790

Leduc

780.986.2626

Lethbridge

403.328.1741

Medicine Hat

403.527.4441

Peace River

780.624.3252

Red Deer

403.346.8878

Rimbey

403.843.4666

Rocky Mountain House

403.845.2422

Saskatchew

anEstevan

306.634.2603

Hudson Bay

306.865.3783

Hum

boldt

306.682.2673

La Ronge

306.425.2215

Lloydm

inster

306.825.9855

Maple Creek

306.662.3127

Melfort

306.752.5800

Moosomin

306.435.3347

Prince Albert

306.764.6873

Regina

306.790.7900

Saskatoon

306.665.6766

Swift Current

306.773.8375

Weyburn

306.842.8915

Manito

baBrandon

204.727.0661

Dauphin

204.638.6767

Killarney

204.523.4633

Neepawa

204.476.2326

Portage La Prairie

204.239.6117

Roblin

204.937.8019

Steinbach

204.326.9816

Virden

204.748.1340

Winnipeg

204.775.4531

Ontario

Kenora

807.468.3338

Red Lake

807.727.1114

Toronto

416.596.1711

Offices in Canada

1.In

clude

s all

rate

s ann

ounc

ed u

p to

Apr

il 30

, 200

9. T

axes

cal

cula

ted

inclu

de fe

dera

l,pr

ovin

cial a

nd te

rrito

rial t

ax (a

nd a

ny a

pplic

able

pro

vincia

l sur

taxe

s).

2.Th

e co

mbi

ned

fede

ral a

nd p

rovin

cial i

ncom

e ta

x pa

yabl

e as

sum

es o

rdin

ary

inco

me

only

(i.e.

sala

ry).

The

cal

cula

tions

do

not i

nclu

de n

on-re

fund

able

tax

cred

its o

ther

than

the

basic

per

sona

l tax

cre

dit.

Any

add

ition

al c

redi

ts a

re c

laim

ed u

sing

the

rate

as n

oted

abo

ve.

3.Th

e co

mbi

ned

rate

app

lied

to a

dditi

onal

tax

cred

its e

xclu

des p

rovin

cial s

urta

xes,

if an

y. 4.

The

top

mar

gina

l rat

e in

200

9 ap

plie

s to

taxa

ble

inco

me

abov

e $1

26,2

64.

5.50

% o

f cap

ital g

ains

(net

of c

apita

l los

ses)

mus

t be

inclu

ded

in in

com

e. T

he c

apita

l gai

nsex

empt

ion

($75

0,00

0) m

ay a

pply

to e

limin

ate

regu

lar i

ncom

e ta

x on

disp

ositi

ons o

fqu

alifi

ed sm

all b

usin

ess c

orpo

ratio

n sh

ares

or q

ualfi

ed fa

rm o

r fish

ing

prop

erty

.

6.N

on-e

ligib

le d

ivide

nds a

re d

ivide

nds w

hich

are

pai

d by

CCP

C's f

rom

inco

me

elig

ible

for t

hesm

all b

usin

ess d

educ

tion

or fr

om in

vest

men

t inc

ome

(oth

er th

an e

ligib

le d

ivide

nds p

aid

byot

her c

orpo

ratio

ns).

7. El

igib

le d

ivide

nds a

re p

aid

out o

f a

corp

orat

ion's

Gen

eral

Rat

e In

com

e Po

ol (G

RIP)

. G

RIP

inclu

des c

orpo

rate

ear

ning

s tha

t hav

e be

en ta

xed

at th

e ge

nera

l cor

pora

te ta

x ra

te a

ndel

igib

le d

ivide

nds r

ecei

ved

from

oth

er c

orpo

ratio

ns. F

or C

CPC'

s , G

RIP

inclu

des i

ncom

e no

tel

igib

le fo

r the

fede

ral s

mal

l bus

ines

s ded

uctio

n. E

ligib

le d

ivide

nds m

ust b

e de

signa

ted

assu

ch b

y th

e pa

yor.

8.

Ont

ario

taxe

s pay

able

exc

lude

Ont

ario

hea

lth p

rem

ium

con

tribu

tions

.9.

Ta

xes p

ayab

le fo

r the

NW

T an

d N

unav

ut in

clude

the

refu

ndab

le c

ost o

f livi

ng ta

x cr

edit.

The

info

rmat

ion

cont

aine

d in

this

card

shou

ld n

ot b

e re

gard

ed a

s a su

bstit

ute

for p

rofe

ssio

nal a

dvice

. M

NP

LLP

acce

pts n

o re

spon

sibilit

y fo

r any

loss

or d

amag

e ca

used

by

your

relia

nce

on in

form

atio

n co

ntai

ned

here

in.

Corporate Income Tax Installm

ent

Final B

alances and Filing Due Dates fo

r 200

9 (excludes capital tax)

2009

-2013 Co

rporate Tax Rates and

Small Business Deductio

n Limits 1

2009

2010

2011

2012

2013

Fede

ral

Gen

eral

/ M

&P

19.0

0%18

.00%

16.5

0%15

.00%

15.0

0%CC

PC –

Smal

l bus

ines

s11

.00%

11.0

0%11

.00%

11.0

0%11

.00%

CCPC

–In

vest

men

t 34

.67%

34.6

7%34

.67%

34.6

7%34

.67%

Smal

l bus

ines

s lim

it 2

500,

000

500,

000

500,

000

500,

000

500,

000

Briti

sh C

olum

bia

Gen

eral

/ M

&P

11.0

0%10

.50%

10.0

0%10

.00%

10.0

0%CC

PC –

Sm

all b

usin

ess

2.50

%2.

50%

2.50

%2.

50%

2.50

%Sm

all b

usin

ess l

imit

340

0,00

0 50

0,00

0 50

0,00

0 50

0,00

0 50

0,00

0

Albe

rta

Gen

eral

/ M

&P

10.0

0%10

.00%

10.0

0%10

.00%

10.0

0%CC

PC –

Sm

all b

usin

ess

3.00

%3.

00%

3.00

%3.

00%

3.00

%Sm

all b

usin

ess l

imit

446

0,00

0 /

500,

000

500,

000

500,

000

500,

000

500,

000

Sask

atch

ewan

G

ener

al

12.0

0%12

.00%

12.0

0%12

.00%

12.0

0%M

&P

10.0

0%10

.00%

10.0

0%10

.00%

10.0

0%CC

PC –

Sm

all b

usin

ess

4.50

%4.

50%

4.50

%4.

50%

4.50

%Sm

all b

usin

ess l

imit

500,

000

500,

000

500,

000

500,

000

500,

000

Man

itoba

G

ener

al /

M&

P 5

13 /

12%

12.0

0%12

.00%

12.0

0%12

.00%

CCPC

– S

mal

l bus

ines

s 61.0

0%0.

92%

0%0%

0%Sm

all b

usin

ess l

imit

400,

000

400,

000

400,

000

400,

000

400,

000

Ont

ario

G

ener

al 7

14.0

0%14

/ 12

%12

/ 11

.5%

11.5

/ 11

%11

/ 10

%M

&P

712

.00%

12 /

10%

10.0

0%10

.00%

10.0

0%CC

PC –

Sm

all b

usin

ess 8

5.50

%5.

5 / 4

.5%

4.50

%4.

50%

4.50

%Sm

all b

usin

ess l

imit

500,

000

500,

000

500,

000

500,

000

500,

000

Que

bec

Gen

eral

/ M

&P

11.9

0%11

.90%

11.9

0%11

.90%

11.9

0%CC

PC –

Sm

all b

usin

ess

8.00

%8.

00%

8.00

%8.

00%

8.00

%Sm

all b

usin

ess l

imit

940

0,00

0 /

500,

000

500,

000

500,

000

500,

000

500,

000

New

Bru

nsw

ick

Gen

eral

/ M

&P10

13 /

12%

12 /

11%

11 /

10%

10 /

8%8.

00%

CCPC

– S

mal

l bus

ines

s5.

00%

5.00

%5.

00%

5.00

%5.

00%

Smal

l bus

ines

s lim

it 50

0,00

0 50

0,00

0 50

0,00

0 50

0,00

0 50

0,00

0

Nov

a Sc

otia

G

ener

al /

M&

P 16

.00%

16.0

0%16

.00%

16.0

0%16

.00%

CCPC

– S

mal

l bus

ines

s5.

00%

5.00

%5.

00%

5.00

%5.

00%

Smal

l bus

ines

s lim

it 40

0,00

0 40

0,00

0 40

0,00

0 40

0,00

0 40

0,00

0

PEI

Gen

eral

/ M

&P

16.0

0%16

.00%

16.0

0%16

.00%

16.0

0%CC

PC –

Sm

all b

usin

ess11

3.2

/ 2.1

%2.1

/ 1.0

%1.0

0%1.0

0%1.0

0%Sm

all b

usin

ess l

imit

500,

000

500,

000

500,

000

500,

000

500,

000

New

foun

dlan

d G

ener

al

14.0

0%14

.00%

14.0

0%14

.00%

14.0

0%M

&P

5.00

%5.

00%

5.00

%5.

00%

5.00

%CC

PC –

Sm

all b

usin

ess

5.00

%5.

00%

5.00

%5.

00%

5.00

%Sm

all b

usin

ess l

imit

500,

000

500,

000

500,

000

500,

000

500,

000

Yuko

n G

ener

al

15.0

0%15

.00%

15.0

0%15

.00%

15.0

0%M

&P

2.50

%2.

50%

2.50

%2.

50%

2.50

%CC

PC –

Sm

all b

usin

ess

4.00

%4.

00%

4.00

%4.

00%

4.00

%Sm

all b

usin

ess l

imit

400,

000

400,

000

400,

000

400,

000

400,

000

Nor

thw

est T

errit

orie

s G

ener

al /

M&

P 11

.50%

11.5

0%11

.50%

11.5

0%11

.50%

CCPC

– S

mal

l bus

ines

s4.

00%

4.00

%4.

00%

4.00

%4.

00%

Smal

l bus

ines

s lim

it 50

0,00

0 50

0,00

0 50

0,00

0 50

0,00

0 50

0,00

0

Nun

avut

Gen

eral

/ M

&P

12.0

0%12

.00%

12.0

0%12

.00%

12.0

0%CC

PC –

Sm

all b

usin

ess

4.00

%4.

00%

4.00

%4.

00%

4.00

%Sm

all b

usin

ess l

imit

500,

000

500,

000

500,

000

500,

000

500,

000

1.In

clude

s all

rate

cha

nges

and

bud

get p

ropo

sals

anno

unce

d up

to A

pril

30, 2

009.

2.

The

fede

ral s

mal

l bus

ines

s lim

it is

redu

ced

on a

stra

ight

-line

bas

is fo

r CCP

C's w

ith to

tal t

axab

leca

pita

l (on

an

asso

ciate

d ba

sis) b

etw

een

$10M

and

$15

M.

3.

Briti

sh C

olum

bia:

2009

Bud

get p

ropo

ses t

o in

crea

se it

s sm

all b

usin

ess l

imit

from

$40

0,00

0 to

$500

,000

effe

ctive

Janu

ary

1, 20

10. T

his p

ropo

sal i

s not

yet

ena

cted

.

4.

Albe

rta: S

BD li

mit

incr

ease

is e

ffect

ive A

pril

1, 20

09.

5.

Man

itoba

: Gen

eral

cor

pora

te ta

x ra

te re

duct

ion

effe

ctive

July

1st o

f eac

h ye

ar.

6.

Man

itoba

: 200

9 Bu

dget

pro

pose

s to

redu

ce it

s sm

all b

usin

ess i

ncom

e ta

x ra

te fr

om 1%

to 0

%ef

fect

ive D

ecem

ber 1

, 201

0 - r

ates

show

n ab

ove

are

pror

ated

. Thi

s pro

posa

l is n

ot ye

t ena

cted

.

7. O

ntar

io: 2

009

Budg

et p

ropo

ses t

o re

duce

its g

ener

al ra

te fr

om 14

% t

o 10

% b

y 20

13,

effe

ctive

July

1st o

f eac

h ye

ar.

In a

dditi

on, t

he M

&P

tax

rate

will

be re

duce

d fro

m 12

% to

10%

effe

ctive

July

1, 2

010.

The

se p

ropo

sals

are

not y

et e

nact

ed.

8.

Ont

ario

: 200

9 Bu

dget

redu

ces t

he sm

all b

usin

ess r

ate

from

5.5

% to

4.5

% e

ffect

ive

July

1, 2

010.

Thi

s pro

posa

l is n

ot y

et e

nact

ed.

9.

Que

bec:

2009

Bud

get p

ropo

ses t

o in

crea

se th

e th

e sm

all b

usin

ess l

imit

from

$40

0,00

0 to

$500

,000

effe

ctive

Mar

ch 2

0, 2

009.

Thi

s pro

posa

l is n

ot y

et e

nact

ed.

10.

New

Bru

nsw

ick: 2

009

Budg

et p

ropo

ses t

o re

duce

the

gene

ral c

orpo

rate

inco

me

tax

rate

from

13%

to 8

% e

ffect

ive Ju

ly 1s

t of e

ach

year

. Thi

s pro

posa

l is n

ot y

et e

nact

ed.

11.

Prin

ce E

dwar

d Isl

and:

Sm

all b

usin

ess r

ate

redu

ctio

ns a

re e

ffect

ive A

pril

1st o

f 200

9 an

d 20

10.

12.

Ont

ario

: For

taxa

tion

year

s end

ing

afte

r 200

8, th

e CR

A w

ill co

llect

Ont

ario

cor

pora

te ta

xin

stal

men

ts; a

nd O

ntar

io w

ill ad

opt f

eder

al c

orpo

rate

tax

inst

allm

ents

rule

s.

13.

Onl

y ju

risdi

ctio

ns w

ith a

cap

ital t

ax a

re n

oted

. Sas

katc

hew

an e

limin

ated

thei

r cap

ital t

ax o

nge

nera

l cor

pora

tions

on

July

1, 2

008,

New

Bru

nsw

ick o

n Ja

nuar

y 1,

2009

. All

prov

ince

s with

the

exce

ptio

n of

Alb

erta

levy

a c

apita

l tax

on

finan

cial i

nstit

utio

ns.

14.

Man

itoba

cap

ital t

ax: F

iscal

yea

rs b

egin

ning

afte

r Jan

. 1, 2

008.

Taxa

ble

capi

tal (

"TC"

) bet

wee

n$1

0M a

nd $

20M

: 0.2

%; T

C be

twee

n $2

0M a

nd $

21M

: 2.

4% o

f TC

>$20

M p

lus $

20,0

00; T

C>

$21M

: 0.

4%.

Fisca

l yea

rs b

egin

ning

afte

r Jan

. 1, 2

009.

TC b

etw

een

$10M

and

$20

M: 0

.1%; T

C be

twee

n$2

0M a

nd $

21M

: 2.3

% o

f TC

>$20

M p

lus $

10,0

00; T

C >

$21M

: 0.3

%.

Fisca

l yea

rs b

egin

ning

afte

r Jan

. 1, 2

010.

TC b

etw

een

$20M

and

$21

M: 2

.2%

of T

C >$

20M

; TC

> $2

1M:

0.2%

. Gen

eral

Cor

pora

te C

apita

l Tax

is e

limin

ated

afte

r Dec

embe

r 31,

2010

.

15.

Ont

ario

cap

ital t

ax: F

iscal

yea

rs b

egin

ning

afte

r Jan

. 1, 2

008.

TC >

$15

M:

0.28

5%.

Fisca

l yea

rs b

egin

ning

afte

r Jan

. 1, 2

009.

TC >

$15

M:

0.22

5%

Fisca

l yea

rs b

egin

ning

afte

r Jan

. 1, 2

010

TC >

$15

M:

0.15%

. Co

mpl

ete

elim

inat

ion

sche

dule

dfo

r Jul

y 1,

2010

.

16.

Que

bec

capi

tal t

ax: c

ompl

ete

elim

inat

ion

sche

dule

d fo

r Jan

uary

1, 2

011.

17.

Nov

a Sc

otia

cap

ital t

ax: r

ate

redu

ctio

ns e

ffect

ive Ju

ly 1s

t of e

ach

year

. Fo

r TC

<$5M

= N

ILca

pita

l tax

; TC

betw

een

$5M

and

$10

M c

apita

l tax

cal

cula

ted

at h

igh

rate

; TC

>$10

M (n

o ex

empt

ion)

cap

ital t

ax c

alcu

late

d at

low

rate

. Co

mpl

ete

elim

inat

ion

sche

dule

d fo

rJu

ly 1,

201

2.

Capital Tax 13

, 14, 15, 16, 17

General

Exem

ption

General

Exem

ption

General

Exem

ption

Rate

($ millions)

Rate

($ millions)

Rate

($ millions)

2009

2010

2011

Man

itoba

140.1

%-0

.3%$1

0M0.

2%$2

1MN

o ca

pital

tax

Ont

ario

150.

225%

$15M

0.15%

or 0

%$1

5MN

o ca

pital

tax

Que

bec 16

0.24

%$1

M0.1

2%$1

MN

o ca

pital

tax

Nov

a Sco

tia17

0.2-

0.4%

or

$5M

0.15-

0.3%

or

$5M

0.1-0

.2% o

r

$5M

0.15-

0.3%

0.1-0

.2%0.

05-0

.1%

Due Date

Threshold for W

aiver o

fInstallm

ent R

equirement

Balance Due

General

Balance Due

CCPC

Filing Deadline

Fede

ral a

ndpr

ovin

ces n

otlis

ted

belo

w

Last

day

of e

ach

mon

th

Last

day

of e

very

com

plet

e qu

arte

r if

you

are

an e

ligib

le

CCPC

–op

tiona

l (ta

xatio

n ye

ars t

hat

begi

n in

200

8 or

late

r)

Tota

l tax

is ≤

$3,0

00

(Sep

arat

e $3

,000

thre

shol

dsap

ply

for f

eder

al p

urpo

ses

and

for t

hese

pro

vinc

ial o

rte

rrito

rial j

urisd

ictio

ns).

2 m

onth

s afte

rye

ar-e

nd

3 m

onth

s afte

r yea

r-end

if:

• cla

imed

SBD

in c

urre

nt o

rpr

evio

us y

ear

• had

taxa

ble

inco

me

(ass

ociat

ed b

asis)

in p

revio

usye

ars ≤

tota

l bus

ines

s lim

it fo

rth

ose

taxa

tion

year

s.

6 m

onth

s afte

rye

ar-e

nd

Albe

rta

Last

day

of e

ach

mon

th

Albe

rta

inco

me

tax

is ≤

$2,0

00 o

r is a

CCP

C th

atcl

aim

ed th

e SB

D an

d ha

sta

xabl

e in

com

e ≤

$500

,000

2 m

onth

s afte

rye

ar-e

nd

3 m

onth

s afte

r yea

r-end

if:

• cla

imed

Alb

erta

SBD

and

had

taxa

ble

inco

me

≤ $5

00,0

00

6 m

onth

s afte

rye

ar-e

nd

Ont

ario

12

(for t

axat

ion

year

s end

ing

befo

re 2

009)

Last

day

of m

onth

s3/

6/9/

12 (i

.e. q

uart

erly

) if

Ont

ario

inco

me

and

capi

tal t

ax is

> $

2,00

0bu

t <$1

0,00

0

Last

day

of e

ach

mon

th

Ont

ario

inco

me

and

capi

tal

tax

<$2,

000

For t

axat

ion

year

s end

ing

in20

09 a

nd la

ter y

ears

, the

CRA

will

col

lect

Ont

ario

tax

and

inst

allm

ents

on

beha

lf of

Ont

ario

2 m

onth

s afte

rye

ar-e

nd3

mon

ths a

fter y

ear-e

nd if

:

• in

the

prev

ious

yea

r had

taxa

ble

inco

me

≤ $5

00,0

00

6 m

onth

s afte

rye

ar-e

nd

Que

bec

Last

day

of e

ach

mon

th

Que

bec

inco

me

and

capi

tal

tax

is ≤

$3,0

002

mon

ths a

fter

year

-end

3 m

onth

s if:

• cla

imed

Que

bec

SBD

and

had

taxa

ble

inco

me

≤ $4

00,0

00

6 m

onth

s afte

rye

ar-e

nd

mnp 2009-2010 guide to personal tax planning final · 2015-06-25 · capital gains and losses ......

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