Determining a person’s earning capacity is crucial when establishing damages as part of a personal injury or wrongful death lawsuit.  However, quantifying earning capacity can be more complicated than one might think.  Typically, the starting point is reported income (i.e. the income reported on a tax return), but certain factors may exist that could render reported income an inaccurate measure.  In these cases, it may be necessary to calculate earning capacity using different methods, or by adjusting reported income.  Even for the same individual in the same year, the calculations of reported income and earning capacity can result in much different conclusions, as you will see below.

The federal government’s Canada Emergency Rent Subsidy (“CERS”) opened for application on November 23, 2020.  The CERS program replaces the Canada Emergency Commercial Rent Assistance program (CECRA) and is designed to subsidize businesses, charities and non-profits that have suffered a revenue drop due to COVID-19.

Introduction

“Mr. Woods and Mr. Mickelson are here to see you,” the law firm receptionist’s voice came over Jane Wu’s speakerphone.  Something in her voice warned Jane that this would not be an easy meeting.  As Eddie Woods and Paul Mickelson were making their way to her office, Jane thought back five years to the time a retiring partner had passed their file on to her.  “These are two golfing buddies who are living their dream,” he’d told her as he packed up his bookshelf.  “They’ve built Augusta Greens into one of the best courses close to the city.  Paul put up most of the money and Eddie loved operating the course.  They’ve always worked well together.”

But now with the two sitting in her office, Jane thought that the two looked like an elderly married couple in the first stages of a divorce.  “Eddie wants to sell out to an interested developer and I don’t – at least not yet,” said Paul.  “He says we can sell it for $10 million.”

On November 5, 2020, Ontario Minister of Finance Rod Phillips announced the province’s 2020 Budget.  Highlights of the tax measures in the 2020 Budget are discussed below:

A Chartered Business Valuator (“CBV”) is a valuation specialist trained to provide an opinion of the fair market value of a business interest.  The typical role of the CBV is that of independent expert, objectively arriving at a conclusion of value that is communicated in a report known as a “Valuation Report”.

In many circumstances, only one CBV will be required but in certain circumstances, especially in matters of dispute, it may be that two or even three CBV’s are required. 

On October 1, 2020, the Government of Ontario announced a change under the Trust in Real Estate Services Act, 2020 that will allow real estate agents (“Agents”) to incorporate and be paid through a Personal Real Estate Corporation (“PREC”).  

The developments on the COVID-19 pandemic have been numerous and developing rapidly since the Government of Canada passed the first COVID-19 Emergency Response Act approximately one month ago.

This Tax Update looks at some of the more recent measures intended to provide relief to Canadian small businesses and taxpayers:

1. the Canada Emergency Wage Subsidy
2. the Canada Emergency Business Account loan program
3. the Business Credit Availability Program
4. Canada Emergency Commercial Rent Assistance

In response to the rapidly evolving threat of the COVID-19 pandemic, the Federal Government of Canada and the Government of Ontario have introduced a number of tax and economic measures intended to benefit individuals and businesses alike.

In this Tax Update, we provide a summary of the following major tax and financial measures announced to date:

• The 75% Canada Emergency Wage Subsidy
• The temporary 10% wage subsidy
• Federal Tax filing and payment extensions
• Provincial EHT relief and WSIB extension
• Canadian Emergency Response Benefit

In 2018, the federal government passed new tax legislation for Canadian-controlled private corporations (CCPCs), including incorporated professionals. Effective for taxation years starting in 2019, the small business limit ($500,000 federally and in most provinces) will be reduced by $5 for every $1 of investment income above $50,000. Under the rules, a new definition of adjusted aggregate investment income (AAII) is used to determine the amount of investment income that will grind down the small business deduction, which is effectively eliminated when investment income reaches $150,000 in a given taxation year.  Just as associated corporations must share the small business limit, investment income in associated corporations must be aggregated to determine if the $50,000 threshold has been surpassed and to determine the amount of the small business limit that will be clawed back. The reduced small business limit is then what must be shared within an associated group of companies.

For Canadian-controlled private corporations (“CCPCs”) claiming the small business deduction, the net federal tax rate is being reduced from 10.5% to 10% and the net Ontario tax rate is being reduced from 4.5% to 3.5%.  As a result, the combined tax rate for CCPCs in Ontario on the first $500,000 of active business income is decreasing from 15% to 13.5%. These measures are meant to offset other changes such as increases to the investment tax rate and limitations being introduced on income sprinkling.