Ontario Budget Commentary for 2016

New info you may be interested in for the 2016 year.

Take a look at our latest publication for related information on:

1. Personal income tax, and simplification of personal income tax
2. Tuition and education tax credits
3. Children's activity tax credits
4. Healthy home renovation tax credits
5. Split income tax
6. Corporate income tax
7. Research and development tax credits
8. Apprenticeship training tax credits
9. Workplace safety insurance premiums
10. Alcohol and tobacco tax
11. Underground economy
12. Tackling climate change
13. Ontario retirement pension plan
14. Property tax

Plus more

Please follow this link to get the scoop: McIntyre_Associates_2016_Ontario_Budget_Commentary

Please note that you will need a PDF viewer. You can get one free here. Adobe PDF Reader


Office Location
McIntyre and Associates Professional Corporation
200 - 900 Moriison Drive
Ottawa, ON.
K2H 8K7

General Enquiries: 613-726-7788
Fax: 613-729-4477
Or visit our contact page here.

Principal Residence

One of the tax rules that most taxpayers are aware of, though not necessarily in detail, is that there’s an exemption from tax on a gain from a sale of the house they live in. If an individual (or family) owns one house that they live in then the rules are fairly straight forward however complications arise as soon as there’s some deviations in the scenario. What the rules actually state is that the exemption is available for a housing unit that the individual or family unit ordinarily inhabits. This means that there’s a limit of one dwelling per family on which the exemption can be claimed. The designation of the exemption is done for each year that the property is owned. For example, the family owns a house for 10 years and a cottage for 5 years. The exemption is first assigned to the house as that’s the only property owned for the first five years and then a decision has to be made whether the house or the cottage gets the exemption for the 5 years that both properties are owned at the same time.

When there’s only one property then the situation is fairly simply however as soon as another property is introduced then there’s potential for a tax liability. It’s best to review all of the properties and their potential gains prior to making any elections.

Questions?

General Enquiries: 613-726-7788

Fax: 613-729-4477
general@mcintyreca.com

McIntyre & Associates Professional Corporation

200 – 900 Morrison Drive

Ottawa, ON

K2H 8K7 

Principal Residence – Rental property

A common scenario is that when an individual (or family) moves to a new house, the old house is rented out rather than sold. What happens in that case is called a “change in use”, the old house changed its purpose from being used as a principal residence to a rent income producing property. This change in use triggers a deemed disposition and a gain is calculated between the original purchase price and the fair market value at the time of the change of use. The property could fall under the principal residence exemption so no actual tax is paid on the deemed disposition. If the rental property is sold 2 years later then the gain is calculated between the sales price and the fair market value of the property at the time of the change in use. There’s an election available which allows the property to still be designated a principal residence for up to 4 years following the change in use, provided that no deduction is taken for amortization when calculating the rental income from the property. Filing this election means that the new house or the old house (up to 4 years) can be used as a principal residence and is eligible for the exemption.

There’s also the possibility that the opposite happens. An individual (or family) move into a housing property which was previously rented out. In this scenario, there’s a deemed disposition for the property. There’s an election available which could defer the gain on the change in use until the property is ultimately disposed of.

There are a number of factors to consider when making the decision to designate one property over another as a principal residence. Things like potential gain in the future, current tax liability and the length of time the property has been owned or will be owned are all factors which could significantly impact the decision.

Questions?

General Enquiries: 613-726-7788

Fax: 613-729-4477
general@mcintyreca.com

McIntyre & Associates Professional Corporation

200 – 900 Morrison Drive

Ottawa, ON

K2H 8K7 

Alter Ego Trusts

An alter ego trust is an inter vivos created after 1999 by a settlor who was 65 years of age or older at the time the trust was created. A key property of this type of trust is that the settlor is the only one entitled to receive any income or capital distributions from the trust during his or her lifetime. It is only upon death of the settlor that the property passes to a beneficiary. This type of trust is typically used to avoid probate fees (which are charged at 1.5% on assets over $50,000 in Ontario) since the trust assets do not formally pass into the estate.

However there are some drawbacks to using this type of trust. The alter ego trust cannot use the capital gains exemption available in respect of qualifying property such as small business company shares. In addition, any losses within the trust can only be used to offset the gains of the trust and do not attribute back to the individual. In the year of death, capital losses can be used to offset non-capital gains in the year of death or the preceding year. Depending on the makeup of the investments, this could be a substantial benefit which may be unavailable. The alter ego trust does not form part of the Estate and therefore the assets cannot be used to form a testamentary trust. This is a type of trust that forms on death of a taxpayer and unlike an inter vivos trust, has the benefit of the marginal tax rates that apply to individuals. The potential savings are up to $17,000 per year however recently CRA has been discussing limiting the access to the marginal tax rates for a period of 36 months from the date of death.

Provided that the most common use of the alter ego trust is to avoid probate fees, the trust will typically have more than $500 of income and therefore would be subject to the annual filings requirement. Ensure that review both the benefits and the drawbacks to this type of arrangement to ensure that it meets your needs.

Questions?

General Enquiries: 613-726-7788

Fax: 613-729-4477

general@mcintyreca.com

McIntyre & Associates Professional Corporation

200 – 900 Morrison Drive

Ottawa, ON

K2H 8K7 

Our Fall 2015 Publication is Now Available

What you will find in our new publication:

• Common U.S. - Canadian Tax Issues "What is the substantial presence test? and does it involve me?"
• CRA's Prescribed Interest Rates "What will I owe if I am late on my income tax payments?"
• What' s New at McIntyre & Associates
• New and Improved McIntyreca.com just for you!

If you would like to receive these updates please register at general@mcintyreca.com
Please Note: Publications are in PDF file format.

Our practice focuses on clients in the healthcare profession, technology sector, real estate development & construction, and high net worth individuals.

Expertise

The team at McIntyre & Associates is well-suited to assist businesses in any sector in the Ottawa region – from services, to manufacturing, to associations and not-for-profit organizations. Our client base is reflective of the diverse nature of doing business in Ottawa. Over the years the firm has developed specific expertise in each of the following areas. This expertise, borne from years of experience, can easily extend to other sectors providing unique insight into client needs and challenges.

Healthcare & Other Professionals

We have extensive experience working with professionals – with insight into their priorities, challenges and goals.

We are very familiar with the special tax rules for professionals.

As professionals ourselves, we understand your commitment to building a successful practice and achieving your goals.We can assist you with the startup of your practice (potential incorporation) through to retirement, and all of the important decision-making in between.

Our extensive experience with professionals means we can advise and assist you in making the right decisions for your practice.

Real Estate Development & Construction

We have a thorough understanding of issues specific to the real estate and construction industries.

Whether it’s tenant inducements, holdbacks, work-in-progress, or the need for bonding, we know the treatment of the tax and accounting issues. With our years of experience we are confident we can work with you through any purchases, sales, construction or renovation projects.

High Net Worth Individuals

As a HNWI we can assist you with your ongoing tax compliance and planning.

We have years of experience and we understand the tax issues related to HNWIs.
We can advise you on income splitting strategies, capital gain and loss planning, estate planning, and other tax issues specific to HNWIs.

Technology Consultants

Whether you are a local IT company or an independent contractor, we can help you as we have years of experience in this area.

We know the tax issues from both sides – the IT company and the independent contractor.
We have a solid understanding of your industry and how to address your key financial decisions.

Start Ups and New Businesses

Starting a business can be an exciting and an overwhelming process. You may need assistance with developing a business plan or financial/cash flow projections for potential investors. As Mcintyre & Associates has worked with many startups and new businesses over the last 30 years, we are uniquely experienced to help assist with the process.
As your resources are limited, McIntyre & Associates has created a new program for qualifying startups. Should you need more information or feel that your business qualifies, please feel free to contact us and we will set up a meeting to get you on your way!

Visit our website today!

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