Golden Girl Finance
 
Jeanne Krahn-Matthewson
Posts (28)
 
 

Ask the Expert

Q&A: Deducting expenses from the sale of a lake property

March 15th, 2013 by
 

Q: Last year we sold a lake property which we had partially developed but not yet built on. Can we deduct all our expenses from the profit we made or what is allowable? We paid someone to level and fill the property. We also paid yearly fees to the park including a one-time fee of $2,000 for lot improvements.

Asked by Anonymous, Saskatoon, SK

 

You can include the following in the cost of the property when calculating your capital gain on the sale: the cost of purchasing the property, as well as the cost of any improvements made to the property. This would include the cost of leveling and filling the property, as well as the one-time park fee of $2,000 for lot improvements.

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Q&A: Are monetary gifts taxable?

February 27th, 2013 by
 

Q: I understand there is no gift tax in Canada. My mother from overseas wants to give me a large monetary gift. She would either send it to me through a bank transfer or deposit it into my bank account in my home country. Will it matter in terms of taxes if the money was deposited into my overseas account? And if my mother was to send it here, is there a form we would fill out to prove it is a gift? Will I have to declare the gift to CRA?

Asked by Anonymous, Calgary

 

Under Canadian tax law, gifts are not taxable. The definition of a gift is “something imparted for no consideration”. 

There is no form to fill out to prove a transfer of funds is a gift. I would suggest that you have your mother sign a statement outlining the amount and that it is a gift. Make sure the statement is dated. Keep the statement with your tax records in case Canada Revenue ever questions the amount.

If the funds are not put into a Canadian bank account, then you may have to disclose to the Canadian government the amount of your foreign assets.  An individual is required to file a T1135 with their tax return if the cost of total foreign assets owned by the individual is $100,000 or more. This includes funds held in non-Canadian bank accounts.

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Q&A: Tax implications of owning two homes when settling an estate

February 18th, 2013 by
 

Q: My parents own two homes within a couple of blocks of each other; they live in one home and my brother lives in the other (rent free). They have a home equity power line of credit owing on the second home. Both my parents have been diagnosed with terminal cancer. Their will is set up to be split five ways between my siblings and myself. What tax implications or other issues might there be with owning both homes when the estate needs to be settled?

Asked by Anonymous, Barrie, ON

 

I’m sorry to hear of your parents’ illness. I can imagine how hard that must be on your family.

With respect to the tax implications of owning two homes, your parents can designate one house as their principal residence which will have to be the house that they live in. On the death of the last to survive spouse, there will be a deemed disposition of both of the houses. The capital gain on the house that your brother lives in will be taxable on the last surviving spouse’s final tax return. This gain is 50% taxable and will be taxed at whatever effective tax rate applies. The gain on the house that your parents live in will not be taxable as long as they have designated this house as their principal residence for the entire time that they owned the house.

Unless there are significant other assets left to the estate, I would assume that both houses will need to be sold in order to fund payment of the taxes and the home equity power line of credit. Whatever assets are left can be distributed to the beneficiaries. If your brother owned the second house, he could designate it as his principal residence and eliminate the tax on the capital gain. It is too late to gift / sell it to him now as this will trigger the capital gain and the applicable taxes immediately.

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Q&A: Preparing a T4 for a live-in caregiver

January 30th, 2013 by
 

Q: I am trying to put together the T4 for my live-in nanny. I am unsure how to treat the room and board that was deducted from her paycheque. Since I had deducted it from her gross wages, do I still need to put it in Box 30 of the T4? And would it still be included in the total of Box 14? For simplicity sake, if she was paid a gross amount of $1000 in wages and I had deducted $100 in room and board - would I then put $1000 in Box 14 and $100 in Box 30? And would she then be able to claim the room and board on her income tax return?

Asked by Anonymous, Ottawa, ON

 

Box 30 is for benefits the employee received from the employer that the employer was not reimbursed for.

If the fair market value of the room and board that the employee received is the $100, then nothing has to be put in Box 30 and only the $1000 gross wages would be included in Box 14.

If the fair market value of the room and board was $200 and the employee had $100 deducted from her wages for the room and board, then Box 30 would include the $100 additional benefit that the employee received and Box 14 would be $1100 (the gross wages plus the room and board benefit of $100).

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Q&A: Business T2 filing based on year-end

January 19th, 2013 by
 

Q: I recently incorporated in Canada on Dec 25, 2011; I did not file a T2 for 2011 as I got advice that I did not need to. I worked in Dec and billed my client in Jan 2012 and was paid in Jan 2012. I have been billing monthly and receiving monthly payments every month for 2012. I am trying to file my 2012 T2 and I am confused as to what my tax year is? Should I have filed a T2 for 2011 on the income that I received in Jan? I am a consultant that bills and is paid the following month. Can I file my T2 for 2012 and include income received for Jan 2012 to Dec 2012 and file a T2 for 2011 that shows zero income?

Asked by Anonymous, Vancouver, BC

 

When you incorporate, you are required to select a year end. It can be any date as long as it is within a year of your incorporation date.

If you pick a December 31st year end, then you should have filed a T2 return for 2011. You are required to include income that you are entitled to but have not invoiced yet (i.e. your services have been provided).

I would suggest dating your invoices on the last day of the month that you actually provide the services. You do not have to pick December as a year-end, but the latest year end that you can pick is November 30, 2012.