March 2016 Newsletter

Many taxpayers are unaware of a federal bonus available if you are buying a home and do not currently own one.

Section 118.05 of the Income Tax Act provides the “first-time home buyer’s credit”. You do not actually have to be a first-time buyer. Rather, you and your spouse (or common-law partner) must not have owned a home during the past 4 calendar years or in the current year.

Any home will qualify: detached house, semi-detached, townhouse, condominium unit, residential co-op share, or mobile home. You have to intend to live in the home as a “principal place of residence” within a year after acquiring it. The home need not be newly constructed.

Since capital gains are only half taxed, the distinction between capital gains and income is very important.

Capital property is property on which any gain is taxed as a capital gain. Only half of a capital gain is included in income in your tax return — the “taxable capital gain”. Thus, the effect is that capital gains are taxed at half the rate of ordinary income such as interest or employment income.

Not all gains are capital gains. If you are in the business of buying and selling goods — for example, operating a retail store — then obviously your gains from the goods you sell are business profits, which are fully taxable, and not capital gains.

We regularly give you news about tax cases decided in the Courts. Why are they important?

First, you need to understand the legal basis on which our tax system operates. Tax is imposed by the Income Tax Act, which is legislation passed by Parliament (and amended every year). The Department of Finance proposes changes to the Act in the annual federal Budget and throughout the year, and drafts amendments to the legislation, but the changes do not become law until Parliament passes them.

A new way around the deadline for filing a notice of objection?

If you disagree with an assessment or reassessment for a taxation year, the Income Tax Act requires you to file a Notice of Objection within 90 days of the date on the Notice of (Re)Assessment for the year or one year after the tax return filing-due date for the year, whichever is later. Without a valid objection, you cannot appeal to the Tax Court of Canada. The 90 days normally starts running from the day the Notice is mailed, even if it never reaches you. For taxpayers other than individuals, the objection period is simply the 90-day period after the date of Notice of (Re)Assessment.