August 2016 Newsletter

Basic rules for an "eligible relocation"

For income tax purposes, you may be able to deduct moving expenses in computing your "net income". A deduction is allowed if you pay the expenses in respect of an “eligible relocation”.

Non-capital and net capital losses

Your losses from income sources can offset your positive income from such sources. However, they cannot bring your income below nil. For example, if you have $50,000 of employment income this year and a $60,000 loss from a business, your net income will be zero. The excess $10,000 loss amount becomes a “non-capital loss”.

In general terms, a superficial loss occurs where a person disposes of a capital property at a loss, and either the person or an “affiliated person” acquires the same property or an identical property in the period beginning 30 days before the disposition and ending 30 days after the disposition, if the person or affiliated person owns (or has a right to acquire) the property at the end of the period.

Most dividends paid by corporations are paid in cash. However, there are times when a corporation will pay a stock dividend. This occurs where a corporation issues new shares as dividends to existing shareholders.

The CRA recently announced the new prescribed interest rates that apply to amounts owed to the CRA and to amounts the CRA owes to individuals and corporations. The amounts are subject to change every calendar quarter. The following rates are in effect from July 1, 2016 to September 30, 2016, and remain unchanged from the last several quarters.

Some moving expenses disallowed

As discussed earlier in this letter, you can deduct certain moving expenses incurred in an "eligible relocation". The Income Tax Act sets out specific expenses that qualify for the deduction, but the list is not exclusive.