Donations, Gains, RRSPs, & Inheritance

by Tax Guy - Burlington Accountant on February 19, 2009 Print This Post Print This Post

Tax Credit Carry Forward – Non-Resident

Question: I am a Canadian citizen but I do not live in Canada (a non-resident) and I have recently started an Online Masters program through a recognized Canadian university.

I’d like to know if I can carry forward tuition tax credits for the tuition I pay while I’m a non-resident.  (If I were to return to Canada in two years, could I still get a tax deduction based on tuition I pay now?)

Here is what my take is. The tax credit is available to residents of Canada.  Since you are not a resident you may not carry forward a credit you were never entitled to.  I hope this helps.

Timeshare Donation

Question: I want to donate my timeshare, but nothing seems to say anything about tax savings in Canada, Ontario.  Can a portion be considered for tax purposes?

If you are donating the property to a charity, you must ensure you get a proper valuation of the property and agreement from the charity they will accept the property.  The donation will be considered a sale at fair market value and any gains will be taxed in your hands.  At the same time, you will receive a charitable donation tax receipt for the fair market value of the property.  This will entitle you to reduce your taxes by 15% of the first $200 of the donation and 29% of any amount in excess of the $200 (federally).  Be aware that while the donation may result in a tax liability.

Note that if you donate listed Canadian securities, there is no capital gain or loss involved and you simply receive the donation receipt and avoid the tax liability.

Paying Capital Gains On House

Question: We are selling our house in a divorce settlement. I was wondering how capital gains taxes are attached to income.

Under the Income Tax Act, property can be transferred to a former spouse or common-law partner at its adjusted cost base (ACB) or tax cost in order to satisfy a property settlement arising from the breakdown of a marriage or relationship.  In a separation, the attribution rules that normally attribute any income or gains back to the transferor spouse do not apply for income such as interest or dividends, but would apply to future capital gains. However, the separating spouses or partners can make a joint election to avoid this future attribution.

If the house is being sold and at least one of you occupies the property, then the principal residence exclusion would apply and no tax should result. It is important that you work with your ex as best as you can under the circumstance to ensure property is not only divided equally, but tax efficient as well.

RRSPs & Married Couples

Questions: What are the potential tax implications, both good and bad, that I can expect?

I remember hearing something about Shifting RRSP contributions around?  Is this correct?

Are there any resources to point me in a specific direction as opposed to trolling around on the Internet in a fragmented fashion?

On the positive side you’ll be able to contribute to your spouses RRSP and lower your taxable income. You can also gift funds to your spouse to contribute to the TFSA.

On the negative side, if you were entitled to the GST credit or child tax benefit these will be reduced or eliminated based on combined income.

Other than that, there are few tax benefits for married couples.

Withdraw From RRSPs To Pay Mortgage

Question: Is it possible to withdraw money from our RRSPs in order to reduce our mortgage line of credit?  We have about $102 000 in RRSPs. My husband is retired and I will retire in a couple of years.

If the value of your RRSPs is equal to or more than the value of your mortgage, you can you can pay off your bank mortgage with your RRSP proceeds and then enter into an RRSP Mortgage and make payments to your RRSP.  You essentially switch your banks mortgage for a mortgage you fund.  You don’t pay the bank interest you pay it to yourself.

Meal Expenses

Question: Can a person claim meal expenses if he is a salaried employee.  Although he does not have receipts for these expenses?

If you are a salaried employee and incur meal expenses to entertain clients or on for travel and are not reimbursed then you may claim 50% of the cost. You must be able to prove your claim although the CRA does not require receipts.

I am actually being audited. I didn’t have receipts, although I did send several copies of different hotels i have stayed in with a break down of meal cost as per their menu’s. The appeal person does not want to accept this and is denying myself base on no receipts. What can i do at this point?

You’ll have to get receipts to substantiate your claims. There is really no way around this.

Investment Income

Question:  My father passed in Sept of 2008 and has both rental property and stock investments. Do I still split the rental information and stock investments or do I need to calculate only until date of death? Or does all automatically transfer to the surviving spouse?

The property can transfer to the surviving spouse without triggering tax provided this was provided for under the will.  If not or there was no will, the division of assets falls under provincial laws of intestacy

Inheritance from a U.S. Estate

Question: My parent’s who lived in the U.S. have died and their property and business are for sale.  The proceeds will be divided amongst the remaining children.  In that I live in Canada, will the money I receive be taxable?

Your inheritance is free from Canadian tax.  It should also be free from US tax.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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