Stuart Bollefer joined Aird and Berlis, LLP, in Toronto, CA, in 2000. In addition to his position as a senior tax partner, Stuart Bollefer serves the company as chair of the wealth management and succession planning group and as a member of the tax and estates group. As a member of these groups, he is knowledgeable about Canada’s probate laws governing assets listed in a decedent’s will.
In Canada, probate is a legal process over the course of which an executor is appointed to manage the estate in question. More importantly, probate processes determine whether or not a person’s will can be legally validated. Under ideal circumstances, probate validates a will and the executor distributes assets as described in the estate plan. Probate can be viewed as an investigation, the purpose of which is to determine whether the will in question is authentic and truly indicative of the deceased person’s final wishes. For instance, probate processes might reveal that the will being used is out of date, and that the decedent had authored and formalized a newer will with different beneficiaries and instructions. On the other hand, court challenges could be launched arguing that a will was written under some form of duress, or by an individual in an impaired state of mind. In these cases the courts could determine the will to be invalid, at which point assets must be distributed according to Canadian intestacy law, as opposed to the decedent’s wishes outlined in the estate plan. Not all assets are subject to probate evaluation. Bank accounts and investments, real property, and automobiles are common examples of assets that go through probate. Meanwhile, joint ownership assets like homes and shared bank accounts are exempt. An insurance policy with a designated beneficiary is also exempt from probate processes.
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Stuart Bollefer is a longtime Toronto, CA tax advisor who coordinates solutions with professionals and corporations. One focus for Stuart Bollefer is on ensuring that clients keep their income in reliable tax shelters that minimize the impact of Canada Revenue Agency (CRA) taxation.
With the CRA taking a larger percentage share as one’s income increases, one basic strategy involves keeping records of daily expenses that can be deducted from taxable income on a dollar-for-dollar basis. Beyond this, tax-saving credits help one recover a part of one’s expenses. Those who are self employed have additional deductions available related to the cost of having a business, and credits may cover expenses related to child care and health care. Another proven tax mitigation pathway is through the registered retirement savings plan (RRSP), with contribution amounts directly deducted from one’s income and invested flexibly. With RRSPs taxed fully upon withdrawal, some follow the tactic of contributing to the RRSP of the spouse with a lower income. This both reduces taxable income and maximizes the use of both spouses’ RRSP contributions. Based in Toronto, CA, Stuart Bollefer delivers knowledgable tax investment advice across a range of clients. Well versed in Canada Revenue Agency (CRA) regulations, Stuart Bollefer has a knowledge of strategies companies employ in optimizing taxes.
One 2022 CRA bulletin brought focus to the limitations personal services businesses (PSBs) face in claiming expenses and other tax deductions, compared with other companies. The example given is one in which a man is offered a 12-month contract position with full-time hours at a trucking company. In this situation the worker may set up a numbered company that has him as the only employer and shareholder, and ABC Trucking as the only client. This numbered company may either keep funds within the business or distribute them to the driver. What this driver may not realize is that the numbered company functions as a personal services business, which involves a T2 tax form. The expenses that may be deducted are limited to wages, salaries, and benefits, as well as specific corporate legal and other expenses. Reflecting a lack of compliance with this regulation, the CRA is contacting companies within sectors in which PSBs are used, and requesting documentation of specific payer and payee relationships. With no legal actions expected to result, the CRA's focus is on making sure that companies correct errors and ensure that compliance mandates are met. Stuart Bollefer is a longtime Toronto, CA, tax advisor who works closely with various businesses and professionals. Stuart Bollefer helps clients navigate the complexities of Canada Revenue Agency (CRA) rules and achieve tax savings.
One common strategy for handling assets after death is "pipeline planning,” a strategy used to minimize the double tax that can otherwise arise upon death. For example, in normal circumstances, shares in a company that the deceased owned are deemed disposed of at market value at the time of death. The resulting capital gain is subject to tax based on the individual’s tax bracket. Then when the company owned by the individual sells its assets a second level of tax is payable. and the proceeds are distributed accordingly. A pipeline plan seeks to avoid these two levels of tax by setting up a new corporate entity. The shares of the company owned by the deceased can then be transferred into this company, with a promissory note provided in return. The two companies can then later merge and potentially bump up the cost of the investment assets. This strategy can allow the investment assets to be converted into cash, with the promissory note then paid off and no further tax assessed other than the gain initially realized in death This is a complicated strategy and advice should be sought before implementing. For example, the Canada Revenue Agency requires at least one year before the two companies can be merged and then the promissory note must be paid out over time. Stuart Bollefer is a Toronto, Ontario, CA, tax consultant who practices with Aird & Berlis, LLP, and provides knowledgeable advice to a wide range of clients. Stuart Bollefer’s focus includes new Canada Revenue Agency (CRA) rules that impact both individuals and businesses.
As reported by Reuters, one major development is Canada’s plan to levy a tax on digital services providers from 2022 on (or until a coordinated international OECD taxation regime is put into place). This includes foreign-based vendors that do not have a physical Canadian presence. From 2022, they will need to collect Canadian sales taxes on products ranging from streaming services to mobile apps. In implementing the new tax, Canada’s Finance Minister noted that multinational digital corporations are not contributing a “fair share” of taxes for revenues they generate through Canadian transactions. This new tax regime is expected to generate approximately C$3.4 billion ($2.6 billion US) over a 5-year span. In a related move, Ottawa will now require those who rent out short-term accommodations via digital rental platforms to collect sales taxes. This is described as a way of balancing the scales for tax-paying hotels that are at a disadvantage. The bottom line is that digital consumers should expect to see higher prices on a variety of services as CRA policy shifts to reflect new cross-border digital realities. Property Received as a Consequence of Death Exception to Tax on Split Income (“TOSI”)
In July 2017 the Liberal Government Finance Minister announced a series of very significant changes affecting the taxation of private corporations. One of these was the tax on split income or TOSI rules which generally were intended to stop income splitting using private corporations. The rules have been subject to a number of revisions, are very complicated and are still subject a number of questions. Stuart Bollefer is admitted to the Bar in the Province of Ontario and is an experienced tax lawyer with the law firm Aird & Berlis LLP. He has presented this topic at the Ontario Tax Conference held in Toronto, Ontario, and discussed these rules in detail. The purpose of this short post is to briefly describe the ambit of the rules and some of the available exceptions, but is not intended to be a substitute for advice from a qualified tax specialist. As part of the Ontario Tax Conference presentation, Stuart Bollefer also prepared an 80 page paper which can be accessed by members of the Canadian Tax Foundation. Essentially, the TOSI rules will subject any type of distribution from a corporation to top rate tax where the payment is made as a dividend on shares owned by an individual or interest paid on debt advanced by the individual, where the recipient of the dividend or interest is related to a person who either owns 10% or more of the shares of the corporation or is active in the business of the corporation. The TOSI rules can also apply to certain capital gains realized on the sale of shares of a private corporation. There are many additional supplementary rules that apply. In order to avoid the application of TOSI, it is necessary to find an applicable exception. One very useful exception discussed by Stuart Bollefer is the “Property Received as a Consequence of Death Exception”. This exception is described below. Property Received as a Consequence of Death This exception is found in paragraph (a) of the excluded amount definition, This exception is applicable to the application of TOSI in the circumstances where a person has not attained 24 years of age in the previous year (25 in the current year) and the property in question was acquired by or for the benefit of the individual as a consequence of the death of a person who is: · a parent of the individual; or · any person, if the legatee is o enrolled as a full time student during the year at a post-secondary education institution (as defined in subsection 146.1(1)), or o an individual in respect of whom an amount may be deducted under the disability deduction provision of section 118.3. A few things should be noted about this exception. First of all, though it generally applies to inheritances, it will not apply if the person is 25 years of age or older. Therefore, this means that a minor or younger person could inherit shares of a private corporation and not be subject to TOSI under this exception, but at the age of 25, TOSI could begin to apply unless another exception is applicable. Secondly, the exception only applies if the individual acquires the shares as “a consequence of the death of a person”. This would normally mean that the shares or other assets would devolve upon the person by a testamentary disposition, that is, by virtue of a provision contained in the deceased’s Will or as a result of an intestacy. It is not clear whether this provision would apply if, for example, the assets were transferred to the person from an alter ego or spousal trust of the deceased person or perhaps more remotely, from a family trust which holds the asset. It is not completely clear whether such a transfer would be as a result of a consequence of the death of say a parent. CRA has opined in some instances that if the language in the alter ego trust is properly drafted, such a transfer could be viewed as a transfer as a consequence of death.[1] It is also interesting that the provision applies if the property is acquired “for the benefit of” a person as a consequence of the death. The “for the benefit” language suggests that the property does not need to be distributed outright to the beneficiary, but could be held in trust for the benefit of the beneficiary. This would suggest that distributions from an estate to a trust benefitting a person who has not attained 25 years of age could qualify as an excluded amount. It is not clear whether the trust would need to be a testamentary trust or whether an inter vivos trust established before the death of the testator would suffice. The rules are complicated and good tax advice should be sought in navigating these rules. Stuart Bollefer will be discussing further exceptions in subsequent posts. [1] CRA Technical Interpretation No. 2000-017625 (November 21, 2000), CRA Ruling No. 2000-0039395 (October 17, 2000), CRA Ruling No. 2009-0350491R3 (January 1, 2010), CRA Ruling No. 2005-0155371R3 (January 1, 2005), CRA Ruling No. 2004-0060271R3 (January 1, 2004). Tax lawyer Stuart Bollefer earned his LLB from the University of Toronto. In practice for more than 30 years, Stuart Bollefer is a partner at Aird & Berlis LLP, where he develops innovative solutions for his clients’ tax issues. He also speaks frequently about tax issues and has given several presentations on the new tax on split income (TOSI) rules.
Income splitting has been used for a number of years as a way of benefitting small businesses by allowing the transfer of income from family members in higher tax brackets to those in lower tax brackets. The income could be transferred as salaries for work done or as dividends paid on shares owned. The result is significant tax savings. However, as of January 2019, the federal government’s new TOSI rules came in effect, removing the split income tax advantages. The new rules include as split income most types of distributions from corporations resulting in the highest marginal tax rate. Effectively, split income gains enjoyed by Canadian family members are taxable at the highest marginal rate. The rules are vary comprehensive but there are exceptions to the application of these rules. One exception applies to persons who are actively involved in the business. Other exemptions relate to spouses who are over age 65. Business owners should consult with a tax professional to see if they qualify for an exemption to these TOSI rules. When not busy with his responsibilities as a Toronto-based tax attorney, Stuart Bollefer enjoys playing golf. While he has pursued his interest in the sport by traveling to courses across North America, Stuart Bollefer also benefits from having a number of top-quality venues close to home. The best of these include: Toronto Golf Club Located in nearby Mississauga, Toronto Golf Club holds distinction as the first championship course in all of Canada and the third-oldest club in North America. Notable challenges include the two par 5s on the back nine and an 11-hole stretch comprising eight par 4s. National Golf Club of Canada Golfers at this George and Tom Fazio design must navigate notoriously difficult tree-lined fairways. Successfully reaching the greens brings even more adversity, however, as the course boasts high-quality but unpredictable putting surfaces. St. George’s Golf and Country Club This Toronto venue has attracted golfers since opening near Lake Ontario in 1929. The five-time host of both the Canadian Open and the LPGA Classic, St. George’s has been named by Golf Digest as the No. 2 course in all of Canada. |
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