Tax and Estate Planning Blog : Moodys LLP and SNC Law

We here at Moodys are not immune to the social media phenomenon that has been spreading like wildfire for the past few years. Over the past 18 months or so, Moodys has been working with advisors to try and harness the power that certain social media technology can deliver. It has been an interesting experience to say the least with our eyes being opened greatly. 

The one real eye opener for us has been that social media tools like Facebook, LinkedIn, Twitter, etc.  are not tools that you can fundamentally control.  That is the underlying premise of social media….you cannot control it. You might be able to influence, but you fundamentally cannot control it. A prominent social media expert and co-author of the bestselling book “Groundswell”, Charlene Li, states that social media is often treated as just another marketing channel and she believes that is a mistake. Instead, she believes that social media can be used to forge meaningful relationships with your clients, target prospects and contacts. This is the goal that we here at Moodys are trying to achieve with our use of social media.

Accordingly, all of the team members at Moodys have LinkedIn accounts. For example, my LinkedIn account is Kim Moody – Directory/LinkedIn. I’d encourage you to visit my LinkedIn account and other Moodys’ team member accounts and give us honest feedback about how Moodys can invest in a relationship with you.

Our firm has also been experimenting with Twitter and although our experiment is young, it is interesting to see the power of this social medium.  Feel free to follow us. 

Our experiment with social media here at Moodys will continue to evolve. Charlene Li and our external consultants believe that social media will permeate through everything society does in the next five years. They also believe that the next interesting wave of change will be at the corporate level where it will change the way that all of us conduct business. I believe they are  right…..and we are committed to getting it correct and, more importantly, listening to our clients and contacts to ensure that the shape of Moodys continues to develop in the way that our clients want to see it evolve.

In addition, Moodys is proud to announce the delivery of its first webcast, “The New Restrictive Covenant Income Tax Rules”. This is the first in a series of many to come that will deliver recorded webcasts on proactive tax topics. Be warned that this first webcast is very technical in nature but it is an important topic that practitioners and clients should be aware of. In addition, as previously announced, our firm is also doing live webinar delivery of our seminar series. Once the live webinar has been completed, a recorded version will also be available for purchase. Accordingly, we are pleased to deliver our first recorded webinar on Owner Manager Tax Planning that was presented live on September 14, 2010. Feel free to visit and purchase the seminar material.

Well…that‘s it for now. We will see you in the social media space but hopefully we will see you live or speak to you on the telephone as well. Here’s to providing value!

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Well, today is Moodys LLP's third anniversary! I can't believe how fast time has gone by. Our firm has continued to grow, expand and add value-added services. The most recent service expansion has been US cross-border services. This has been a challenging addition given how complex the US taxation area is but it's also been a lot of fun and exciting given how much these services are needed. We're committed to continuing to grow this area and our existing service offerings......expect future teammate additions soon. Of course, having a great firm is all about having great team members, partners and, of course, clients. Thanks to our clients for your continued support. Thanks to the Moodys teammates......you're all amazing. Thanks to our law firm partner - Shea Nerland Calnan LLP - the support you provide is much appreciated. Finally, thanks to all of our suppliers....we appreciate your support.

UPDATES

 Well, a lot has been happening in the last couple of weeks. Here's a brief update.

 1.       Aggressive Tax Reporting Proposals

 As we've written about in our blogs of September 8, 2010, the Department of Finance has released draft legislation for the aggressive tax proposals. The Department requested comments from interested parties no later than September 27, 2010. Many parties have made submissions. The Society of Trust and Estate Practitioners ("STEP") is one such body that made a submission (their second submission). This space is changing quickly. For example, the United States recently released the final form and requirements for when a corporation will have to disclose its uncertain tax positions ("UTPs") to the Internal Revenue Service. These rules, in my opinion, are much more invasive than the Canadian proposals but given how countries around the world are introducing similar types of provisions, it will be interesting to see if Canada tinkers with the proposals in the future. Stay tuned.

2.       Employee Life and Health Trusts ("ELHTs")

As discussed in our blog of March 1, 2010, the Department of Finance introduced proposals for ELHTs on February 26, 2010 and such proposals were slightly amended by the release of a second round of draft legislation on August 27, 2010. The Department of Finance asked for interested parties to provide comments by September 27, 2010. Well, the Government did not waste any time in trying to get this piece of draft legislation passed. On September 30, 2010, yesterday, the Government introduced the Sustaining Canada's Economic Recovery Act  to the House of Commons. It appears that the Government is committed to getting the ELHT legislation passed quickly. When passed, the ELHT legislation will significantly change the way old "health and welfare trusts" are used. Again, stay tuned.

 3.       Garron Appeal Heard

 As discussed in our blog of September 16, 2009, the Tax Court decision of Garron was a landmark decision involving the residency for tax purposes of a trust. On September 30, 2010 (yes.....yesterday again), the Federal Court of Appeal heard the taxpayer's appeal with the decision reserved. The tax community anxiously awaits the Court's decision.

 4.       Collins and Aikman Appeal Decision

 As discussed in our blog of June 29, 2009, Collins and Aikman was a GAAR decision that was in favor of the taxpayer. The Crown appealed the decision. On September 29, 2010, the Federal Court of Appeal heard the appeal. In a bit of a surprising move, the Federal Court of Appeal released its decision from the bench and dismissed the Crown's appeal (meaning that the taxpayer was successful again). The overall decision was five paragraphs long. While it is a little early to digest what this decision may mean for the ever changing GAAR landscape, it was interesting to see how decisive the appeal was handled by the Federal Court of Appeal.

That's it for now.....thanks again for the last three years and here's to another three decades (or centuries) of multi-disciplinary tax advisory services for the private client. Cheers!      

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On September 17, 2010 the Canada Revenue Agency (the “CRA”) announced changes to its administrative policy on filing requirements for partnership information returns. The administrative changes will apply for partnership fiscal periods ending on or after January 1, 2011, so December 31, 2010 and earlier fiscal periods are not affected.

As a reminder, a partnership is not a taxpayer or a taxable entity, but the partnership’s income is taxable in the hands of the partners themselves. Nevertheless, Income Tax Regulation 229 requires all partnerships to file an annual “information return” in prescribed form (i.e. Form T5013 and its supporting schedules). Only one partner must file a partnership return on behalf of the partnership and the partner(s). Administratively, it has been CRA’s policy that a partnership with fewer than 6 partners did not need to file a partnership return, unless one of the partners was another partnership.

Effective January 1, 2011, the new administrative policy requires a partnership return to be filed annually by a partnership that carries on business in Canada, or a Canadian partnership with Canadian or foreign operations/investments if:

1. at the end of the fiscal period, the partnership has an absolute value of revenues plus expenses of $2 million or more, or has more than $5 million in assets, or
2. at any time during the fiscal period the partnership

-          is a tiered partnership (i.e. has another partnership as a partner, or is a partner in another partnership),

-          has a corporation or trust as a partner,

-          invested in flow-through shares, or

-          is requested to file a return by the Minister.

Regarding the first criterion, the “absolute value of revenues plus expenses” means the sum of total revenues and total expenses from the partnership’s financial statements, not revenues minus expenses, which results in net income. In addition, “assets” means the cost of all tangible and intangible assets, without taking into account any depreciation or amortization.

So, which partnership will not have to file a partnership return? Using the new criteria, it appears that a partnership where all partners are individuals (i.e. none of the partners is a trust, corporation or another partnership) will not have to file, unless its revenues plus expenses are $2 million or more, or its gross assets exceed $5 million. In addition, it appears that a partnership will not be required to file a partnership return where it ceases to meet any of the new criteria above in a fiscal period. However, this circumstance is not specifically mentioned in the CRA announcement, and further clarification is required.

Note that an exempt partnership may still wish to file a partnership return to protect itself from a potentially unlimited reassessment period, since the CRA has three years from the date of assessment of the partnership return to reassess the partnership (assuming no misrepresentation attributable to neglect, carelessness or wilful default has been made).

Finally, the CRA announcement also states that Form T5013 is being updated for the 2011 year, so more reporting changes may be forthcoming.

For more information see www.cra-arc.gc.ca/whtsnw/tms/prtnrshp-eng.html.

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