Xref: utzoo ont.general:1025 can.general:1712 Newsgroups: ont.general,can.general Path: utzoo!lsuc!dave From: dave@lsuc.on.ca (David Sherman) Subject: Re: The Taxman Cometh for NSERC Award Recipients Date: Fri, 8-Sep-89 08:46:11 EDT Summary: comments on tips Message-ID: <1989Sep8.084613.10300@lsuc.on.ca> Distribution: can References: Organization: Law Society of Upper Canada, Toronto kim@watsup.waterloo.edu (T. Kim Nguyen) writes: > - Having your own company allows you to make use of MANY > deductions, such as (part of) rent, car costs, phone, > stationery, etc. which can be considered valid buisness > expenses. If you do any consulting work, make sure to have > the hirer pay your company (instead of you directly). This statement is generally correct but reflects a confused meaning of the word "company", which normally means the same as corporation. You want to have the funds paid to you as an independent contractor, or "paid to your business", in such cases. If you are carrying on business through a corporation, that's an entirely different situation. Of course, in either case, effective 1991 you're going to have to collect an extra 9% GST if you're not paid as an employee. Also, whether you're classified as an employee or not depends on the facts, not just on what you and the payer call yourself. If the facts determine that you're really an employee, you'll be taxed as such even if you issue invoices and are paid without source deductions. > Self-employed persons get better deductions (larger eligible > amounts for RRSP contributions). That specific example isn't quite correct. The deductions are larger only if you aren't a member of a company pension plan. If you are, you're getting benefits through the plan anyway. > Computers and other > "high-tech" assets depreciate tremendously, so you can use > those to great advantage in cutting your taxable income > down. Advertising for your company is also completely > deductable. Day care costs are also valid business > expenses for the self-employed. The last statement is somewhat misleading. A Federal Court case earlier this year held essentially that such is the case, but the case is under appeal and is widely expected to be overturned. So you can make the claim, but it may not hold up. If your daycare expenses don't exceed the statutory limits allowed to all taxpayers, then you can claim them anyway, regardless of whether you're self-employed. > - See an accountant for more deductions possible. Or a lawyer who specializes in tax. > - Losses on rental properties can be written off against > other income. This might be a good reason to go out and buy > a place (building/condo) for yourself... and if it is your > principal residence, any profit you make on selling it will > be considered nontaxable (up to $100k). Wrong. First, the principal residence exemption has no dollar limit. Second, if you rent part of the building, you may lose the principal residence exemption in part. Third, the general capital gains exemption is indeed $100,000, but that's combined with all other capital gains. Fourth, you can lose access to the exemption if you deduct certain passive losses including interest expense (such as the mortgage interest on your rental property.) > - Gifts to universities: you donate $$$ to the university to > buy a computer (the donation is tax deductable). The > university lends you the computer, and a couple of years > later it sells it to you at its depreciated value. Two > birds with one stone. The donation gives you a credit, not a deduction. Be cautious with such schemes. They could run into a number of anti-avoidance rules. For example, if you're an employee of the university the use of the computer might be deemed to be a benefit from employment and thus taxed. GAAR might also apply if these transactions were planned together. >Of course, there'd be nothing better than paying a few $$$ and talking to >an expert on the matter (accountant). Or lawyer. (Tax lawyers and accountants have different perspectives, sometimes.) David Sherman -- Moderator, mail.yiddish { uunet!attcan att utzoo }!lsuc!dave dave@lsuc.on.ca