Partnership information returns – Be aware that for partnerships with fiscal periods ending after December 31, 2010, the Canada Revenue Agency has replaced the requirement to file a partnership information return based on the number of partners with one related to financial thresholds and partner structure. See our Tax Memo “Partnership Information Returns–Who Must File Starting 2011?”
Avoidance transactions – Be aware that draft legislation makes an “avoidance transaction” meeting certain conditions a “reportable transaction” that must be reported to the Canada Revenue Agency, generally for transactions entered into after 2010 and those that are part of a series of transactions completed after 2010. See our Tax Memo “New Federal Reporting Regime for Aggressive Tax Planning: Draft Legislation Released.”
Depreciable assets –
Accelerate purchases of depreciable assets. Ensure assets are available for use at year end.
Purchase eligible computers and systems software before February 2011. The CCA deduction is enhanced from 55% declining balance to 100% (no half-year rule).
Purchase eligible M&P machinery and equipment. The CCA deduction is enhanced from 30% declining balance to 50% straight-line, for purchases made before 2012.
Reserves – Identify and claim reserves for doubtful accounts receivable or inventory obsolescence.
Business income reserve – If you sold goods in 2010 and the proceeds are receivable after the end of the year, you may be able to defer tax on related profits by claiming a reserve over a maximum of three years.
Dispositions – Defer, until after year end, planned dispositions that will result in income.
Accounting method – Consider changing the corporation’s method of accounting in respect of the timing of income inclusions. This may require the Minister’s approval.
Costs of doing business – Compare costs of doing business in different jurisdictions.
Intercompany charges –
Ensure charges are reasonable given changes in the economy.
Consider adjustments to intercompany charges to reduce overall taxes paid by the related group. For example, charge reasonable mark-ups for services provided by related corporations.
Capital gains rollover – If you sold or will sell eligible small business corporation shares in 2010, invest the proceeds in other eligible small business corporation shares by April 30, 2011, to be eligible to defer all or part of the capital gain. (Applies to individuals only.)
Capital gains reserve – If you sold or will sell capital property in 2010 in exchange for debt, you may be able to defer tax on part of the capital gain by claiming a capital gains reserve over a maximum of four years.
Foreign exchange – Consider triggering a foreign exchange loss that is on account of capital before year end to offset capital gains in the current year or previous three.
Retirement income – Consider setting up an individual pension plan as a means of enhancing retirement income.
Shareholder loans to your corporation – Determine whether your corporation would benefit from deductible interest on shareholder loans made to the corporation, to reduce active business income to the $500,000 threshold. This threshold is lower in some jurisdictions (see Table 6 on page 19).
Shareholder loans from your corporation – Repay shareholder loans from your corporation no later than one tax year after the amount is borrowed (exceptions apply).
Protect your investment in your business assets – Consider:
transferring assets (e.g., real estate and intellectual property) from an operating company to a separate company on a tax-deferred basis; and
arranging to secure a loan from a shareholder.
Exemption for qualified small business corporation shares –
Structure the business so that corporate shares become or remain eligible for the $750,000 capital gains exemption.
Consider crystallizing the capital gains exemption and/or restructuring to multiply access to the $750,000 capital gains exemption with other family members.
SR&ED – Ensure claims in respect of SR&ED expenditures or investment tax credits (ITCs) are filed by the deadline, which is 18 months after the corporation’s year end. A federal change (see also provincial changes on page 7) allows SR&ED ITC claimants that have numerous SR&ED projects in a taxation year to continue to file SR&ED Project Technical Information only for the 20 largest in dollar value, rather than for all SR&ED projects, until further notice. See Developments “The CRA Revises Form T661 Requirements – Back to Top Twenty Projects.”