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(2004); to $275,000 (2205) and after 2005, to $300,000.

Federal Capital Tax

Eliminate the .225 per cent federal capital tax over five years, starting January 1, 2004.

Resource Taxation

Change the taxation of resource income by phasing in, over a period of five years: a reduction of the corporate income tax rate from 28 per cent to 21 per cent; a deduction for provincial and Crown royalties and mining taxes paid and the elimination of the existing 25-per-cent resource allowance; and a new tax credit for qualifying mineral exploration expenditures.

MARRIAGE BREAKDOWN

62(7)

SPOUSAL SUPPORT MADE AFTER DEATH

In a February 26, 2003 Technical Interpretation, CCRA notes that where Mr. A is paying tax deductible support payments to his former spouse (Ms. A), if, upon Mr. A’s death, the Estate is required to continue to make the periodic payments, the amounts will not be deductible to the Estate, or be taxable to Ms. A.

RRSP ROLLOVER

The Income Tax Act provides for an RRSP rollover from one spouse to the other spouse under a division of property arising on the breakdown of a marriage or common-law partnership.

In a favourable 2002 Advance Income Tax Ruling, the taxpayer and the spouse had previously entered into a separation agreement which provided for periodic monthly support amounts.

The agreement is to be amended to

delete the future support payments and replace them with a transfer from the taxpayer’s RRSP to the former spouse’s RRSP on a rollover basis.

CANADA PENSION PLAN (CPP) - CREDIT SPLITTING

When a relationship ends, the Canada Pension Plan pension credits which the couple built up during the time they lived together can be divided equally between them.

SUPPORT PAYMENTS

It is noted in CCRA’s Guide Pl02, that if a person wishes to deduct alimony he/she must register their Order or Agreement by completing Form T1158.  Also, a payor of alimony may request CCRA to reduce the amount of income tax that an employer is deducting from salary by completing Form 1213 (Request to Reduce Tax Deductions at Source).

COMMON-LAW COUPLES

The December 20, 2002 issue of the Globe and Mail notes that common-law partners (unlike married couples) do not have a guaranteed right to a 50-50 split of assets when the relationship collapses based on a recent Supreme Court of Canada case.

This case involved Susan Walsh and Wayne Bona, a couple who cohabited for ten years and had two children.  After the breakup, Ms. Walsh wanted a share of the assets in Mr. Bona’s name.  She sought to have Nova Scotia’s Matrimonial Property Act declared unconstitutional because it excluded common-law partners from its definition of spouse.  The Court noted that extending the legal consequences of marriage to common-law partners would “nullify the individual’s freedom to choose alternative family forms, and to

have that choice respected by the state”.

REDO THE DEAL

It was noted in the October 28, 2002 issue of the National Post that Eric Miglin is appealing an Ontario Court of Appeal Decision to the Supreme Court of Canada.  The Ontario Court had ruled that Mr. Miglin’s spouse could reopen their property settlement and alimony agreement if there are material changes and circumstances that would have likely led to a different agreement if they had been known at the outset.

In this case, Ms. M got the Toronto home worth $500,000 as well as $60,000 a year to support their four children.  Mr. M retained the Killarney lodge which receives millions of dollars annually.  The Ontario Court adjusted the agreement to provide Ms. M with an additional $4,400 a month for personal support.

This case could affect thousands of divorced couples who would like to redo their Divorce Agreement.

FARMING

62(8)

SALE OF TIMBER

In a December 5, 2002 Tax Court of Canada case, the taxpayers entered into a five-year plan to have trees removed from their farm property.  The Court concluded that the gain was capital (not business income) even though the property was not being used for farming.

Arguments in favour of “capitalincluded that the property was originally acquired with the intention of farming, the property had been owned for over forty years and there was no timber sold until recently.

2003 SECOND QUARTERISSUE NO. 62PAGE 4

Tax Tips & Traps

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