You have just learned that you have been appointed the liquidator of your brother’s estate (succession). Here are some useful lessons to ensure that you are released from all the deceased’s tax liabilities.

As a liquidator (formerly known as the testamentary executor), you have responsibilities. According to the tax laws, you must:

• File all the income tax returns required for the deceased person and his/her succession;
• Ensure that all the current taxes are paid;
• Inform the beneficiaries about the taxation of the amounts they receive from the estate (succession).

You must also ensure that you obtain the necessary authorizations and clearances to avoid incurring your personal liability for the tax debts of the deceased.

Québec – Authorization to distribute the property of the estate (succession)

In Québec, the liquidator must obtain a certificate authorizing the distribution of the property of the estate (succession) before distributing any funds, and even before paying bills. Failing to request such a certificate may be costly. Any amount distributed before this certificate is obtained will render the liquidator personally liable for the tax liabilities of the deceased, up to the limit of the amounts distributed without authorization. However, the tax authorities allow distribution of funds or payment of bills, without a certificate, up to a limit of $12,000.

For this purpose, a prescribed form must be filed as soon as possible after obtaining the inventory of the deceased person. In addition to basic information on the deceased, this form will present his assets and liabilities and the amounts already distributed or paid since the death.

Federal – Clearance Certificate

The liquidator (legal representative) must obtain a Clearance Certificate for federal tax purposes. As in the case of Québec, failure to obtain this certificate will render the liquidator personally liable. However, the scope of this liability will not be related to the valuables distributed before the certificate is obtained. In fact, contrary to the rules in Québec, the Clearance Certificate can only be requested once all the income tax returns have been filed and assessed – in other words, after the estate (succession) is liquidated. It is generally suggested that the liquidator retain a certain amount until the Clearance Certificate is obtained, in order to cover the tax debts that could appear during the analysis of the application.

Given the special tax consequences applicable in case of death and the possible liability of the liquidator, it may be wise to consult a tax specialist.

Please do not hesitate to consult our team specializing in this field.  It will be their pleasure to assist you.

Employment and the economy are still priorities in achieving a balanced budget in 2015

Federal budget March 21, 2013

Today, Canadian Finance Minister, the Honourable James M. Flaherty, presented his eighth budget, the second budget of the Conservative majority government. Although a budgetary deficit of $18.7 billion is anticipated for 2013-14, a surplus of $800 million is projected by fiscal 2015-16.

In this uncertain environment, the government’s focus is clear: jobs and the economy. Economic Action Plan 2013 builds on the foundation that was laid last year with measures to create jobs, promote growth and support longterm prosperity. Several measures, in particular, are intended to assist the struggling manufacturing sector.

From a tax perspective, previous budgets have adopted a number of rules to close tax loopholes and prevent certain business and individuals from avoiding taxes. This year’s budget is no different. A number of new measures have been introduced to close tax loopholes and combat international tax evasion and tax avoidance.

The government also announced its intention to consult on possible measures to eliminate the tax benefits that arise from taxing testamentary and certain other trusts at graduated rates. A consultation paper will be publicly released to provide stakeholders with an opportunity to comment on these possible measures.

Finally, previous budgets had noted the government’s interest in exploring the issue of whether new rules for the taxation of corporate groups—such as the introduction of a
formal system of loss transfers or consolidated reporting— could improve the functioning of the corporate tax system in Canada. Following extensive public consultations, the government has concluded that moving to a formal system of corporate group taxation is not a priority at this time.

The following is a summary of the tax measures that were addressed in this year’s budget. Please contact us for more information on any of these measures.

Updated on January 24, 2024

Did you know that, under certain circumstances, you can claim a tax deduction for purchasing Canadian works of art?

Whether they are individuals in business, partnerships, corporations or trusts, taxpayers who acquire an eligible work of art can claim an annual capital cost allowance equal to 20% of the amount paid for federal purposes and 33 1/3% of the amount paid for Quebec purposes.

Eligible works of art

Eligible works of art are:

• Prints, etchings, drawings, paintings, sculptures and other similar works of art whose cost is not less than $200;
• Hand-woven tapestry or carpets, or handmade appliqués, whose cost is not less than $215 per square metre.

Conditions

• The work of art must have been created by an artist who was a Canadian citizen or permanent resident at the time it was created;
• The work of art must have been acquired from a person with whom the purchaser was dealing at arm’s length;
• The work of art must have been acquired solely for the purpose of generating business income, for example, to decorate the reception area, a conference room, hallway or a shareholder’s office, and be visible to the enterprise’s clients.

Note that taxpayers cannot bring the works of art to their personal residence, unless they have an office where they receive customers, which could be the case, for example, of self-employed individuals, such as consultants, accountants, lawyers, etc.

In the future, taxpayers who sell an eligible work of art that subsequently appreciates in value, must pay tax on the taxable capital gain and, as necessary, add the recapture of the capital cost allowance claimed over the years to the their business income.

As an individual who owns works of art, you are not eligible to claime a capital cost allowance. However, there may be tax implications when you sell such works of art. It is advisable to retain information on the purchase date and price.

Lastly, taxpayers also have the option to donate works of art to charitable organizations and obtain a charitable contribution credit.

Do not hesitate to contact us if you have any questions regarding the owning works of art as part your business activities, or for all other inquiries.

Our experts will be happy to provide you with sound advice regarding your tax situation. They can help you avoid costly mistakes and give you the benefit of their knowledge to optimize your business’s tax situation.