Danielle Loranger
Senior Manager | Lawyer, D. Fisc. | Tax

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.

15 May 2013  |  Written by :

Ms. Loranger is your expert in taxation for the Sherbrooke office. Contact her today!

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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.

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In the March 29th, 2012 budget, the federal government announced certain changes to the Scientific Research and Experimental Development Program (SR&ED).

Some of these measures have been in effect since January 1st, 2013.

Here are the key changes brought to the calculation of federal tax credits for SR&ED in effect since January 1st, 2013:

Outsourcing Costs

As of January 1st, 2013, only 80% of the cost of outsourcing contracts concluded between persons at arm’s length shall be eligible for the SR&ED credit.

SR&ED Overhead Expenses

Overhead expenses directly imputable to execution of SR&ED are eligible to the calculation of the SR&ED tax credit. However, instead of itemizing overhead expenses, taxpayers can use a proxy method according to which overhead expenses are estimated at 65% of SR&ED salaries. As of January 1st, 2013, the rate of 65% is reduced to 60%.

For calendar years overlapping January 1st, 2013, the rates used shall be pro-rated based on the number of days in each of the calendar years.

SR&ED Credits – Quebec

On the provincial level, the new government of Quebec announced in its November 20, 2012 budget that from now on, all refundable tax credits shall be taxable. Hence, SR&DE tax credits in Quebec which pertain to an expense incurred in a taxation year beginning after November 20, 2012, are taxable.

Other Changes

In addition, Canada Revenue Agency, has just published twenty newly revised policies for the application of the SR&ED program. This revision was done in view of consolidating and clarifying existing policies developed over the years, based on needs.

The most crucial document concerns eligibility of work. In principle, the notions explained in previous publications have not changed. Therefore, the three criteria of a project’s eligibility that is, advancement, uncertainty and scientific or technological content, remain unchanged even if a new, five-question method to assess them is proposed. However, it is possible that the text of the new policies may limit the scope of the SR&ED program. The implementation of these new consolidated policies shall allow to determine if this is indeed the case.

Do not hesitate to contact us to optimize your SR&ED tax credits in view of supporting your growth.

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Grant Thornton International has published a special edition of IFRS News regarding the recent publication by the IASB of a document entitled Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (the amendments). This special edition explains the key features of the amendments and provides practical insights into their application and impact.

To view this publication, click on the “Download” button on the right.