Newsletter Page 2 - Dean Constand - Toronto Certified General Accountant

Newsletter Page 2 - Toronto Certified General Accountant

Newsletter #5 September 2009

Small Business Needs (Cont'd - Page 2)

buying a home
buying a car for use in the course of employment
buying shares from the treasury of that same corporation

      For these loans not to be considered income in the year taken, the shareholder must make sure
      that there are reasonable repayment terms set up at the time the loan was made, and the loan
      must be made in the shareholder’s capacity as an employee, not a shareholder. In other words,
      the corporation must have other arm’s-length employees who can access loans from the company.

      Stay Tuned…

      My next newsletter will provide the 2009 personal income tax rates in comparison with the small
      business corporation rate in Ontario, which highlights the importance of keeping profits in the
      company, and using the methods I’ve described to access dollars from your corporation on a
      tax-free or low tax basis.

Personal Income Tax

                                                          Death and Taxes
                                 Probate Fees in Ontario

      The probate process validates your will. There is no general requirement that a will be probated.
      Third parties can require probate to validate a will, for example, in cases when there is estate
      litigation, when the will is contested, or when bank accounts are in excess of $10,000 to $15,000
      (this is a bank requirement so the bank sets the amount). Effective June 8, 1992, the rate for
      probate fees in Ontario is 0.5% on the first $50,000 of estate value and 1.5% on the excess. On
      an estate valued at $1 million the probate fees would be $14,500.

      This “tax” applies only to assets passing by will, and is based on the value of the estate. “Value”
      means gross value except that, with respect to real estate, mortgages can be deducted from the
      value. The following assets are excluded from probate:

insurance payable to a named beneficiary
assets held on joint account and passing by survivorship i.e. bank accounts, real property, Canada Savings Bonds, Guaranteed Investment Certificates
real estate situated outside of Ontario
RRSPs, RRIFs, pension plans, etc. payable to a named beneficiary

      While trying to minimize these fees, care must be taken not to forget the fair distribution of the
      estate. Sometimes it will be preferable to pay the probate fees just to make sure the estate plan
      works without being potentially inequitable or complicated. For example, your other beneficiaries,
      perhaps those who didn’t receive the RRSPs, could be short-changed when the estate income tax
      bill is paid out of their inheritance. It may be necessary to have assets in your estate, and therefore
      subject to probate, in order to pay income taxes, to share the income tax burden among
      beneficiaries, to create trusts for children, spouses and others with conditions you want met (rather
      than distributing the assets directly to them), and to make charitable donations.

      Stay Tuned….

      The December 2009 newsletter will discuss year end tax tips.

                                                           Notice to Reader

      Dean Constand C.G.A. publishes this newsletter for information purposes only. Feel
      free to distribute to colleagues and friends. Although the material has been carefully
      prepared, it is not a substitute for professional advice.

                                      Email Contact: accountant@deanconstandcga.com

                              Site Design & Content Copyright ©2008-2011 - Dean Constand
                                              Toronto Certified General Accountant

                                       Dean Constand is a member in good standing of the
                                            Certified General Accountants of Ontario

Tax Tips