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New Partner in EPR Maple Ridge Langley

John Thomson, CPA, CGA

John Thomson, CPA, CGA

The partners of EPR Maple Ridge Langley, Chartered Professional Accountants, are pleased to announce that John Thomson, CPA, CGA has been admitted into partnership effective January 1, 2016.

John has been with EPR since 2007 and received his professional accounting designation in 2012. He also has a Bachelor of Business Administrator, Major in Accounting, from Kwantlen Polytechnic University. John’s areas of practice are small to medium sized business accounting and taxation, as well as personal income tax, estates and trusts. His focus is on providing professional quality services to help clients succeed in their business ventures.

John is an active member of the community, including serving as Treasurer of the Chamber of Commerce for the past 3 years. He is also on the Community Advisory Committee of the Salvation Army Ridge Meadows Ministries.

In his leisure time John enjoys spending time with his young family, snowboarding and golfing.

 

 

Understanding your shareholder loan account

© Copyright 2012 CorbisCorporationYour shareholder loan account is made up of all capital that you contribute to the corporation and all purchases made on behalf of the corporation using personal funds or personal credit cards netted against cash withdrawals and personal expenses paid by the company on your behalf.

As long as you do not withdraw more than what you initially contributed to the business, you can withdraw the balance of your shareholder loan account on a tax-free basis.  If you draw too much money from your business so that you end up owing the corporation money, you have one year from your fiscal year-end date to pay it back. This can be repaid either via direct repayment, salaries or dividends. If the amount is not repaid, the amount of the loan will be included in full on your personal income tax return.

Withdrawals from your shareholder loan account include cash, personal expenses paid by the corporation, and property transferred to you personally. If you take property out of the corporation be sure that you transfer the asset at the fair market value just as if you purchased it from a company that you had no interest in.

Interest does not have to be paid on the amounts owing to the shareholder however, if interest is paid, then a legal contract should be drawn up stating an obligation to pay interest and the actual amount of the interest. The interest paid on the shareholder loan is then deductible to the corporation and taxable to the shareholder.

CRA has specific rules about corporate shareholder loans. Since corporations often pay tax at preferred rates, CRA is concerned that owners could take money out of their company without paying personal income tax on it. CRA specifies that if a shareholder owes money to the company on two consecutive year-end balance sheets, the principal portion of the loan must be included in the shareholder’s income tax return. It also notes that a series of loans and repayments will be viewed as one continuous loan. This prevents the shareholder from paying the loan off just prior to year-end and then re-borrowing the money just after year-end so the loan does not show up on the balance sheet.

You need to be continuously aware of your shareholder loan balance. From a tax perspective, it is often advantageous to eliminate the amount that you owe the company by issuing a bonus or declaring a dividend to the shareholder rather than having the amount included on your personal income tax return by CRA.

For more information on shareholder loans, please contact your EPR office.

Best Before 2017

by Andrew Guilfoyle & Adam Shapiro & Zachary Schwartz

New income tax rules for life insurance will come into effect at the end of the year, with significant impact on estate plans.  Here are strategies ahead of time for your clients.

Joe, a 50-year-old, nonsmoking at our wealth management firm, recently came to us seeking counsel on a number of estate-planning issues.  Since life insurance was going to plan an important role in his plan, we informed Joe that the income tax benefits of certain insurance strategies would be diminished if his plan were implemented after 2016.  In particular, Joe was evaluating an investment in a $5-million universal life insurance policy.  He did not have a specific timeline for completing his plan, but he was interested in having the policy owned by his holding company.  Joe wondered how his planning would be affected if he decided to wait until after 2016 to implement this insurance program.

We explained that the current Canadian income tax rules on life insurance would enable his holding company to distribute up to 100% of that $5-million death benefit tax-free to he new shareholders of the holding company should Joe die any time after he turned 73.

But new income tax rules for life insurance will take effect on January 1, 2017. These new rules will have a significant impact on estate plans.  Under the new rules, if Joe were to die at age 73, his holding company would be able to distribute only $4.175 million of the death benefit proceeds on a tax-free basis.  In Ontario, the tax cost of distributing the remaining $825,000 would be in excess of $300,000.  The full $5-million would only be accessible to Joe’s heirs if he were to die after age 90.

Unfortunately, as Joe came to realize, the pending income tax changes will diminish some the tax advantages practitioners have come to take for granted in life insurance and annuity products.

Read more…….

Reprinted from CPA Magazine, December 2015, with permission of the Chartered Professional Accountants of Canada, Toronto, Canada.

Any changes to the original material is the responsibility of EPR Canada Group Inc. and have not been reviewed or endorsed by the Chartered Professional Accountants of Canada.