BOOKS AND RECORDS RETENTION

In a May 11, 2015 Technical Interpretation (2014-0548841E5, Godson, G.), CRA noted in the absence of an exception, a corporation’s non- permanent records must be retained for a period of six years after the end of the last taxation year to which they relate. Also, such records on hand at the date of dissolution must be retained for two years after the date of dissolution (Paragraph 230(4)(b) and Regulation Paragraph 5800(1)(b)).

For further information see VTN Monthly Tax Update Seminar, Issue No. 407

TAX ACCRUAL WORKING PAPERS

In a June 5, 2015 Federal Court case (M.N.R. vs. BP Canada Energy Company, T-908-12), CRA had unsuccessfully demanded “records that describe its uncertain tax positions to assist the Minister in conducting its present and future audit responsibilities”.

For further information see VTN Monthly Tax Update Seminar, Issue No. 407

REFUNDABLE DIVIDEND TAX ON HAND (RDTOH) DIVIDEND REFUND – LATE-FILED RETURNS

In a March 20, 2015 Tax Court of Canada case (Presidential MSH Corporation vs. H.M.Q., 2014-94(IT)G), at issue was whether the RDTOH balance would be reduced by disallowed RDTOH claims relating to late-filed returns.

According to Subsection 129(1), the Minister cannot provide a dividend refund where the tax returns are not filed within three years of the respective year-end.

Taxpayer wins
Court determined that the RDTOH balance should not be reduced by the amount of the disallowed claim due to late-filed returns.

For further information see VTN Monthly Tax Update Seminar, Issue No. 405

PRINCIPAL RESIDENCE EXEMPTION (PRE) SEPARATION

In a March 19, 2015 Tax Court of Canada case (Estate of Helen Bouldin Balanko vs. H.M.Q., 2014-3116(IT)I), at issue was whether the taxpayer could claim the PRE on the disposition of her property even though her husband from whom she was separated (as alleged by the Estate, and testified by the son) had already claimed the PRE for the same period.

Taxpayer loses
The Court found that a Written Separation Agreement is required by the Act for this taxpayer to be eligible to claim the PRE. As no Written Separation Agreement was found and presented to the Court, the Appeal was dismissed.

For further information see VTN Monthly Tax Update Seminar, Issue No. 405

INTEREST DEDUCTIBILITY

On March 6, 2015, CRA released Income Tax Folio S3-F6-C1: Interest Deductibility which replaces Interpretation Bulletin IT-533. The Folio notes that three criteria must be met for an amount to be considered interest, as follows:

Various other issues are also discussed.

For further information see VTN Monthly Tax Update Seminar, Issue No. 405

• • calculated on a day-to-day accrual basis;
  • calculated on a principal sum; and,
  • compensation for the use of the principal sum