Archive | January, 2012

RPP-Defined Benefit Plan

Defined benefit plans are far more predictable because the employee knows how much his/her pension will be upon retirement. The benefit that the employee eventually receives is based on one of, or a combination of, the following factors: a pre-determined percentage of the employee’s salary over a specified number of years (for example, 2% of […]

The Registered Pension Plan (RPP)

An RPP is a formal arrangement where the employer contributes periodic payments on behalf of am employee to a trust for the employee’s retirement. The rules stipulate that the employee must be a member of the registered pension plan. “Member” is defined in subsection 147.1(1) as a person who has a right (absolute, or contingent […]

Retirement Plans

The Income Tax Act currently recognizes and supports three types of deferred income plans (shown in Figure 9-1): Registered pension plans; Deferred profit sharing plans; and Registered retirement saving plans. A registered pension plan can either be contributory (both the employee and employer make contributions) or non-contributory (only the employer makes contributions to the plan), […]

Tax Deferred Income and Saving

When a taxpayer earns an income, the income taxes thereon are payable on a current basis. To encourage savings for retirement and other purposes, certain deferral plans are available. Some of these, like the RRSP and RPP, defer the current income by providing a deduction for capital amounts contributed to an appropriate plan. Other deferred […]

Special Rules – Stock Options

The tax implications of employee stock options were discussed in Chapter 4. A taxable benefit arises when the FMV of the shares at the time the option is exercised, exceeds the exercise price. This taxable benefit is employment income either in the year the option is exercised or the underlying shares are sold. To ensure […]

Involuntary Exchange of Property

The same rules apply to the replacement of property that was involuntarily disposed of and replaced with similar property by the later of: the end of the second taxation year following the taxation year in which the property was disposed of, and 24 months after the end of the year the property was disposed of. […]

Special Rules-Exchanges of Property

Where a taxpayer realizes a capital gain on the involuntary disposition of a capital property or on the voluntary disposition of a former business property, the taxpayer may elect, in the year the property is replaced, to defer that gain. The gain may only be deferred to the extent that the taxpayer reinvests the proceeds […]

Superficial Losses

Sometimes, taxpayers that have realized substantial capital gains in a taxation year will attempt 세 recognize capital losses on other property that they do not truly want to dispose of, by selling and repurchasing the same property in a very short period of time. To address the situation where the disposition is solely tax-motivated (deduction […]

Restrictions and Anti-Avoidance Measures

The taxation of capital gains and losses has undergone a plethora of changes over the last three decades. With the preferential tax treatment of capital gains and the restrictions on capital loss deductibility, many taxpayers are motivated to obtain the more favourable treatment. Several provisions are in place to prevent tax avoidance or the inappropriate […]