In this article, you will read about the recent battle of success against the CRA. The Canada Revenue Agency is tax collecting agency based in Canada. It often lands business owners and individuals in trouble for improper or wrong filing of taxes. Business owners often have to face a lot of difficulties when filing for tax returns or loss encountered by the company. This loss can cause a huge debt to the owner in case he/she is looking to sell the business. However, with certain provisions made by the government, a loss incurred can actually help benefit the concerned and affected individual. Read on to find out how a business owner and his wife actually profited from the loss incurred by their company.
The man and his wife owns a business in Calgary, Canada where each of them has 50 percent of the common shares of the company in their name. The husband has a high paying job and his wife was working full time at their business. Due to reasons concerning family issues, they had to sell their business at a very low price. When they were filing their end of the year’s tax, they came to me and said they expected that year’s tax filings to be very simple as they had sold the business. After I examined all the financial information, we came to the conclusion that they could get a huge amount of refund from the government by utilising the loss they faced at the time of selling the company. There are mainly three different points on filing a return based on this incident.
Claiming a loss based on capital in share value
Selling their assets and claiming capital loss
A debt owed to you by a business or small corporation
We examined all three options and found out that option three was the most profitable and viable and would fetch us a huge return. Option three states that in a business incurring loss, the money to keep running the business has to come as a loan from the owner and at the time of sale if the return is not large enough to repay the loan and the owner intends on selling the business, the debt incurred can be termed as business loss. The other benefit of option three is that the husband who was paying a major amount of the loan can claim the loss in his tax return in which the marginal rate is 39 percent instead of his wife’s 15 percent. After we dealt with the CRA for four months, they finally allowed 100 percent of the loss we filed for. Thus my client got a refund which is more than the sale of the company.
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