business loss

GUARANTEED INCOME SUPPLEMENT: Change in an Individual’s Circumstance

The guaranteed income supplement (GIS) provides a monthly benefit payment to lower income individuals resident in Canada. Payments from July of one year to June of the next, are based on income of the previous calendar year (i.e. 2016 income is used to determine July 2017 to June 2018 payments).

Where an individual is married or in a common-law relationship, GIS entitlements are based on the combined income of a couple. Where an individual enters into a spousal relationship, the payment issued in the following month will be modified to account for the combined income and new GIS reduction threshold.

An estimate of current year income may be used to calculate the GIS rather than using the base year if a major event affecting income occurs in the year (e.g. job loss, business loss, loss of pension). This is commonly referred to as the “Option Method”. The “Option Method” may also be used part way through a payment year when a marital status change occurs. The recalculation would occur for the second payment after the event occurred. This option may provide for increased monthly payments immediately rather than waiting until the following July when the payments are revised based on the prior year income.

For more information on GIS eligibility and the payment calculation, see Service Canada’s information (https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/guaranteed-income-supplement.html).

 

Action Item: If you experience a change in income or relationship status, consider applying for an adjustment to your GIS payments using the alternative “Option Method”.

 

The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a blog such as this, a further review should be done by a qualified professional.

No individual or organization involved in either the preparation or distribution of this blog accepts any contractual, tortious, or any other form of liability for its contents.

For any questions… give us a call.

BUSINESS LOSS OR PERSONAL VENTURE: Can I Deduct Losses Against Other Income?

In order for an individual to apply their business loss (where reasonable expenses exceed revenues) to another source of income such as employment earnings (thereby reducing the overall tax liability), the taxpayer must be able to prove that they are truly running a business. That is, they have to show that the undertaking was in the pursuit of profit.

An April 28, 2017 Tax Court of Canada case considered whether a practicing lawyer had a source of business income in respect of her law practice for the 2011-2014 years.

The taxpayer incurred losses in all of the years in question ranging from $4,014 to $12,613 and reported annual revenues ranging from $0 to $3,850. The taxpayer reported that the time she spent on the proprietorship was diverse, however, on average she worked about 5 to 10 hours per week. The taxpayer testified that she did no pro bono or volunteer work, but rather, charged clients depending on their circumstances. In some cases, the clients did not end up paying for the services.

Taxpayer loses

The Court found that while the lawyer’s work was very commendable, the practice did not have a view to profit. For example, the gross revenue per hour for the 2011-2014 years were, $5, $1.70, $1.70 and $7.70 (assuming 50 weeks at 10 hours/week for the year). These amounts were not even minimum wage, much less amounts which could sustain a law practice operating with a view to profit.

Although the taxpayer’s work was not strictly volunteering, it was very close. As the venture was not carried out with a view to profit, there was no business, so the losses were not deductible against other sources of the taxpayer’s income.

 

Action Item: If your proprietorship is in a loss position, ensure to document evidence to support your efforts to be profitable.

 

The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a blog such as this, a further review should be done by a qualified professional.

No individual or organization involved in either the preparation or distribution of this blog accepts any contractual, tortious, or any other form of liability for its contents.

For any questions… give us a call.

Marsha MacLean Professional Corporation