February 2010

Notice To Reader

The following commentary has been prepared by Parker Garber & Chesney, LLP based on information available to the public on the date of publishing. Readers are cautioned that this commentary is informational only and that any issues specific to the reader’s needs be addressed with the appropriate tax professional. The reader is cautioned that this document is not meant to provide advice specific to the reader’s particular situation and that advice cannot be given in such a manner.

In This Issue

• EMPLOYER ISSUES - ONTARIO’S BILL 168 – MORE GOVERNMENT INTRUSION IN THE WORKPLACE
• DEMAND LOANS STATUTE-BARRED
• PERSONAL TAX - CAPITAL GAINS DEDUCTION LIMITATIONS
• IN THE COURTS – CHILD CARE EXPENSE GOOD ANYTIME

EMPLOYER ISSUES - ONTARIO’S BILL 168 – MORE GOVERNMENT INTRUSION IN THE WORKPLACE

Beginning in June, 2010 all Ontario employers with 5 or more employees will be required to comply with the new regulations included in the Ontario Workplace Violence and Harassment section of the Occupational Health and Safety Act. While the protection of employees is important and, in fact, necessary, this new legislation is far reaching, intrusive and has a certain amount of overkill since employees are protected already by a variety of criminal and civil protections.

What this legislation seems to accomplish, more than affording protection to employees, is the government’s further unfettered intrusion into the workplace while overstepping the legal protections we all thought we had based on search and seizure and privacy laws. In addition it requires more paper work and unproductive time spent by, for the most part, small employers, just when we are being told by the Bank of Canada that we are being too unproductive in comparison to our G8 and G20 partners.

Included in the new requirements are the following:

• Each employer must prepare a risk assessment of any potential violence or harassment that can originate in the workplace.
• Each employer must develop and implement policies related to these potential risks.
• The policy must include procedures for how employees will report complaints and how the employer will deal with them.

The legislation gives the government absolute access to company records and all employees can be questioned at any time by government inspectors without being given the normal protections required under our Constitution.

And we thought 1984 had come and gone.
 

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DEMAND LOANS STATUTE-BARRED

In 2003 Ontario revised the limitation period for loans. The Ontario Court of Appeal has confirmed that the rules apply to demand loans and that the time limit begins running from the date of the loan and note from the date of demand. The time limit resets every time there is a payment or an acknowledgement of the loan. This should be a concern for loans within family or corporate groups where the debtor dies or declares bankruptcy and the lender finds the note to be unenforceable. Lenders should ensure that a mechanism is put in place to renew or acknowledge the loan on a timely basis.

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PERSONAL TAX - CAPITAL GAINS DEDUCTION LIMITATIONS

When a taxpayer has claimed the capital gains deduction in prior years it in important that they keep track of the amounts claimed because they can impact on future returns. One of the restrictions is when a taxpayer claims an Allowable Business Investment Loss (ABIL) as the result of the disposition or insolvency of a small business corporation in which they have shares or debt. The ABIL claim results in one-half of the loss being deductible against other income and is not restricted as a capital loss. In the event that the taxpayer had previously claimed the capital gains deduction, the ABIL claim will be clawed back and converted to a capital loss to the extent of the previous deduction claimed.

Another, less recognized limitation is related to the final return of a taxpayer in the year of death. Generally speaking capital losses carried forward from prior years plus those reported in the year of death can be claimed against other income for the year of death and the immediately preceding year. However, once again, a previously claimed capital gains deduction will reduce the capital losses that can be claimed.
 

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IN THE COURTS – CHILD CARE EXPENSE GOOD ANYTIME

In a decision of the Tax Court (Labrecque v The Queen), the court was asked to address child care expenses paid for services provided on Saturdays, a day when neither parent normally worked. CRA disallowed the claim on the basis that the fees were not paid “to enable the taxpayer … to perform the duties of an office or employment” as defined in the Act.

The court found in favour of the taxpayer stating that there is nothing in the Act requiring the activities to correspond to the time when the parents are working.
 

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