For partnerships, the CRA has changed an administrative policy that was first proposed in September, 2010. The change triggers additional filing requirements for many partnerships throughout Canada.

Bottom line is more paperwork. But I’ll spell out the details.

The technical details

The reporting rules generally require partnerships to submit a T5013 Partnership Information Return to the CRA by March 31 of each year. This includes a variety of schedules primarily related to the financial status of the partnership and tracking partner capital balances. Previously, partnerships with fewer than six partners were typically exempt from the reporting. Now, the CRA is basing the threshold for reporting on the financial size of the partnership as well as the nature of the partners.

The forms themselves will be changing as well for 2011.

Financial thresholds for reporting

Effective January 1, 2011 (for the March 31, 2012 reporting deadline) a partnership will need to report:

• If, at the end of the fiscal period, the partnership has an absolute value of revenues plus an absolute value of expenses of more than $2 million, or has more than $5 million in assets; or
• If, at anytime during the fiscal period,
• the partnership is a tiered partnership (has another partnership as a partner or is itself a partner in another partnership);
• the partnership has a corporation or a trust as a partner;
• the partnership invested in flow-through shares of a principal-business corporation that incurred Canadian resource expenses and renounced those expenses to the partnership; or
• the Minister of National Revenue requests one in writing.

So, what does this mean? If you have a partnership, you’re more likely now to require additional reporting to the CRA. This can be as simple as a partnership with:

• your spouse in owning different pieces of real estate
• another entity such as a corporation or a trust (which includes an estate – so for example if your partner passed away you’ll need the additional reporting)
• another partnership

The financial thresholds will get easier and easier to breach as the investment portfolio grows, and given the CRA’s reluctance to regularly update many threshold levels over the years for inflation. Initially, I think the financial thresholds seem relatively reasonable.

A word of caution on “joint-venture partnership”

Further, to all of those who have been ignoring my words of caution related to calling your business/investment relationship with others a “joint-venture partnership”, I really hope that the additional reporting requirements don’t affect you. However, I have serious concerns. Partnerships and joint ventures can be very different creatures. Please don’t confuse them or invite the CRA to distinguish them on your behalf.

While more reporting to the CRA is not the end of the world, this is another administrative burden imposed on real estate investors that investors may regard with frustration.

More recent changes to the partnership rules will effectively result in changes in the year-ends for different corporations, but we’ll talk about that in a future article.

For additional information you can refer to http://www.cra-arc.gc.ca/tx/bsnss/tpcs/prtnrshps/menu-eng.html

George E. Dube, CA

• Please forward us the accounting documentation for completing the trust’s financial statements and tax return by the end of January.
• It is absolutely critical that if the trust has any loans to non-arm’s length parties (for example yourself, spouse, a company that you or family members have partial ownership of), the interest must be paid by January 30th (not the 31st) to avoid income tax “attribution”.

If you have any questions please email George (georgedube@dubecuttini.com).

If we have your information already, please confirm that we will be preparing T4s or T5s for you. Please email Cynthia (cynthiaparent@dubecuttini.com) or Joseph at (josephmartins@dubecuttini.com).

Holiday Office Hours

As is our tradition, our office is closed at noon on  Friday, December 23rd, reopening Monday January 2nd.

The CRA has posted an article outlining what you should beware of when you receive a communciation from someone purporting to be CRA: Beware of fraudulent communications.

They have also provided samples of fraudulent communications that taxpayers have been receiving:

• Samples of fraudulent emails
• Samples of fraudulent Online Refund Forms

As they note in the article, the CRA does not do the following:

• The CRA will not request personal information of any kind from a taxpayer by email.
• The CRA will not divulge taxpayer information to another person unless formal authorization is provided by the taxpayer.
• The CRA will not leave any personal information on an answering machine.

The CRA urges that when in doubt, ask yourself the following:

• Am I expecting additional money from the CRA?
• Does this sound too good to be true?
• Is the requester asking for information I would not include with my tax return?
• Is the requester asking for information I know the CRA already has on file for me?
• How did the requester get my email address?
• Am I confident I know who is asking for the information?

Having a healthy dose of caution when receiving unexpected emails is a good policy.

There are some restrictions when making online payments. For example, the banks from which you can make the payments are limited. As well, there are limits to the total amount you can pay each day. But this is definitely worth checking out.

1. Go to the CRA’s web site: http://www.cra-arc.gc.ca/menu-eng.html
2. Follow the instructions to make either instalment or tax payments on filing.
3. About half way down the page, under “Links for businesses” select “My Payment” and it will take you to another screen.
4. Then click the box that says “Start My Payment” and it will take you to another screen.
5. Then click the box that says “Continue” and it will take you to another screen.
6. Then under the title “Business” select “Corporation Income Tax (T2)” and it will take you to another screen.
7. If you are making an instalment payment, then click the line that says “Interim” and it will take you to another screen. If you are making the payment identified on your corporate tax return then select “Payment on Filing” and it will take you to another screen.
8. You will then have to enter in you corporate account number, the corporation year end that you want the payment to apply to and the amount. Then select “Continue” and follow the instructions.

And, that’s as far as our instructions can go as the next screens are available only to those making payments.  However, the next steps should ask you to confirm the transaction. Once you do that, you will be directed to your financial institution’s online banking page, you log in and proceed as you would to pay bills.  Once you authorize the funds transfer, you will be redirected back to CRA’s web site and you can print out a receipt.  If you are not redirected back to CRA’s web site, the payment service provider will present a default receipt. We always recommend printing the receipts for your records to prove the payment was made.

• Choosing a real estate accountant
• When, if ever should I incorporate?
• New rules for JV’s and partnerships
• Court cases you need to know about

• Structure
• Liability
• Withholding taxes
• Income, capital gains and estate taxes

1. Should we incorporate or not?
2. What are the top 3 things people think they can expense but cannot?
3. What are 3 tips you would offer real estate investors about accounting and tax?

Thanks Andrei for allowing us to share the video here!

(Originally posted on Beach Investing.)

We were able to reconnect with many people,and meet new friends and clients, including those from Janet Thompson’s practice. We also noticed lots of networking during the event to go along with funny stories, food and drink. Our three-storey building also provided a great workout to all those who took the grand tour.

Special thanks has to go to Robin, Kathy, and Stephanie for organizing the event and taking on the cleanup afterwards.

Thank you again to all who were able to attend and looking forward to doing it again in the future!