Do not let others....

YOU DON’T SAY
A commentary on why Canadians should challenge
The Canadian Revenue Agency taxable benefit legislation.
By Victor Drummond © October 2007

Canadians have historically and typically been a very law abiding, complacent , compassionate and contented lot – much like the cows that give better milk.

In fact we do give better milk – the milk of human kindness – in our support of an infinite number of charities and worthy causes.

On average we are so charitable that we will happily contribute to many appeals that are far from legitimate charities. But then who has the time and resources to sift the real from the phoney.

Just put some contribution money on the plate and walk away with a clear conscience.

In this social environment then it is no wonder that rascals work all kinds of scams on us.

Such as the unscrupulous contractor(s) that take your money and do little or no work – or worse still -- rip your house apart and then totally disappear from the scene – with your cash.

Of course before you part with your money they will provide a logical view of the finished project and promise the work will be first class – will be finished on schedule – wont generate additional costs – etc. Little to none of which turns out to be factual.

These charlatans only appear on the street – there couldn’t be any in established organizations, e.g. the Canadian Government – or could there be?

No? The street scoundrels likely learned this technique by watching politicians on TV.

Well so what if there are a few scoundrels in government offices – what harm could they do to me?

I go to work every weekday and pay my bills on time – and pay my taxes as they come due – and generally mind my own business --so they can’t hurt me.

Don’t be so sure. What about those taxes?

Lets examine some tax situations and look at the facts.

(q) Have you ever been taxed on money you never received? (a) No.
Well thousands of Canadians have been. How do you suppose this came about?

(q) Have you ever purchased, or received, corporation shares? (a) Yes.
(q) Did you ever sell any at a profit? (a) Yes.
(q) Did you report your profit on you next tax return? (a) Yes.

(q) Did you pay tax on your gain? (a) Yes. (q)How much were you taxed?

(a) Well the inclusion rate that year was 50% and I was in the 38% taxable income range so I paid .38 x .5 = 19% tax on my realized gross profit.

(q) Did you feel the tax you were required to pay was “Fair”? (a) Yes.

So what if some scoundrel in government wrote up a series of tax bulletins that collectively said: “When you bought your shares you had made a theoretical gain because:-“

(1) the company shares you had purchased were those of a corporation that was not a
Canadian Controlled Private Corporation, (CCPC).
(For whatever difference that makes.)

AND

(2) the broker that sold you the shares was an agent of your employer and your purchase was made via an Employer Shares Purchase Plan, (ESPP).
(For whatever difference that makes.)

AND

(3) you paid less per share than the average closing price of the shares over the last 20 or so trading days – an average used to calculate the Fair Market Value (FMV), of the shares.

Therefore you must pay tax on the difference between what you actually paid for your shares and their calculated FMV.

(q) Have I sold my shares? (a) No.

(q) OK – So where is my gain? (a) You don’t have any gain.

(q) So what am I being taxed for?

(a) You are being taxed on a potential gain – one that you might realize if you can sell your shares at the calculated FMV or higher.

(q) Doesn’t that sound “Fair to you?” (a) NO WAY DOES IT SOUND FAIR.

(q) So what if I sell my shares at a profit later and really make a profit? Am I off the hook?

(a) No – not if you receive more money for your shares later than:-
“The Adjusted Cost Base”, (ACB) of the shares you had.

(q) So if I do sell my shares later for more than the ACB – am I taxed on more “Taxable Benefit” money?

(a) No – now you are taxed on a “Capital Gain” profit.

(q) You don’t mean to say that my “Taxable Benefit shares are now a “Capital Gain” item?

(a) Yes – that is exactly what I am telling you.

(q) So what happens if I can not sell my shares for anything like the money I paid for them?

(a) If after you paid your “taxable benefit” taxes on your initial shares purchase -- and you then have to sell your shares at a loss – you are just plain out-of-luck – you can not apply those “Capital Equity” losses against the “Taxable benefits” taxes you already paid on those same shares.

(q)Doesn’t that sound “Fair” to you? (a) NO WAY DOES IT SOUND FAIR.

(q) How can it be that shares I have been taxed on as a “taxable benefit” and which never produced one cent of gain for me to be taxed on -- in the first place -- can now become a non-recoverable Capital loss?

(a) Oh Revenue Canada is “Fair” about “Capital Gains/Losses” – you can report your loss on Schedule S3 of your tax return and if you ever make a Capital Gain in the future – then you can apply your Capital losses against those “Capital Gains.”

(q) Doesn’t that sound “Fair”?

(a) NO WAY IT IS FAIR – if I am taxed on something -- that didn’t produce a gain in the first place -- and then I can not recover any of the extorted tax money when those same shares result in a loss – (q) What is “Fair about that?”

(a) NOTHING

(q) What do I do if my “taxable benefits”, (tb), taxes are really huge? I have heard of cases where the unrealized tb tax is in the hundreds of thousands of dollars – exceeding even the real total annual income of the taxpayer? Is that a true situation? (a) Yes it is.

But Revenue Canada has made provision for that contingency – they have produced a document T1212 whereby you can defer up to $100,000 per year of tb “income”.

(q) Isn’t that “Fair”? (a) “Fair” NO WAY – you have a really warped sense of humour.

(q) Is it also true that many victims of the tb tax rip-off were obliged to borrow money and/or mortgage their homes in order to pay down those huge unjustified tb taxes?

(a) Yes that is also a fact. (q) But don’t you agree it is fair and proper taxation?

(a) DEFINITELY NOT. What’s fair about taxing money one never received and then allowing the tax to stand in abeyance for as long as the victim lives?
(q) What kind of crackpot dreamed up this scam?

(a) Well like I said in the beginning -- there are rascals and scoundrels – even
in government.

(q) So what is your opinion on this shares -- as a taxable benefit tax situation?

(a) NO WAY IS IT “FAIR” TAXATION – This whole set up of classing shares as a taxable benefit stinks to high heaven.

(A) YOU DON’T SAY.

Well in that case don’t go back to watching TV – and soothing your conscience by contributing to another “charitable” cause.

Get cracking and make sure everyone knows you are only going to vote for the political party that commits to implementing real and timely corrective action on this issue.

There are thousands of real Canadian tax victims waiting for justice.
And justice doesn’t appear to be coming from our government.

So -- If you -- the Canadian voter ignore their plight -- then your
total charitable contributions actually add up to a zero.

NO COMMITMENT – NO VOTE – AND I DO SAY.

Victor Drummond ©