Business Planning


Partnership Year-Ends – Tax Changes

W hat are the tax implications of a member of a corporate partnership having a fiscal yearend different from that of the partnership? The latest federal budget provides a new answer to that question. Previously, partnerships owned by corporations could defer taxes on their income. They did this by setting the year-end of the partnership on a date after the year-end of the corporate partners. For example, if a corporate partner had a March 31 year-end, the partnership could have an April 30 year-end in order to defer the partners’ income taxes on 11 months of income from the partnership. The budget proposals of March 22, 2011 will do away with this deferral opportunity.

Henceforth, each corporate partner will be required to include in its current fiscal year its share of the partnership income calculated on the deferred portion of the partnership’s fiscal year. This period is referred to as the “stub period.”

There will surely be some fine-tuning of the calculations but generally this new rule applies to all corporate partners, other than professional corporations,
that have year-ends of March 23, 2011, or later. “Some clients were concerned about the additional tax burden of having to include additional income in
their fiscal years ended March 31,” says Tax Partner Sunita Arora.

“The government has made a transitional reserve available to permit the stub-period income to be brought into income over five years, using a graduated formula.”

Furthermore, the Canada Revenue Agency has stated that they will also apply similar rules to members of joint ventures and co-tenancies. At this point, these
details have not been released.


Donations of Flow-Through Shares

Registered charities may receive fewer donations when proposed changes introduced in the March 22, 2011 federal budget come into effect. These proposals, which are now in draft legislation, aim to reduce the tax benefits of donating publicly traded flow-through shares to registered charities. “The budget proposes that only the capital gain in excess of the original cost of the flow-through share will be exempt from tax,” explains Senior Tax Partner Jeff Nightingale. “This is a significant change since an added benefit of donating flow-through shares will no longer be available to taxpayers. When this draft legislation becomes law, the change will take effect for any shares purchased after March 11, 2011.

“Under the existing rules, the tax cost of the shares is reduced to nil by virtue of the flow-through of deductions and credits. If the shares are donated, the resulting capital gain, which is equal to the value of the shares, is not taxed. The proposed change will tax the portion of the share cost that was written off when purchased, thereby significantly increasing the after-tax cost of the donation.” If you need further information, please contact your Lipton adviser.


Using Social Media in Your Business

Social media is acknowledged by most business owners today, yet there is still confusion over how it should be used. According to Systems Administrator Bryan Walderman, the question is not if, but how you should use social media as a marketing tool. “Social media is here to stay, and it’s too large a market to ignore. The sheer number of people using these sites is staggering – it’s been said that all Facebook users together would constitute the third most populated country in the world.” Of the hundreds of sites available, the most popular are Facebook, LinkedIn, YouTube and Twitter. Each site has its own demographics, cutting across all ages and groups, enabling business owners to target specific markets. Best of all, these sites are free.  Where do you start in creating a social media presence?

Bryan offers this advice:

  • Identify the site.
    “Do your research. The type of business determines the media channel used. Tap the know-how of younger members of your staff or family.”
  • Create a policy.
    “Obtain legal advice. The policy outlines the conditions of use and comprises human resources, information technology, legal and marketing principles. One aspect should cover employee use of social media during work hours.”
  • Maintain your page.
    “Maintain your presence by updating your page regularly so it remains relevant to your target market.”
  • Consider security.
    “Social media sites are password protected and encrypted. However, if you want 100 per cent security, these sites may not be for you.”
    For more information, please contact your Liptonadviser.

Professional Profile – Jeffrey Nightingale, BComm, MBA, CA, TEP

Senior Tax Partner Jeff Nightingale values the same things at Lipton LLP today as he did when he joined the firm 25 years ago. “We are a true partnership. Even
with all the changes in business and technology, our core values have remained the same. We share ideas freel and collaborate as a team to deliver the best solutions for our clients.” As taxation has evolved over the years, Lipton’s tax team has also grown significantly under Jeff ’s leadership, keeping pace with the complex changes in estate planning, tax planning and compliance. The team now consists of a second tax partner and two tax professionals, including two U.S. CPAs.

A graduate of the University of Windsor, Jeff obtained his MBA from Babson College in Wellesley, Massachusetts. He was recently appointed to the Ontario Institute of Chartered Accountants Appeals Committee, which conducts appeals of decisions made or sanctions imposed on Chartered Accountants by the Discipline Committee. Jeff is also on the Budget and Finance Committee and Audit Committee of Temple Sinai Congregation, having previously served as its treasurer.
With Jeff and wife Sherri’s three children now young adults, he plans to even further increase his time and involvement at Lipton. He explains, “We pride ourselves on serving clients with an entrepreneurial bent, which in turn means that the partners and staff must always be leading edge.”