It is well understood that qualified donations made by an individual generate donation tax credits in the year the donation is made or the subsequent five taxation years. What are less known are donation “carryback” rules that are available when a donation is made in the year of an individual’s death or some of the subsequent years.
Rectification, in simple terms, is a legal process where an entity petitions the court to change previously executed written documents. In the tax world, rectification may be used by a taxpayer to change the terms of a legal document to alter the tax results of a transaction, but is generally regarded by practitioners as a bit of a “Hail Mary” as it is an expensive and time consuming exercise with uncertain results. The fact that the threshold for granting a rectification order is quite high does not help the cause. This threshold was further elevated by the judgement in Fairmont Hotels, 2016 SCC 56, which narrowed the scope of rectification. However, it appears that at least one provincial court is showing a willingness to interpret the tests laid out in Fairmont in a taxpayer friendly manner.
The principal residence exemption allows Canadians to reduce or eliminate Canadian income tax on gains resulting from the disposition of a home or vacation property a Canadian “ordinarily inhabits”. Eligibility for the exemption is being scrutinized more than in the past, by the CRA.