Tax Tip Thursday

Part 3 of your Can you deduct it quizzes!

Let’s see how you do.

12. “What triggers more CRA audits:

A) large charitable donations
B) cash businesses
C) huge vehicle claims
D) cryptocurrency”
Answer:
Honestly… ALL of the above can attract scrutiny.
But historically:
• cash-intensive businesses,
• unusually high vehicle claims,
• and unreported crypto activity
are major CRA focus areas.
CRA uses sophisticated data-matching now.
They compare lifestyle, income, industry averages, property ownership, banking data, and more.
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13. “True or False:

CRA can go back forever if fraud is involved.”
Answer:
True.
Normally CRA reassessment periods are limited.
BUT if CRA believes there was:
• fraud,
• misrepresentation,
• gross negligence,
• or intentional omission,
there may effectively be NO time limit.
That surprises a lot of people.
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14. “What do you think CRA sees first:

your income…
or your lifestyle?”
Answer:
Increasingly — both.
CRA analytics compare:
• declared income,
• property ownership,
• luxury purchases,
• vehicles,
• travel,
• investments,
• and reported lifestyle indicators.
Someone claiming $25,000 income while owning multiple luxury assets may attract attention.
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Cottage & Small-Town Ontario Questions
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15. “If Grandpa bought the cottage for $40,000 in 1978 and it’s worth $1.5 million today…
who gets the bigger shock:

the kids or the accountant?”
Answer:
Usually the kids.
Because many families have NO idea how large the capital gain has become.
Waterfront Ontario properties have exploded in value.
The accountant may expect the tax bill…
the family often does not.
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16. “Can you leave a cottage to your kids tax-free in Canada?”

Answer:
Usually not completely.
Canada has no inheritance tax itself.
BUT at death, CRA generally treats the cottage as if it was sold at fair market value.
That can trigger major capital gains tax.
Some exemptions and planning strategies may help — but many families are shocked by the size of the tax bill.

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Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.