Tips Page 1 2 3 4 5

2007 PERSONAL INCOME TAX RETURN CHECKLIST

81(1)

Appendix A provides a checklist of information that will be needed to complete your 2007 Personal Income Tax Return.

---

PERSONAL TAX

81(2)

STUDENTS

Some claims that may be made by students include:

(i) tuition and ancillary fee tax credit,

(ii) a textbook credit of $65 per month in school,

(iii) an education amount of $400 per month.

If the student cannot use the tuition, education and textbook amounts, these can be transferred to a parent or grandparent up to $5,000. Amounts not used by the student and not transferred may be carried forward and used by the student in a subsequent year.

Also, the student may claim a public transit pass credit. If the student is under age nineteen, the unclaimed amount may be claimed by the parent.

Scholarships, fellowships or bursaries are tax-free.

A student may deduct moving expenses against employment income or research grants. These may be carried forward to the next year if not deductible in the current year.

Also, a tax credit is available on interest on loans made under the Canada Student Loans Act and the Canada Student Financial Assistance Act, or similar provincial law. This cannot be transferred to a parent but can be carried forward for up to five years.

MEDICAL EXPENSE - ATTENDING A PRIVATE SCHOOL

In a June 26, 2007 Tax Court of Canada case, the taxpayer paid tuition fees of $12,900 on behalf of her son to attend a private school (Rothesay Collegiate School in Saint John, New Brunswick). The son had been diagnosed with severe learning disabilities and behavioral problems.

The Court permitted the tuition fees as a medical expense and noted that:

1. The Income Tax Act permits a medical expense for the care, or the care and training, at a school, institution or other place that the patient, who has been certified by an appropriately qualified person to be a person who, by reason of a physical or mental handicap requires the equipment, facilities or personnel specifically provided by that school, institution or other place for the care, or the care and training, of individuals suffering the handicap suffered by the patient.

2. Even though Rothesay was not a school exclusively for the learning disabled, the school’s programs were able to adapt to and accommodate such individuals. The programs were progressive enough that they could accommodate those with Attention Deficit Disorder and learning and organizational disabilities.

COMMON-LAW PARTNER

In a September 27, 2007 External Technical Interpretation, CRA noted that a common-law partner is a person who, at that time, co-habits in a conjugal relationship with the taxpayer and has done so throughout the twelve-month period that ends at that particular time. Common-law partners are considered to be spouses for income tax purposes.

The duration test is not satisfied where the person simply “stays” with the taxpayer. Rather, the test requires a conjugal relationship. Where a person who lives with the taxpayer is routinely absent from the home for part of a week, that fact, in and of itself, would not preclude a finding that throughout each such week the person was living in a conjugal relationship with the taxpayer.

CHARITABLE DONATIONS

Administratively, CRA usually permits either spouse to claim a charitable donation tax credit even though the donation receipt may be in the other spouse’s name. However, if there is a large donation it would be advisable to ensure that the receipt is in the name of the person who wishes to claim the tax credit.

CHILD CARE EXPENSE (CCE)

In a November 21, 2007 External Technical Interpretation, CRA note that only the portion of the fees paid to an educational institution relating to child care (i.e., supervision before and after classes or during the lunch period) may qualify as a CCE. However, when the payment is for a child who is under the compulsory school age, the services are generally considered to be for child care (rather than education), unless the facts indicate otherwise.

---

EMPLOYMENT INCOME

81(3)

TELEPHONE AND LODGING EXPENSES

In a July 24, 2007 Tax Court of Canada case, the taxpayer was a commissioned sales employee who agreed to work on a temporary basis in a location which was three hours from his home base. He rented a motel from Monday to Friday at that location and deducted the expenses.

The Court permitted the $4,800 for the motel expenses on the basis that this was not personal because it was a temporary employment location.

Also, the employee incurred cellular telephone charges which were partly reimbursed. He successfully deducted the business portion of the amounts that were not reimbursed.

TRAVEL FROM HOME TO A POINT OF CALL

In an October 29, 2007 External Technical Interpretation, CRA note that the use of an employer-provided motor vehicle by an employee to travel between his/her home and regular place of employment is generally considered personal and not deductible.

However, where the employee proceeds directly from home to a point of call, other than the employer’s place of business to which the employee regularly reports, or returns home from such a point, use of the vehicle is not considered personal and is deductible.

Some Good News for a Taxpayer!

In an October 30, 2007 Tax Court of Canada case, Mr. H was required to travel for employment purposes and received 31.5 cents per kilometre and a fixed allowance for travel which he included in income and then deducted expenses.

Included in the expenses deducted by Mr. H was the daily 30-kilometre drive between his residence and his office for which he did not receive an allowance. His justification was that the only reason he took the motor vehicle to work was his employer’s requirement that he do so. He had alternate and less expensive means of transport of which, but for the employment requirement, he would have availed himself.

The Court concluded that these commute kilometres are allowable motor vehicle expenses and noted that:

1. The employee was required to have his motor vehicle available at the office.

2. The only way that requirement could be satisfied was to drive it there each day.

3. The Court accepted the taxpayer’s argument that, except for the requirement that he have his vehicle at work, he would have relied on the cheaper alternate transportation that was available to him - catching a ride with his son who lived at home, car-pooling or taking the bus. Instead, he had to take his car back and forth and was responsible for the expenses incurred in doing so.

Editor’s Comment

CRA do not always follow these Tax Court Informal decisions in their assessing practices.

THE AUTO LOG

In a September 26, 2007 Tax Court of Canada case, the employer supplied a minivan (a 1998 Chevrolet Astro) which was used for both business and personal trips by the employee. CRA assessed a standby charge and an operating benefit to the employee.

Employee Loses

The Court confirmed CRA’s reassessment and noted that to successfully rebut the taxable benefit assessment, the employee must provide clear, explicit evidence of the actual employment use of the automobile in terms of kilometres. The Appellant did not provide such evidence.

More Tips