# millionaires claiming low-income tax credits... is this right?



## doingtherightthing (Mar 30, 2012)

my husband and i got our landed immigrant status to canada sometime during the end of 2010 under the investor application class. after selling several of our assets we were able to raise a few million dollars ($CAD) which we used during the immigration process. 

our immigration lawyer recommended an accountant to advise us in how the tax system works here. as we get ready to file our tax forms, there are a couple of things that he said which struk me as odd and one in particular as completely outrageous:

the first one was that because we sold all of our assets before we even started the immigration process, the money from that sell cannot be taxed by the CRA. both my husband and i live off from that money so, as you can imagine, everytime we need money we simply withdraw it from the savings account where it is (it's currently sitting doing literally nothing for the time being). he said that this money is not "income" but "capital gains" and hence it's not taxable. it sounds a little strange to me but ok, i'll let this one pass...

... now, on to the one that i just found outrageous:

after meeting with him and going over our tax forms i couldnt help but notice that he had asked for tax credits from many credits specifically designed for low-income people. when i asked him whether my husband and i qualified as a "low-income family" under canadian tax law, he said that because we dont receive any income that automatically places us in the low-income bracket and makes us ellegible to all these low-income tax credits. i tried to object saying that i found it almost morally reprehensible that we're claiming money we dont need but he proceeded to say that the law is very clear and we HAVE to claim that money because we fall in that income bracket.

first, i'm not sure if this is going to trigger an audit... i mean, newly-landed immigrants, first tax declaration, assets in the US & Canada being declared while claiming low-income taxes? i dont know anything about taxes but a situation like this would strike me as odd.

second, this is just... wrong. plain wrong. i am not a tax expert but i'd like to get an idea of whether my accountant is doing his job correctly before i decide to switch. he came very-well recommended, he is a chartered accountant and has worked for the government before so i would like to think he knows what he's doing... but to be honest, the low-income part just rubbed me the wrong way.

any opinions and insights on this issue would be greatly appreciated.

sincerely,

tryingtodotherightthing


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## Young&Ambitious (Aug 11, 2010)

Your accountant is correct.

In Canada entities are taxed on the basis of the year's income, not assets. The assets you sold were before your immigration date and thus do not need to be taxed in Canada. Consider yourselves lucky re the timing of this. If you feel bad, donate some money or your time to a cause you deem worthy would be my recommendation.


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## Spudd (Oct 11, 2011)

Hmm. Is the money sitting in a bank account in Canada or in another country? If it's in Canada, you'll pay tax on the interest, which will count as income for you. If it's in another country, then I guess you have to answer "Yes" to the question about whether you have more than $100,000 in foreign property, and I don't know what the implications of that are since I've never had to say yes to that one. 

If you want to pay back the low-income tax refund you receive, you can certainly donate it to a museum or something that is run by the government. I googled to see if it's possible to pay it directly back to the government but couldn't find anything. In Toronto, they accept voluntary tax donations to the city as well (of course ignore this if you don't live in Toronto).


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## doingtherightthing (Mar 30, 2012)

i would like to thank you both for your time to look into this. he did warn us that once it starts collecting interest that even if it's in another country it'll have to pay taxes but that it was ok for this year...

... i guess if the law says those low-income taxes have to be claimed i guess there it nothing i can do about that. i'll certainly donate it to charity when the time comes... but it just sounded so odd to me... anyways, if that's how it is then that's how it is.

thanks!


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## GoldStone (Mar 6, 2011)

Have you read Canadian Revenue Agency page for newcomers? It describes the rules that govern your first year tax return.

http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nwcmr-eng.html



> *What income must you report?*
> 
> For the part of the tax year that you were not a resident of Canada for tax purposes:
> 
> ...


Suppose you landed in Canada on June 1, 2011.

For the period before June 1:
- income earned outside of Canada is not taxable
- income earned from Canadian sources is taxable

For the period after June 1:
- any income is taxable, no matter where you earned it (inside or outside Canada)

Cash sitting in your bank account is an asset. As such, it's not taxable. If the bank account pays interest, the interest counts as income.


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## GreenAvenue (Dec 28, 2011)

Haha, I really have to laugh when I read this story, kinda makes me wonder where you are from. Nah, don't want to know. We landed in 2005 and we went through pretty much the same story. But don't think these 'rich people ' get away with it, the Revenue Agency will find you. But for now I would say: don't worry.


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## stephenheath (Apr 3, 2009)

It's just a case of timing... and no, you don't HAVE to take it, but you may as well, consider it Canada's welcome gift to you, since the Prime Minister is a lousy cook so you don't want him coming to your door with a loaf of bread or a pie or something.

And you aren't paying much taxes yet because you aren't having your money work for you, but presumably when you get situated you'll either wind up working (which is all taxable) or deploying that cash in a form more likely to keep up with inflation, which will generate income or capital gains which is taxable... and even if not, you're paying the taxes when you buy things (the HST) as well as keeping the economy boosted which helps others work and pay taxes... really, we're just like Las Vegas, we suck you in and then a few years later you wake up, look around, and wonder where all your money went 

Ok, well, maybe not that bad, but the house will win here too


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## Nemo2 (Mar 1, 2012)

GreenAvenue said:


> Haha, I really have to laugh when I read this story, kinda makes me wonder where you are from.


Especially since the OP has already "learned" to say _'anyways'_.


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## the-royal-mail (Dec 11, 2009)

I disagree with the statement that the money is "doing nothing" for the OP. In fact, we need to start to change that mis-perception that a lot of people have that money is "doing nothing" just because it happens to reside in a savings account. In this case the money is golden - it's your income that provides you the means to buy food and keep a roof over your head! Doesn't sound like a do-nothing scenario to me!

On the question about low income status, there is nothing unusual about that at all. If you are low income then you are eligible for the various credits such as GST rebate and so forth. I've had some years where I've been low income due to unemployment etc. Par for the course.


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## HaroldCrump (Jun 10, 2009)

the-royal-mail said:


> On the question about low income status, there is nothing unusual about that at all. If you are low income then you are eligible for the various credits such as GST rebate and so forth. I've had some years where I've been low income due to unemployment etc. Par for the course.


Yabut, the OP's situation is not a true low income situation.
The real issue is that social benefits are looking at T4/T5 type income only, and not the value of assets, even liquid assets such as loads of cash in the bank.
The net effect is that tax payers, many of who barely make enough to make ends meet, are paying welfare-like benefits to people who are in fact "rich" by any standards.


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## MoneyGal (Apr 24, 2009)

Indeed - a lynchpin of Derek Foster's "retire young" strategy.


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## hboy43 (May 10, 2009)

Hi:

So I am one of these "evil" people to which you speak here. I have capital, but don't pay much tax. I however always take enough RRSP or capital gains to pay $1 to $2K a year.

I don't get any low income breaks because my wife pays plenty of tax on her employment income.

Here is the morality as I see it: 75% of the population could be as wealthy as I am if they chose to, but they did not. I did not iherit, steal, or get excessively paid (highest employment income year was $70,000, only 3 years over $50,000). I paid for my university. Only large gifts were $5000 from my parents, and maybe $5000 wedding costs from my inlaws. I am not excessively intelligent or lucky. I however in my youth consumed far less beer, women (in the dating, wooing sense, not prostitution), cars, housing, movies, restaurants etc. to get to this state than you did. You could have too. I would bet that even today, my consumption of the above would fall in the bottom 1/3 of Canadians at my age. 

I frankly find it offensive that the many of you consider you should have a claim on my money via the tax system. 

The current system is that income is taxed. I happen to have little income. Those of you who are always trying to reduce the tax you pay, might give consideration to explaining how you are any different from me. We are all just obeying the law trying to maximize self interest. From here, such people just look like hipocrites.

If you want capital to be taxed, fine get the legislation written that way, but make sure you include housing. Again, don't be hipocritical. Why should I be penalized for having $200,000 house and $800,000 dividend paying stocks, when another might have $1,000,000 house and zero stock. Wealth is wealth right? Just don't expect me to remain wealthy under a capital taxing regime, like a cameleon, I'll just change colour to reduce my tax target, again in a perfectly legal way, just as you all will be doing.

hboy43


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## Dmoney (Apr 28, 2011)

hboy:

Current tax laws are in place for people like you. You've already paid tax on earned income, so now you pay less on invested savings. No problem there.

I do think gov benefits should be both income and means tested. Any form of welfare should only be for those who have absolutely no means to pay their own way. If you have $1 MM in the bank, you should not be eligible for any handouts. 

Taxing wealth would be a horrible idea, but those with wealth should not be given anything additional.


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## kcowan (Jul 1, 2010)

Dmoney said:


> Taxing wealth would be a horrible idea, but those with wealth should not be given anything additional.


Handouts should include a means test on capital not just income.


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## kcowan (Jul 1, 2010)

hboy43 said:


> I however in my youth consumed far less beer, women (in the dating, wooing sense, not prostitution)


I know what you mean even though you seem to have included prostitution.


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## Dmoney (Apr 28, 2011)

kcowan:

That's what I meant by means test. I don't think wealth should be taxed, but I definitely don't think those with wealth should have access to gov. handouts. 
Just like I don't think a couple making $120K should receive any OAS. 

The whole change from 65 to 67 years of age for OAS does nothing to address the fact that those who don't need it are receiving welfare.


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## HaroldCrump (Jun 10, 2009)

hboy43 said:


> I frankly find it offensive that the many of you consider you should have a claim on my money via the tax system.


I don't think anybody is suggesting taxing assets (or "wealth") on an on-going, yearly, basis.
However, just as no one is staking a claim to your hard earned "wealth", similarly you cannot stake a claim to someone else's income (via taxes) to get welfare handouts.
And I don't mean _you_ personally - just a general statement.


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## Toronto.gal (Jan 8, 2010)

I agree with you Harold!


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## Square Root (Jan 30, 2010)

Overall personal tax policy is a pretty complicated subject. There are many taxes to consider: income taxes(including cap gains tax), wealth taxes( property tax, probate taxes, ultimately cap gains on death), transaction taxes(GST, HST, PST), import and excise taxes(probably not significant for most people). Pretty hard to escape them all despite hboy "I only pay a token" tax planning. I think it tends to average out to some degree. Taxing wealth on an ongoing basis brings many problems. Think of the elderly who have to sell their homes because they can't afford the property taxes. Think about the added complexity that would result from having to file a personal balance sheet with CRA every year. 
I am a very high earner and when you add up GST/HST, property taxes , and income taxes, there is no doubt I pay my share. I don't mind paying as it reflects the fact that we live in a great country that provided the environment to succeed. Overall, I think our personal tax system works pretty well, all things considered.


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## OhGreatGuru (May 24, 2009)

To OP: Your conscience is admirable, but your accountant is right. It's a function of our income tax system, which taxes earnings, not assets. (I'm not sure you actually have to apply for these credits, but from his point of view it would be unprofessional to tell you not to apply for an entitlement. To do otherwise would mean he had not advised you properly.) Don't worry, the tax man will collect plenty from you in future years when you put your assets to work.


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