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Budget 2019 – Poor wording requires 2 ex-spouses within 5 years for Home Buyers Plan

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This is one of those rare times I hope I am wrong in my interpretation, and look forward to being proven wrong by my professional colleagues.

On March 19, 2019 the federal government tabled its election-year budget. One of the newest and strangest provisions is the ability for people going through a separation or divorce to potentially have access to their RRSP under the Home Buyers Plan.

Now in my article and podcast entitled: “Escape Room – The NEW Small Business Tax Game – Family Edition” with respect to the Tax On Split Income (TOSI) rules, I made a tongue in cheek argument that people will be better off if they split, because then the TOSI rules won’t apply.

In keeping with the divorce theme, beginning in the year of hindsight, 2020, the federal government is giving you an incentive to split up and get your own place.

However, there are a few hoops:

On page 402 of the budget, under new paragraph 146.01(2.1)(a), at the time of your RRSP withdrawal under the Home Buyers Plan, you must make sure that:

  • – the home you are buying is not the current home you are living in and you are disposing of the interest in the current home within two years; or
  • – you are buying out your former spouse in your current home; and

you need to:

  • be living separate and apart from your spouse or common-law partner;
  • have been living separate and apart for a period of at least 90 days (markdown October 3, 2019 on the calendar),
  • began living separate and apart from your spouse or common-law partner, this year, or any time in the previous 4 years (ok, you don’t have to wait for October); and…

…here is where the tabled proposed legislation gets messy.

Proposed subparagraph 146.01(2.1)(a)(ii) refers to where the individual

  • wouldn’t be entitled to the home buyers plan because of living with a previous spouse in the past 4 years that isn’t the current spouse they are separating from

“(ii) in the absence of this subsection, the individual would not have a regular eligible amount because of the application of paragraph (f) of that definition in respect of a spouse or common-law partner other than the spouse referred to in clauses (i)(A) to (C), and…”

The problem with the wording of this provision, is that it is written in the affirmative by the legislators using the word ā€œandā€. This means, you must be able to answer ā€œtrueā€ to all the tests for the entire paragraph to apply.

The way I read this, the only way to answer ā€œtrueā€ to this subparagraph is if you have a second spouse (ie: spouse other than the spouse referred to) that you shared a home with and you split from in the past four years.

If you have a second spouse that you shared a home with in the past four years, then ā€œparagraph (f)ā€ in the definition of ā€œregular eligible amountā€ would apply and the answer would be ā€œtrueā€.

If the answer is “true” you can then get access to your RRSP Home Buyers Plan.

If you don’t have a second spouse then, even though “paragraph (f)” might be met, the phrase ā€œspouse other than the spouse referred toā€ would not be met, and therefore the answer would be ā€œfalseā€.

This would, in turn, cause the entire logic test of the provision to be ā€œfalseā€ and so you would not be able to take out a ā€œregular eligible amountā€ from your RRSP for the Home Buyers plan because you do not meet the provisions.

If my interpretation is correct then I would really be curious as to what part of the economy they are trying to stimulate.

In my opinion the legislation could be fixed with a simple edit:

“(ii) in the absence of this subsection, the individual would not have a regular eligible amount because of the application of paragraph (f) of that definition in respect of:

(A) a spouse or common-law partner; or

(B) a spouse or common-law partner other than the spouse referred to in clauses (i)(A) to (C); and…”


Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr is the President & Founder of CGL Strategic Business & Tax Advisors; you can find out more about Cory’s biography at http://www.CGLtax.ca/Litzenberger-Cory.html

CEO | Director CGL Tax Professional Corporation With the Income Tax Act always by his side on his smart-phone, Cory has taken tax-nerd to a whole other level. His background in strategic planning, tax-efficient corporate reorganizations, business management, and financial planning bring a well-rounded approach to assist private corporations and their owners increase their wealth through the strategies that work best for them. An entrepreneur himself, Cory started CGL with the idea that he wanted to help clients adapt to the ever-changing tax and economic environment and increase their wealth through optimizing the use of tax legislation coupled with strategic business planning and financial analysis. His relaxed blue-collar approach in a traditionally white-collar industry can raise a few eyebrows, but in his own words: ā€œPeople don’t pay me for my looks. My modeling career ended at birth.ā€ More info: https://CGLtax.ca/Litzenberger-Cory.html

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Business

PM Carney’s Astounding Conflicts Are Clearly Exposed. What Will Parliament, The Media, And Voters Do About It?

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Will opposition parties force an election? Will the media demand Carney account for his conflicts? Will voters continue to allow Carney and Brookfield to profit from Carney’s leadership as they condemn the US President for doing the same?

From Conservative Party Communications

Conservative members of the Ethics Committee released the following statement on its ongoing investigation into Prime Minister Mark Carney’s conflicts of interest:

ā€œYesterday, the Ethics Committee heard scathing testimony from Canada’s leading ethics and accountability experts on the faƧade that is Mark Carney’s so-called blind trust – and his conflict of interest screen which is nothing more than a smokescreen.

ā€œLeading ethics and conflict of interest experts told MPs that these measures are entirely insufficient, and that Prime Minister Carney stands to make millions from his investments while keeping them largely hidden from Canadians. The breadth of Carney’s conflicts and potential to benefit financially are entirely unprecedented in federal Canadian politics.

ā€œCarney was involved in structuring Brookfield’s Global Transition Funds, from which he is set to receive carried interest payments potentially worth tens of millions of dollars. Carney knows exactly what assets are in these funds, but he has refused to disclose them. If the funds make money, he makes money – and the decisions he makes as Prime Minister will impact their value.

ā€œDemocracy Watch founder Duff Conacher testified that theĀ Conflict of Interest ActĀ allows Carney to ā€˜secretly profit’ from ā€˜secret investments’ – dismissing blind trusts as ā€˜not blind at all’ – and confirmed that Carney knows exactly what is in his blind trust. It is only the public that is blind to the full extent of the Prime Minister’s holdings.

ā€œAs currently written, theĀ ActĀ allows the Prime Minister to participate in ā€˜99% of the decisions’ that impact his private investments. Conacher considers the legislation a ā€˜sad joke’ – noting thatĀ  ā€˜any time [Carney] is making a decision that affects businesses in Canada, he is in a financial conflict of interest.’

ā€œAs York University’s Dr. Ian Steadman told the Committee, blind trusts simply ‘aren’t enough’ to prevent public office holders from advancing their personal financial interests.

ā€œWitnesses also slammed the Prime Minister’s conflict of interest screen. The screen is enforced by Carney’s top two aides who serve at his pleasure and are not independent. It lacks any transparency or oversight mechanism, which Conacher noted is a violation of theĀ Act.

ā€œThe Ethics Commissioner has the power to strengthen the ethics screen and enforce full transparency today. He has failed to do so. This is deeply troubling, and must be addressed.

ā€œThese revelations are just the tip of the iceberg in an ongoing investigation. Conservatives will continue to expose Mark Carney’s unprecedented conflicts of interests and fight to close the loopholes in theĀ ActĀ that the Prime Minister is taking advantage of.ā€

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Addictions

Canada must make public order a priority again

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A Toronto park

Public disorder has cities crying out for help. The solution cannot simply be to expand our public institutions’ crisis services

[This editorial was originally published byĀ Canadian AffairsĀ and has been republished with permission]

This week, Canada’s largest public transit system, the Toronto Transit Commission,Ā announcedĀ it would be stationing crisis worker teams directly on subway platforms to improve public safety.

Last week, Canada’s largest library, the Toronto Public Library, announced it would be increasing the number of branches that offer crisis and social support services. This builds on a 2023 pilot project between the library and Toronto’s Gerstein Crisis Centre to service people experiencing mental health, substance abuse and other issues.

The move ā€œonly made sense,ā€ Amanda French, the manager of social development at Toronto Public Library,Ā toldĀ CBC.

Does it, though?

Over the past decade, public institutions — our libraries, parks, transit systems, hospitals and city centres — have steadily increased the resources they devote to servicing the homeless, mentally ill and drug addicted. In many cases, this has come at the expense of serving the groups these spaces were intended to serve.

For some communities, it is all becoming too much.

Recently, some cities have taken the extraordinary step of calling states of emergency over the public disorder in their communities. This September, both Barrie, Ont. and Smithers, B.C. did so, citing the public disorder caused by open drug use, encampments, theft and violence.

In June, Williams Lake, B.C., did the same. It was planning to ā€œbring in an 11 p.m. curfew and was exploring involuntary detention when the province directed an expert task force to enter the city,ā€ The Globe and MailĀ reportedĀ last week.

These cries for help — which Canadian Affairs has also reported on inĀ Toronto,Ā OttawaĀ andĀ Nanaimo — must be taken seriously. The solution cannot simply be more of the same — to further expand public institutions’ crisis services while neglecting their core purposes and clientele.

Canada must make public order a priority again.

Without public order, Canadians will increasingly cease to patronize the public institutions that make communities welcoming and vibrant. Businesses will increasingly close up shop in city centres. This will accelerate community decline, creating a vicious downward spiral.

We do not pretend to have the answers for how best to restore public order while also addressing the very real needs of individuals struggling with homelessness, mental illness and addiction.

But we can offer a few observations.

First, Canadians must be willing to critically examine our policies.

Harm-reduction policies — which correlate with the rise of public disorder — should be at the top of the list.

The aim of these policies is to reduce the harms associated with drug use, such as overdose or infection. They were intended to be introduced alongside investments in other social supports, such as recovery.

But unlike Portugal, whichĀ prioritized treatmentĀ alongside harm reduction, Canada failed to make these investments. For this and other reasons, many experts now say our harm-reduction policies are not working.

ā€œMany of my addiction medicine colleagues have stopped prescribing ā€˜safe supply’ hydromorphone to their patients because of the high rates of diversion … and lack of efficacy in stabilizing the substance use disorder (sometimes worsening it),ā€ Dr. Launette Rieb, a clinical associate professor at the University of British Columbia and addiction medicine specialist recentlyĀ told Canadian Affairs.

Yet, despite such damning claims, some Canadians remain closed to the possibility that these policies may need to change. Worse, some foster a climate that penalizes dissent.

ā€œMany doctors who initially supported ā€˜safe supply’ no longer provide it but do not wish to talk about it publicly for fear of reprisals,ā€ Rieb said.

Second, Canadians must look abroad — well beyond the United States — for policy alternatives.

As The Globe and MailĀ reportedĀ in August, Canada and the U.S. have been far harder hit by the drug crisis than European countries.

The article points to a host of potential factors, spanning everything from doctors’ prescribing practices to drug trade flows to drug laws and enforcement.

For example, unlike Canada, most of Europe has not legalized cannabis, the article says. European countries also enforce their drug laws more rigorously.

ā€œAccording to the UN, Europe arrests, prosecutes and convicts people for drug-related offences at a much higher rate than that of the Americas,ā€ it says.

Addiction treatment rates also vary.

ā€œAccording to the latest data from the UN, 28 per cent of people with drug use disorders in Europe received treatment. In contrast, only 9 per cent of those with drug use disorders in the Americas received treatment.ā€

And then there is harm reduction. No other country went ā€œwhole hogā€ on harm reduction the way Canada did, one professor told The Globe.

If we want public order, we should look to the countries that are orderly and identify what makes them different — in a good way.

There is no shame in copying good policies. There should be shame in sticking with failed ones due to ideology.

 

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