The Tax Issue:

I recently sold my half of our house to my spouse. Can it still be seized by the government if I owe them any tax?

The Answer:

One of the many tools in the CRA toolbox that gets quite a bit of use is section 160 of the Act. This rule provides that if you transferred any property to your spouse, a child or any person with whom you do not deal at arm’s length, and if you owe taxes to the CRA in respect of the year in which the transfer is made, or any previous tax year, then that person may be liable for your debt to the government.

So, in your case, if you have a tax liability outstanding, or will be liable for tax this year, then the CRA will calculate the value of the property you sold, reduced by the amount your spouse actually paid you for it, and your spouse may have to pay to the CRA whatever amount you owe, up to that value.

So, for example, if you owe $20,000 in taxes for 2009 and previous years, and your share of the house is valued at $80,000, if you spouse paid you $65,000 for your share, then she is liable for your tax bill up to a maximum of $15,000.

Today I received an interesting early Christmas gift from the CRA – a new business number! If you’ve been following my Twitter Tweets (and who isn’t?), you should know that starting January 1, 2010, anyone who files information returns with more than 50 slips attached will be required to file their returns electronically.

These new rules apply to all information returns that require slips, some of the most common being T4, T5, T4A, RRSP contributions and TFSA reports.

For those who file 50 slips or less, the electronic filing system is voluntary.

In order to file electronically, you need to have a web access code and a business number.

Business numbers with the new “RZ” suffix have been automatically issued to many corporations and filers of information returns. The RZ suffix is to be used when filing information returns (other than T4’s where the existing payroll account suffix “RP” applies).  So, if you’ve received what looks like a new business number in the mail and were wondering why, you’re business number hasn’t changed  – you’ve simply been automatically registered to file electronic information returns and your business number will have a suffix of , say, RZ0001 attached to it.

There are four different program account types, as follows:

• T5, RRSP, T5007, T5008, SAFER
• TFSA (tax-Free Savings Account)
• T5013 (Partnership Return)
• T5018 (Construction contract payments)

If you are filing returns for different program file types, you will need a different suffix for each type. For example, for filing t5’s your number may end with RZ0001, and your T5013 filing number may end with RZ0002.

If you have not automatically received these new business numbers, you must apply for them by filing the new special business number application form RC257.

If you need more information, you can call the CRA at 800-959-5525

I’d really hate to say the campaign is corrupt. Allegedly, reportedly, yada, yada, yada. I think it’s corruption IF his campaign is taking money from attorneys representing clients that his office is investigating, or even simply has jurisdiction over. Why are only attorneys exempt? “Attorney General” Andrew Coumo… attorneys exempt… is that a coincidence or what? Conflict of interest must be avoided. I don’t care if “every body does it,” that is no excuse. Corruption must stop.

Cuomo Took Cash From Lawyers With Matters Before Him

Nov. 23 (Bloomberg) — New York Attorney General Andrew Cuomo’s campaign fund took tens of thousands of dollars from law firms representing clients his office investigated or accused of wrongdoing, state records show.

Well then, I guess that settles it. It’s not “corruption”, it’s ‘ethically challenged!’ HAHAHAhahaha!!!

Besides, who is going to enforce any law signed by a Governor… the Attorney General?

For the most part, Gross says that lawyers have always been exempted from restrictions on contributions. “Generally speaking [Spitzer] accepted contributions across the board from lawyers,” he says. “I don’t know of other AGs who have taken the position that they would not, I’ve just never heard of it.”

Gross adds that expanding such a ban would surely put a candidate at a disadvantage against their competition.

A disadvantage? Tough noogies. Ethics are more important. If it’s not the ideal career path, get over it.

Governor Cuomo? NY AG Will Need Cash from Lawyers to Run

It seems like we haven’t heard much from New York Attorney General Andrew Cuomo in recent weeks. But a report Monday by Bloomberg figures to push Cuomo back into the spotlight.

With an expected run for governor of New York in 2010, the AG–son of former New York governor and Willkie Farr & Gallagher of counsel Mario Cuomo–will need plenty of contributions to fund his campaign. Cuomo has been hard at work bringing in serious cash. Now, some of the names on his donor list are raising questions.

Of the $16 million contributed so far to the attorney general, nearly $1 million comes from lawyers representing clients who are being investigated by Cuomo, Bloomberg reports.

So why is the Attorney General raising campaign cash???

A call to Cuomo’s office inquiring about who he has retained as outside counsel to advise him on his political campaign was not returned by the time of this post. The attorney general has not yet officially announced plans to run for governor.

Really?

For his fund “Andrew Cuomo 2010” he raised more than $10 million as of July, according to records at the New York State Board of Elections. By the next filing due mid-January, Cuomo, 51, plans to have $20 million in donations and plans to run for governor, said a person familiar with his plans.

Governor!

He’s already a movie star!!!

He’s got the support of adoring fans!

Support of a well-known economist!

Well maybe he doesn’t have all that. He does have $16 million in cash so far…

and people remember his dad’s name.

http://wp.me/pFeEj-8R

Esta es una instancia para incorporar en sus planificaciones materiales existentes en su establecimiento.

The Tax Issue:

I am a partner in a Canadian co-ownership of real estate rental property and my siblings and my mother are also part owners. I would like to make a gift of my share to my children. Can this be done tax-free? Could I sell the property to them for a dollar?

The Answer:

In Canada, we don’t have a gift tax. However, when a gift is made between family members there is a deemed disposition at fair market value. So any gain that has accrued on your share of the co-ownership will be realized and you will be taxed. I’m not sure of your particular situation, but you might want to check your 1994 income tax return (if you can find it). That’s the year that the $100,000 general capital gains exemption was repealed. A special election was available to make one final use of the exemption and “bump up” the cost base of capital assets. If  you made the election on your real  estate venture, that could shelter part of the tax on a future disposition.

Special rules would also apply to your kids if you make this gift to them. Their cost amount for depreciation purposes could be reduced by the amount of your proceeds that results in the non-taxable portion of a capital  gain.

One of my pet peeves is when people make the mistake of thinking that a sale for a dollar is the same as a gift. It isn’t. A sale at an amount less than fair market value is not a gift, and different, much harsher rules apply. Your proceeds will still be equal to fair market value, but the cost base to the purchasers will be equal to exactly what they pay, i.e. one dollar. Then, when they decide to sell, they would be paying tax again on the full amount of proceeds. This “double tax” is the penalty for making a sale to a related person at an amount less than fair market value.

Even if he did not realize it, and he probably is too obtuse to have done so, Democratic Representative Paul Kanjorski admitted that government is the cause of the financial problems.

In proposing that government be given more power to meddle in the financial markets “Kanjo” said the following:

“‘No firm should be considered to be ‘too big to fail.’ Financial firms that want to play in a casino need to have their own resources to cover their bets and not assume that tax dollars are available in reserve if their bets fail,’ he said.”

So Kanjo thinks that the reason for the financial mess is that banks had a distorted perception of risk.  Banks were taking risks that were too great relative to what they could afford to lose.

Kanjo is correct in thinking that to an extent.  Let us consider what may have created that distortion for banks. 

The Democrat/Socialists since the 1970s starting with the Community Reinvestment Act were  putting pressure on banks to lend to unqualified borrowers.  In other words, banks didn’t want to take on those risks but the government said “do it or else”.  This was started with Carter and driven furiously by Clinton.

Then in the 1990s when banks wanted to grow the government had laws in place that made it difficult for them to do so.  One of the very few options for banks to grow was through mergers and acquisitions for which banks had to seek and receive government approval.  What the Democratic Congress decided to do was make approval contingent upon satisfying certain criteria such as giving loans to high-risk people who the banks did not want to give loans to in the first place.  So banks were coerced into giving loans to people because the government gave them a none-too-subtle hint that if they did not they could not continue to grow their businesses.

The government then fueled the fire by maintaining interest rates very low.  The Federal Reserve would loan money to banks at incredibly low interest rates which the banks would then loan to people so they could buy all those houses.  Since the rates were low the bank would offer low rates to make things more affordable.  Americans, and even some illegals, were given loans at very low introductory rates which caused them to take loans when they should not have or take loans that were too big.  And all of that occurred because the government pressured banks to lend to high-risk people and then provided the banks with the financing to do it.  The bank not only gave the gun to the baby but they gave it plenty of ammunition to reload.

So the government created all these rules and regulations to control how banks operated and enabled them to do so by maintaining terribly low interest rates.  All of which contributed to distorting the true nature of the risk that was being undertaken.  There is one additional aspect to this that cannot be forgotten: 1966. 

In 1966 Congress involved itself in banking by interfering with savings and loans (S&Ls).  Ironically this too had its roots in mortgages.  In 1966 government began to limit how much interest a bank could pay you because it did not want you to save your money, it wanted Americans to spend their money by purchasing houses.  And thus began government’s forced-march of Americans and S&Ls down the path of financial ruin.  This all came to a head with Congress’ passing of the Tax Reform Act of 1986.  The effect of this was to cause Americans to sell their houses which in turn caused prices to plummet.  This is what became known as “the S&L crisis”.

But how did this contribute to the “financial crisis” of 2008?  Wouldn’t one think that the mortgage industry would have learned something?  In a word: yes.  But that is not the right question to ask.  The question that should be asked is not if the financial industry learned anything from the S&L crisis but what was learned.  The government’s Federal Savings and Loan Insurance Corporation was in the position of insuring all the S&Ls in what became effectively a tax-payer bailout of these failed institutions.  So what the financial industry learned first-hand was that if they failed it didn’t really matter because the government would bail them all out.  This belief was reinforced by the bailout of Amtrak in 1971 and Chrysler in 1979.  Why wouldn’t they think the government would bail them out in 1986 or in 2008 for that matter?

The banks for the most part did just what the government wanted them to do in all of these cases.  The results in all cases as we all know were horrendous and only got worse as the government became more involved. 

Had the government not interfered with regulation and manipulation of interest rates would there have been the massive inflation of  real estate prices followed by the creation of associated derivatives leading to the ultimate catastrophic failure?  Almost certainly not and any failures that would have occurred would have been much smaller because there would have not been the leverage provided by the Federal Reserve pumping money into the system.

Isn’t it interesting that in 1966 the government stepped in to “fix” a banking system that was not only working but encouraging people to save rather than spend and that led to a massive failure of the system.  The same result was had in the auto industry.  And now here we are repeating the same mistakes again only doing so with much more sever consequences.

The most concerning aspect of all of this can be found in another of Kanjo’s statements

“After meeting with many European Union officials and members of the European Parliament earlier this year, I realized that we share many of the same concerns,”

Just like Obama’s efforts to strip Americans of their sovereignty through international treaties on CO2 emissions, gun control and causing a collapse of the US$ in order to drive the world to one currency, Kanjo is coordinating with foreign nations to structure the government take-over of US banking.

Although these are very disturbing actions being taken by Obama and his fellow socialists in Congress, they are by no means a recent development.  Government has been attempting to subject Americans to socialism for decades and each and every time the consequences are more severe and result in the government becoming more involved only to repeat the same cycle twenty years later for the next generation.

The deductibility of interest and taxes on vacant land is a topic that invariably causes confusion for many people, myself included. So, since I felt the need to brush up on the issue, I thought I’d subject you to the same torture.

To quote Maria von-Trapp, let’s start at the very beginning. That would be subsection 18(2), a very fine place to start. In its simplest application, it provides that interest and taxes on vacant land are not deductible. That’s a pretty well-known concept.

Income tax rules: Someday there will be a musical

OK, let’s jump ahead now to paragraph 53(1)(h). That’s the provision that allows us to add these disallowed expenses to the adjusted cost base of the land. Again, a simple concept.

So why the whole Tax Issue treatment? Well, for one thing, I’ve got space to fill; for another, it gets a bit more complicated.

Let’s jump back for a minute to 18(2). There are a few exceptions to the rule, whereby the expenses will be deductible. The provision does not apply at all, if the land was used in the course of a business at any time during the year. So, for example, if a piece of land was used at any time to store inventory, such as scrap metal, as part of a business, 18(2) would not apply and the expenses would be fully deductible. Note that the rule applies to a business. This means that rental use is not likely to qualify. Further, the exception does not apply to developers, who are subject to their own set of rules.

In the case of rental use, a second exception allows a deduction of interest and taxes to the extent of income for the year from the land; income may be offset, but no loss can be generated by these expenses.

Lets go back now to paragraph 53(1)(h) because the ACB adjustment may not be so clear cut. What many practitioners are surprised to discover (and often only find out during an audit) is that the non-deductible interest and taxes on vacant land is not automatically added to the ACB. In order for the ACB adjustment to apply, the expenses must have been disallowed by virtue of subsection 18(2). Flipping back there, we find that the expenses are disallowed in the calculation of net income from business or property. Therefore, the land must be part of a business or property income earning endeavour. If not, there is no ACB adjustment.

Typically this problem comes up in cases such as Bauerle v. MNR, where the taxpayer purchased a parcel of land in 1957, held it until 1981, and reported a capital gain on disposition. In calculating the ACB of the property, he added the interest and taxes for all the years he owned it. The tax court held that paragraph 53(1)(h) did not apply to increase the ACB because the land was not used or held in connection with the earning of income from a business or property. In such cases, the expenses are simply non-deductible capital expenses, and are lost.

Alternatively, an adjustment to the cost of land inventory may be available under subsection 10(1.1). The owner must hold the land as inventory, either as a developer or dealer. Any gain or loss on the sale of the land would, of course, be treated as ordinary income of the taxpayer.

This begs the question as to the treatment of an isolated purchase of land as an adventure or concern in the nature of trade. Such a purchase would classify the land as inventory and the disallowed expenses would be available as addition to the cost of inventory under 10(1.1). Again, any gain would be fully taxable as business income. Furthermore, whether a purchase of land is an adventure or concern in the nature of trade is a question of fact, and must be analyzed based on the circumstances. These factors include: (a) the taxpayer’s conduct; (b) the nature of the property; and (c) the taxpayer’s intention.

So the problem with vacant land is not as easy as A-B-C or even Do Re Mi. Blindly assuming that interest and taxes may be added to ACB could become a costly trap in the end

Mark Stewart . ” I am a General of the County ”

He is at it again…. just loves the US Postal Service….. but then of course he has his own private real estate fund to draw from … watch this space

This post concerns the use of zappers in restaurant operations.  It is not a “how to” guide in their “proper” use, nor is it, in any way, an endorsement of their use.  In fact, if you are even thinking of employing a zapper to fill your pockets with cash stop and read this post.  It is not worth the risk.  You will get caught, eventually, and here’s why.

Use a Local POS Vendor

If you purchase your software and zapper from a local vendor, distributor, developer or consultant, you will get caught.  If you use a zapper, you will need some technical support to ensure that your computer system does not keep any stray bits of zapped data on the hard drive.  As a result, you are locked-in with your consultant or other advisor.  There will come a day when that person will be caught assisting another taxpayer in the use of a zapper.  One way or another, the tax authorities will gain access to the consultant’s customer list, and you will become the latest target for an aggressive tax audit.

The Ministry of Revenu Quebec has used this method of identifying restaurant tax evaders quite successfully.  They have also worked with the Canada Revenue Agency to execute search warrants in other provinces.  The next step (much harder) is to collaborate with tax authorities in other countries, such as the U.S. 

Zappers Aren’t Perfect

Even though zappers can delete or modify specific transactions and make it appear as though they were never there, many POS systems have frequent backup sub-systems to prevent the loss of data in the event of an unexpected shut down or power loss.  These backup versions of files may remain on the computer disk and may contain remnants of the original “zapped” transactions.  Where the use of a zapper is suspected, a tax auditor may call in a computer audit specialist to obtain the evidence of zapper usage.  Using a zapper consultant to help cleanse your computer system means you have an accomplice (see first point).

Comparative Analyses

Auditors of all types (not just tax auditors) use analysis to help determine whether financial figures “make sense”.  In a typical business, we compare key metrics with those of similar businesses.  Where there are significant differences that have no reasonable explanation, we suspect errors or omissions in the accounting system.

Typical metrics might include the percentage of cash sales and whether this has changed significantly over the course of the audit period.  An obvious one is the margin percentage for major product groups (wine, beer, liquor, food).  Another might be the cost per ounce of alcohol for a variety of categories.

While most restaurants and bars do not have ready access to key metrics for similar establishments, rough guidelines are available from restaurant associations and other restaurateurs.  Care should be taken to making sure you compare metrics from similar establishments.  Metrics for a sports bar will be very different from those of a fine dining restaurant.  Where proper comparatives are not available, you need to make sure that your margins (and other metrics) are reasonable, by comparing your actual metrics with what you should have expected given your prices, costs and other known information.

Vertical Analyses

Auditors also look at the relationship between various financial figures, as a test of their reasonableness.  Many financial figures are related to sales volume or dollars.  To some extent, labour costs, supplies,  and a variety of other expenses vary with the volume of business.  An auditor will analyse these relationships over time to determine whether there may have been unreported sales.  Few restaurateurs would be capable of the meticulous recordkeeping and adjustments that would be required to make sure these analyses stayed consistent at all times.

Accounting for Cash

Most businesses generate some cash sales.  There is nothing wrong with this.  Once the cash has been received, it becomes an asset of the business.  Well run businesses ensure that all receipts (including cash) are promptly deposited, intact, into the bank accounts.  Many small (and some large) businesses do not follow this sound practice.  Where such funds are not deposited into the bank, it is imperative that the owner meticulously account for all cash received with proper cash disbursement records and receipts (invoices).

Some restaurateurs are known to pay some of their staff in cash, without going through the regular payroll system.  This is done to try to keep the labour costs in line with the reported sales (after zapping or skimming).  Another practice is to purchase some supplies or inventory with cash, perhaps using separate cash accounts with existing vendors.  In each case, the restaurateur has brought in accomplices to the fraud, increasing the chance of being caught.

Owners Living Above Their Means

While typically not used in restaurant audits, it is possible to examine the owner’s lifestyle to determine whether it makes sense, given the level of income reported from the business.  If the owner’s lifestyle cannot be supported by the income from the business and other legitimate sources of funds, this becomes evidence that funds have been fraudulently removed from the business.  Note that this method of assessing taxes is much more prevalent in the U.S.  It is also used in Canada, and elsewhere, where it is difficult or impossible to verify income by any other means.

Changes in Cash Receipts

When a zapper is first used, or a skimming operation is commenced, there will be a decrease in cash receipts reported by the restaurant.  This may provide evidence that a tax fraud has taken place and prompt the auditor to examine the books and records more closely.

That said, not all sudden decreases in cash receipts are fraudulent.  A significant change in the restaurant operation may be completely legitimate and reasonable, depending on the circumstances.  At the end of a patio season, cash sales may drop off considerably as fewer customers pay with cash in an indoor dining room.  Similarly, if business at a bar drops off relative to its dining room volume, there will likely be a significant drop in cash receipts.

Paper Guest Checks

Most guests are provided with guest checks during their visit, regardless as to whether they pay by credit card or by cash.  When a customer takes the paper guest check, it is an external piece of evidence of the transactions incurred at the restaurant.  If a tax auditor were to obtain copies of cash-paid guest checks for a restaurant or bar (perhaps during another audit), these could be used to match up with guest checks reported by the restaurant during a future audit. 

If the auditor is unable to exactly match the paper receipt with an identical guest check in the restaurant’s POS system on that date, this will be strong evidence indicating the use of a zapper.  In fact, this is exactly how a Revenu Quebec auditor stumbled upon a major tax evasion case involving the use of zappers.  The auditor visited a restaurant that had been selected for an audit and paid for the meal with cash.  During the audit, it was determined that the original guest check had been altered, by removing an item (the original food modifier was not zapped).  Note that the guest check number must be identical too.  Note also, it only takes one discrepancy to provide strong proof.

Original POS Reports

Every day a restaurant operates, a variety of POS reports may be generated.  As a minimum, each server will have a shift report showing the start and end times, total sales, by category, taxes collected, receipts by type, and balance owing to (from) the house.  In most cases, this is a printed report provided to the manager or owner for review.  Often the server retains a copy to keep track of tips owed.  In order to keep track of the server’s performance and to help identify theft, these reports must include all sales.  That is, they are pre-zapped reports.

The manager or owner also prints a day end report showing the aggregate totals for all servers for the day.  Other reports may include taxes collected, sales by item, inventory usage, etc…  Some reports may be provided to the chef for ordering purposes or inventory management, others may be provided to the manager.  Again, all of these reports are pre-zapped summaries of transactions during the day.  Effectively, all of these reports are a hardcopy “snapshot” of the POS transactions actually processed by the restaurant.  Even though they may be subsequently changed by a zapper, they are a permanent record that may be made available to an auditor.

Unless all of these reports are destroyed after a zapping operation, there will be a paper copy available to indicate the use of a zapper in the operation.  All that is required is a simple comparison of the original report with the current, zapped report. 

All it takes is one disgruntled employee who suspects the use of a zapper (or other means of skimming) to provide original POS reports to a tax authority.

Quebec Approach

Quebec has decided to take a different approach to combatting the use of zappers and other forms of technologically-assisted tax evasion.  They have started a pilot project involving the use of a Sales Registration Module (SRM), which will create a permanent record of each establishment’s transactions and guest checks.  The SRM will produce reports for preparing QST returns.  It will allow tax auditors to easily determine whether a specific guest check has been recorded or whether it has been tampered with by any means.  Every patron must be presented with a guest check, or the establishment will face substantial fines.

The full rollout of the SRM system is expected in 2011.  All but very small restaurants are expected to use the new SRM, which will be provide free of charge by Revenu Quebec.

 Conclusion

While you may get away with the use of a zapper for a while, there are too many ways you could be tripped up.  When it does happen, the penalties will be severe.  It is not worth taking the risk.

Recently, we’ve begun to hear a lot more about tax evasion in the restaurant industry.  More specifically, we’re talking about technologically-assisted tax fraud, using zappers or phantom-ware.  It made the news, again this past week, when it was disclosed that the Canada Revenue Agency had found more than $40M of unreported tax in the restaurant industry attributed to the use of zappers.  Today’s post looks at the issue of tax fraud in the restaurant industry and tries to determine how “rampant” it might be. 

While tax fraud can occur in many different ways, when we talk about the restaurant industry, it usually takes the form of cash sales “skimmed” off and not reported for tax purposes.

The Pre-zapper Era

Before the mid-1990s when zappers became available, restaurants, bars and other businesses with significant cash sales used other means to skim a portion of cash sales and under-report their sales and sales tax liabilities.  Manually prepared invoices or guest checks could be destroyed if the customer settled the bill with cash.  We don’t see too many places that still use manual guest checks, but there are a few. 

A restaurant with stronger internal controls would have kept all checks and monitored the sequence of guest check numbers, to ensure that all invoices were recorded.  This is why the tax auditors ask for all guest checks issued during the audit period.  When they are not kept, it helps the auditor conclude that the restaurant’s internal controls are inadequate for ensuring the accuracy and completeness of the sales and sales tax records.

Another method was to have phantom cash registers.  Typically, an establishment would maintain an extra cash register (or two) at a bar where the majority of the sales were likely to be paid in cash.  The sales rung into the phantom cash register would never be recorded in the accounting system.  The owner of the bar would need to keep track of any significant underreporting of sales, so that alcohol inventory could be repurchased off licence.  This would have been required, to make sure that the margins, based on licensee purchases, would appear to be reasonable.  More sophisticated frauds involved separate accounts with food suppliers, where a portion of the purchases were made in cash, to make the food margins appear reasonable, where a portion of food sales were not reported.  Finally, some of the servers/bartenders would have to be paid in cash, so that the labour costs would appear reasonable. 

As computerized POS systems became more affordable, their use in restaurants of all sizes exploded.  This gave rise to a couple of new, technologically-assisted methods for skimming.  The first was phantom-ware, which was built into the original POS software and could be programmed or activated to remove specific types of sales transactions.  While there was a legitimate use of such software (the ability to reset data in the system for a new user), in reality, it was quite rarely used.  Where phantom-ware was identified and used to commit a tax fraud, the tax authorities were able to convict the software developers as co-conspirators in the crime.  Consequently, their use is quite rare.  Instead, zappers were developed and their use appears to be on the increase around the world.

What does a Zapper do?

A zapper is a standalone software application that is attached to the POS system from time to time.  It is usually contained on a CD or a memory stick.  It is removable and only resides on the computer (or network) while it is doing its “work”.  Consequently, its use may be shielded from other employees (or even owners) of the restaurant or bar.  It can be extremely difficult to detect, though not impossible.

When a zapper is activated on a POS system, it allows the user to access the POS transactions database and make changes to the entries.  Zappers are designed to search for cash sales, because these have no independent audit trail outside of the POS system.  Whole guest checks can be deleted, items can be removed from the check, or the amounts can be modified.  The zapper keeps track of the amount of items “zapped” from the system.  Once the desired amount of sales has been achieved, the zapper renumbers the guest checks in the POS system and prepares adjusted reports for the day. 

Sophisticated zappers may also adjust inventory usage figures and employee time records to conform with the adjusted sales figures. 

How Prevalent is Zapper Use?

There is very little hard evidence of zapper use anywhere in the world, though some European countries believe that zappers are being used in cash-based industries and are taking steps to curb their use.  In particular, Greece, Germany, Italy, and the Netherlands. 

A limited study of tax evasion in the restaurant industry in Germany revealed significant underreporting of cash sales.  Closer to home, in Quebec, two studies were undertaken.  In the first, 41 zappers were found in 70 systems tested.  At first blush, this is a startling finding.  However, the sample was taken from the customer list obtained from a zapper distributor in the province!  Given the sample, it becomes startling that only 41 of the 70 systems were using the zapper!  In the second study, based on a random sample, the Ministry of Revenu Quebec found 16% of all sales were unreported.  They concluded that “tax evasion is rampant” in the Quebec restaurant industry.

Revenu Quebec has only released a summary of their findings, so it is difficult to comment.  For example, we don’t know how they determined that 16% of all sales were not reported.  We don’t know whether this underreporting of sales relates solely to the use of zappers or to the use of other means.  We don’t know the number of establishments using zappers or the percentage of establishments with zappers in use. 

Other countries, like Japan (no cases) and the U.S. (2 cases) have not seen the same level of usage, or their tax authorities have been unable to detect their usage.  In Canada, we have seen about 275 cases in Quebec, many of which were found on distributor client lists, but only 11 across the rest of the provinces.  The latest sweep by the CRA has identified a few more, but at this point we don’t know how many or where they are located.  Given that there are thousands of restaurants across Canada, even the number of zapper cases identified in Quebec does not justify calling their use “prevalent” in the restaurant industry.

You can not lump the entire restaurant industry together and say that zapper use is “prevalent” or tax evasion is “rampant”.  The industry is too diverse.

Tax evasion, with or without zappers, requires that a significant portion of the fraudulent restaurant’s receipts be in the form of cash.  Credit cards (including debit cards) create their own independent audit trail, making it nearly impossible to skim these receipts without being caught.  Some restaurant and bar operations tend to take in more cash from sales than others.  Nightclubs, bars, sports bars, pubs and fast food franchises tend to have significant cash sales.  Higher end, fine dining restaurants tend to have very few cash receipts, as few people carry around large amounts of cash and corporate entertaining is almost always supported with a credit card receipt.

Fast food operations, despite taking in large amounts of cash, are less likely to skim significant amounts of cash, because they are accountable, not only to the tax authorities, but also to the franchisor.  Franchisors have several methods of identifying unreported sales, because their franchise fee is usually dependent on gross sales of the franchisee.  For example, a franchisor could monitor the franchisee’s sales in relation to the volume of pizza boxes (or other packaging) consumed. 

While there are documented cases of fraudulent use of zappers, their use in Canada is no where near as prevalent as the tax authorities would have us believe.  Furthermore, as society moves toward less use of cash in commercial transactions, the potential for tax evasion using zappers decreases.

Did you ever get yourself into a bad relationship? How about a lousy business venture? How about a bad relationship, three lousy business ventures, a few lawsuits and a tax court case? Consider the case of John G. Dalfort v. Her Majesty the Queen (2009 DTC 1278), and the relationship from hell. Apparently, while they were together, John and his ex, Karen Conquergood, attempted a few enterprises that didn’t quite pan out. The first was an escort service. Then they tried a pyramid scheme, and finally a crab-fishing business. Well, you can’t say they didn’t diversify! They also received cash from two separate lawsuits brought, first against an insurance company and then a physician.

John and Karen - Even crabs couldn't keep them together

After they split up (yes, somehow they were not destined to last), she sued him for spousal support, her share of the take from the aforementioned ventures, as well as for her share of the proceeds from the sale of their house and a 45-foot sailboat. Finally, there was the small matter of the damages she sought for assault.

Ms. Conquergood was only mildly successful in her claims, but poor John then tried to deduct the legal fees he paid to defend himself. And so, The Tax Issue must now discuss the mundane topic of legal fees and their tax treatment.

The CRA has summarized their position on legal fees in their bulletin IT-99R5. First, there is nothing in the law that allows for the general deduction of legal fees. Apart from a few specific provisions which we discuss below, legal fees are only deductible if they are non-capital expenses incurred to earn income from a business or property.

Examples of deductible legal fees for business purposes include:

• Preparation of general sales contracts
• Obtaining security for trade debts
• Preparation of annual minutes and corporate filings

Legal fees for obtaining financing or issuing shares are capital in nature, but under a special rule, they may be amortized over five years.

Other legal fees that are capital in nature may be added to the cost of capital assets acquired or to cumulative eligible capital.

Apart from the above, specific sections of the law allow you to deduct legal fees incurred for:

• Enforcing or establishing a right to salaries and wages
• Enforcing or establishing a right to pension benefits or a retiring allowance (including damages for wrongful dismissal)
• Preparing an appeal to a tax assessment
• Making representations to a government body
• Establishing a right to child support
• Enforcing a pre-existing right to spousal support or child support

Legal fees incurred to establish a right to spousal support are not deductible.

From a payer’s point of view, fees to contest a claim for support payments or to reduce pre-existing support amounts are not deductible.

But let’s get back to our hero, John. The Tax Court ruled that his legal fees were incurred to defend against claims which were either personal in nature, or involved business activities which had been, but were no longer carried on. His claim was dismissed.

I think there are many lessons to be learned from this case, the tax treatment of legal fees being probably the least important.

El objetivo de LibroTeca, es presentar a nuestro alumnos la gran variedad de libros existentes en nuestro CRA y motivarlos a su lectura de manera dinámica y entretenida.

Te Esperamos en e CRA

Due Thursday, November 12

The assignment is to write a one page (12-15 line) random “poem” about yourself.  It does not need to rhyme or have rhythmic structure.  It is more a collection of “I” statements.

• The more personal, the better, but some other students will see it.
• They should be random; you are not writing about one occurrence, feeling, or memory
• Nothing trivial, please.  I don’t want “I once made scrambled eggs.”
• Do not use the provided list of sentence starters as the entire assignment.  They are merely recommendations. Feel free to use your own as they relate to your personal experiences.

The list of potential sentence starters is below.  If you have any questions, please email me.

Potential Starters:

I am told that…

I loved to…

I’ve held a…

I have seen…

I remember…

I was born…

I used to…

I have heard…

I’ve learned that…

I remember how it felt to…

I believe…

I have been…

I have felt…

I still have…

I have studied…

I have gone…

I made myself…

I have received…

I don’t want to scare you, but I feel it is my duty as a fellow restaurateur and as an accountant.  After reading this headline, many of you will think this blog entry is going to be about the economy and how it will affect your restaurant business.  As for the economy, I think the worst is behind us, but there is another threat to your business that is going to be a lot worse in the next few years.  Let me explain…

Most economists seem to think that the recession has bottomed out and we are now on the road to recovery.  To be sure, the recession was sudden and quite severe.  The recovery is unlikely to anything but a long, gradual improvement in business conditions.  This is not good news to the many small businesses, including vulnerable restaurants, with their razor thin margins.   We could all use a quick return to buoyant growth! 

Governments at all levels need this too.  The sudden, deep recession put a serious dent in government tax revenues.  Also, they had to increase their spending to avoid an even worse fate.  The federal and provincial governments are under intense pressure to limit their deficits, maintain key social programs and not raise taxes.  A quick return to growth would do wonders for the government coffers, but it isn’t likely to happen.  This leaves tax authorities with few options.  They can find new taxpayers and they can make sure that “tax cheats” pay their taxes.  Unfortunately, to the tax authorities, the terms “restaurateur” and ”bar owner” are synonymous with “tax cheat”!

I am mainly concerned with Canadian taxes imposed on restaurants and bars, but it is usually a good idea to look at what is happening in the US, to understand what is likely to happen up here.  A look at various state tax authorities reveals an ominous trend towards increased audit activity directed at licenced restaurants and bars.  Few taxpayers will object to their government taking measures to ensure that all taxpayers comply with the tax laws.  By increasing audit efforts, tax revenue can be increased without the negative political connotations of an increase in taxes.  It is very easy to justify hiring more auditors to avoid increasing taxes!  And this is what we see happening south of the border.  You should expect to see the exact same trend in Canada.

But why target restaurants and bars?  There are a number of reasons.  All restaurants are required to charge sales taxes on their gross revenues.  In Ontario, the rates are 8% on food sales, 10% on alcoholic beverages, and 5% GST on all sales.  Generally, there are no deductions against these taxes.  If a tax auditor can show that the restaurant failed to report sales, an assessment can be issued calculated at the appropriate rates, combined with penalties and interest.   Tax authorities suspect 50% or more of all restaurants and bars are “cheating” on their taxes owing.  It is easy for the auditor to accurately verify the alcohol purchased.  There is a theoretical (or standard) cost for every drink sold.  With a few simplifying assumptions, the auditor is able to estimate the sales that should have been generated by the restaurant during the audit period. 

So, for a relatively small amount of work, the auditor is able to estimate the likely “true” sales of the business.  Then, it is up to the taxpayer to rebut the presumption that the restaurant has failed to report all sales.  In order to do so, the restaurant must document the reasons that costs deviated from the standards.  This can be exceptionally difficult to do, after the fact.   Few restaurants and bars have the time to document all of the factors that affect their margins.  It can be done, but there can be a significant cost.  Ideally, such information should be independently developed.  While it can be costly to stay on top of your margins, it is still far cheaper than letting the tax auditors have their way with you, and an ongoing analysis of your margins will help you manage your restaurant more effectively.

If I have scared you into action, I’ve done my job.  Continue reading this blog site for a comprehensive list of procedures to help protect your business.

Efeito criado em algunss minutos no after effects,
muito simples, breve estarei postando o tutorial aki…
pessoal podem dar sugestoes tbm !
obrigado.

Criado por Renato Soares Ferreira.

DEPENDS ON THE DAY IT SEEMS..what the politicians have to say

http://www.morningjournal.com/articles/2009/11/10/news/mj1869084.txt
HAVE THEY CHANGED THEIR TUNE??? Not what they told us ??

Before the vote, Mayor Anthony Krasienko told council the city’s legal advisers have said the original ordinance, passed in 2006, is “illegal, unlawful and flawed.”

He said the program was administered poorly by the then-Mayor Craig Foltin and former Community Development Director Sanford Prudoff.

HOWEVER LET US GO BACK TO:

Thursday January 29th-2009
http://www.morningjournal.com/articles/2009/01/29/news/doc4981224403197887573517.txt
Krasienko said the CRA program is working well despite those possible problem areas. He said no changes need to be made in the Community Development Department’s administration of the program because the auditor’s office has a check on them.

“Ziance said the CRA program is perfectly legal and falls within what the state statute allows.”
and then there is this from the attorney’s to this blog

http://thatwoman.wordpress.com/2008/03/18/cra-questions-and-answers/

QUESTION
The legislation stating the abatement period “should”
provide the percentage of abatement….
Q. Does the stated abatement in the contract held by the property owners meet that requirement . For instance back to the 50% abatement for 1 year UNLESS……..100% for 15 years or 12 ( depending if it is a rehab etc.

ANSWER……..

Yes, combined with the language in the states CRA Act

( what is a reader supposed to think??)

AND NOW BACK FROM THE FUTURE THE BETLESKI BACKERS
Chronicle Telegram:
http://chronicle.northcoastnow.com/2009/11/10/lorain-council-rejects-deal-with-county-auditor-on-tax-breaks/

I maintain those who voted against this don’t understand it and never have and want to get out of dealing with it by passing the buck to the 9th District Court,” Holcomb said. “The only issue the appellate court can rule on is whether (Common Pleas Court) Judge (Mark) Betleski can hear it.”

That’s something Stewart confirmed Monday night, saying it’s “an impossibility” for the appellate court to decide whether the CRA legislation now on the books is legal.

AND let us not forget that Mr. Greg Holcomb had more than a passing interest

http://thatwoman.wordpress.com/2008/02/18/is-it-the-fish-that-stinks-or-the-company/

Why were the two Lorain council people free to speak to the Plain Dealer in that article -
Councilman Holcomb and
Councilman Snodgrass

when at least one informed the public and myself, on at least two occasions, they were unable to discuss the CRA program due to pending litigation. Yet, apparently, no such “gag order” was in place for the PD article and why wasn’t the fact mentioned in that PD article, that the two most outspoken critics of the City CRA and fellow council person Dan Given ( as noted on the pages of WoM and page 5 PD article)of THEIR other hats?

The question that begs to be asked “were they acting in the City of Lorain’s best interest as City Council people or as EMPLOYEES of Mark Stewart, their boss, the respondent in the lawsuits?”

WHAT HAT?

although now working elsewhere was also a Stewart employee during much of this argy bargy ..

and Here comes THE FRIENDLY JUDGE YOU can run but you can’t hide – we still see you with Mon Generale Stewart

http://thatwoman.wordpress.com/2008/02/18/is-it-the-fish-that-stinks-or-the-company/

Just to repeat:

And speaking of too many hats:

People in CRA 4 cannot even complain to their council person (Craig Snodgrass)

because he is under a “gag order” and is also the Chief Deputy of Finance for County Auditor Mark Stewart. ( enough to make you gag!)

The other argument that Chandra and Stewart make in their dismissal

The City is a party to two pending actions, a declaratory judgement and an administrative appeal, before the Lorain County Court of Common Pleas etc

TOO MANY HATS

Mark Betleski, The Judge

is the brother of Phil Betleski
(‘Nervous’ Betleski avoids jail time for theft in office)
http://www.morningjournal.com/articles/2009/03/04/news/mj697177.txt

the former Lorain City Councilman who voted AYE on the amendments and then was running against Dan Given for Council at Large, contacted the Chronicle with his concerns, which the Chronicle then wrote about AFTER the election,

LORAIN — Councilman Phil Betleski has accused two fellow councilmen of violating the Ohio ethics code and is calling for one of them to resign from a committee position. Betleski, D-2nd Ward, sent an e-mail to Councilman Dan Given dated May 1 in which he asks Given to recuse himself as chairman of the Tax Incentive Review Committee. He also wrote that Councilman Tony Krasienko, another committee member, was in violation, too.

Then we have Judge Betleskis Law Clerk- John Keys -who just happens to be married to Linda Keys who sent out the letters of denial ( you guessed it )works for Mark Stewart as well

The abatements were first called into question earlier this year when they came across the desk of county auditor employee Linda Keys…… The chief deputy for the real estate section in the Lorain County Auditor’s office, Keys is the official who processes abatement applications

I wonder why the PD isn’t asking about that seemingly conflict of interest? And they have a problem with Dan Given wearing too many hats !!! Can we say hypocritical? And can we say

people who wear too many hats themselves -shouldn’t toss them

AND THEY FEEL COMFORTABLE SHARING THEIR LUNCH WITH HERE COME THE JUDGE!!!!!!

-
Let us remember the “Betleski Connection” as we read these words of wisdom from the Generale
http://chronicle.northcoastnow.com/2009/11/10/lorain-council-rejects-deal-with-county-auditor-on-tax-breaks/

“The case is assigned to Judge Betleski,” Stewart said. “You have to go to the local judge before you can to the appellate court.”

AND HE WITH THE DEEPEST POCKETS WINS AND WE THE TAXPAYERS LOSE!!!!

A question: can it be that if the Judge rules in favor of the County then the City of Lorain can indeed be held harmless for future litigation ???? Just a thought

Today’s Toronto Star ran an article about restaurants hiding cash income.  You can find it here:  Restaurant probe finds $40M in ‘phantom’ sales.

Until recently, most detective work surrounding the use of zappers had been focused in Quebec.  Now, we find out that the CRA has been involved in a two year, national probe of the restaurant industry.  So far, they’ve found about $40 million of unreported income, though they expect to find much more by next March when the study is completed.  Of course, such unreported income must be in cash, as there is a separate audit trail for all credit card receipts.  It appears that this CRA probe concerns the use of zappers by restaurants.  Previously, I wrote about zappers, here.

I find it interesting that the CRA has only found about $40M of unreported sales, whereas Revenu Quebec estimated $417M of unreported taxes in a two year period.  It may be that CRA is considering only unreported sales using zappers, whereas Revenu Quebec is estimating tax losses by any means.  The scary thing is that someone, presumably at CRA, named Caitlin Workman is quoted as saying, “preliminary work indicates that (practice) is prevalent across Canada.”  So, the CRA thinks that the use of zappers in the restaurant industry is prevalent!

Prior to undertaking this probe of the restaurant industry, the CRA had identified only 11 cases of using a zapper, and zappers have been around since the mid-1990s.  Does this sound “prevalent” to you?  I’m willing to bet that Revenu Quebec, alone, identified more than 11 uses of zappers in the past.  In fact, they have prosecuted about 275 cases of restaurants using zappers during the last 10 years.  While other researchers have given their opinions that the use of zappers is likely to increase in the future, there does not appear to be a consistent level of usage across all jurisdictions.  In fact, several local factors lead many of us to believe that Quebec restaurants are much more likely to use zappers than restaurants in other parts of Canada.  I’ll be examining this opinion in more detail in a future post.

Both the federal and provincial tax authorities know that the restaurant industry is an easy target for assessing taxes on “unreported sales”.  Studies like this one that find any evidence of unreported sales give them the justification to step up their enforcement efforts.  The CRA and all of the provincial tax authorities use indirect audit methods to determine unreported sales, they do not wait to find the existence of a zapper.  All restaurant owners (even completely honest ones) need to be even more careful in the next few years.

The Tax Issue:

I am enrolled in a university course on an audit basis. I’m allowed to attend the lectures, and receive course material, but I do not write any exams and I get no mark. It’s half the regular fee for a course, and I’m wondering if the fee can be deducted?

The Answer:

The general rule for the tuition fee credit is that the fee must be paid to a university (or a certified post-secondary institution), must be over $100 and must cover a period of not more than 12 months. Provided these requirements are met, the CRA takes the view that fees for auditing courses are eligible for the tuition credit.

Another question arises as to whether the time spent in auditing a course would qualify  for the education credit – $400 per month for full-time and $120 per month for part-time attendance. That would probably depend on the structure of the course, and whether you would be considered to be a student attending the class. It would seem that if the tuition qualifies, then the course would also qualify for the education tax credit if your time is actually spent attending the class.

Interestingly, the tuition fee credits require hat you be enrolled in a Canadian university. The rules are a bit different for foreign universities.  Here, you must attend the university and the course must lead to a degree.

Recently, the question of attendance in a university has been the focus of some commentary. The question is, are you “attending” a university if you are taking a correspondence or online course. In the case of Valente (2006 DTC 2685) the Tax Court ruled full-time attendance can be done through the internet.

The CRA has recently published an opinion stating that a student enrolled in a university outside Canada and taking courses over the internet may be able to claim a tuition tax credit provided that student is able to demonstrate that their attendance over the internet constituted “full-time attendance”.

So far, I’ve discussed the POS system and how to maintain it for accurate reporting, how to document your sales mix for all audit periods, and the importance of maintaining an accurate history of your menu prices.  Taken together, these bookkeeping tasks are crucial in helping the restaurateur determine, and properly support, accurate weighted average prices.  This is a crucial component of the mark-up calculation performed during a typical audit.

Now we’ll take a look at the actual cost of the alcoholic beverages purchased for sale.

Gross Quantities & Costs

In Ontario, licensed establishments are required to purchase all alcoholic beverages from licensed agencies, the LCBO or Brewer’s Retail.  Each vendor keeps track of licencee purchases with the use of licence numbers.  This allows auditors to obtain a listing of every bottle of alcohol purchased by a licencee for any period of time.  Details include the bottle size, quantity purchased, description, invoice cost and date of purchase.  In Ontario, the details include the price net of GST, the licencee discount, and the gallonage tax.  These figures allow the auditor to calculate a net cost for each bottle of alcohol purchased (wine, liquor, beer).

All of this information is provided to the auditor in electronic form.  Typically, the auditor imports the data into an Excel spreadsheet, where it can be sorted to match the sales categories and sub-categories.  From there, the auditor will summarize the total ounces and cost of alcohol purchased in each category.

Allowances

Depending on the type of restaurant operation, the auditor will make one or more allowances to consider the effects of spoiled (tainted), spilled and over-poured alcohol.  Usually, this allowance is expected to cover staff theft as well.  Additional consideration may be given to alcohol used in cooking and customer comps.  The amount of the allowance (usually expressed as a percentage) is based on the restaurateur’s responses to questions during the initial interview, the nature of the restaurant’s operations, and the auditor’s judgement (based on “similar” operations) as to the percentage that might be considered “reasonable”. 

Depending on the type of alcohol and the peculiarities of the operation, allowances can be as low as 1% and up to about 50%.  In many cases, the allowance is about 10% for all possible reasons (spilled, spoiled, over-poured and stolen).  Any allowance greater than this will need to be properly supported.

All other adjustments will need to be properly supported with logs or ledgers detailing the reasons adjustments are required for alcohol used in cooking, customer comps and other reasons.  This will be a topic of a subsequent post, but for now, you should know that logs will be required to support any other adjustments to costs.

Proper Matching

It is extremely important to make sure that the auditor is properly matching the correct alcohol with the drinks sold in each category.  It is equally important for the auditor to exclude beverages that are not actually sold to customers.  For example, several liqueurs may be used solely for flavouring martinis or cocktails.  Similarly, Vermouth is rarely, if ever, sold on its own.  These are commonly regarded as mixes.  Some restaurants consider port wine sales in the same category as after-dinner drinks, brandies and cognacs.  Most likely, these will be reported as liquor sales rather than wine sales.  Care should be taken to making sure that the auditor is aware of the restaurant’s categorization of menu items.

Cost Per Serving

During the initial interview, the auditor will ask questions of the restaurateur in order to pin down the serving sizes for all drinks sold.    The auditor will also examine menus to help determine the serving size for all alcoholic drinks.  The auditor will also be asking questions to gain an understanding of the potential over-pouring of each category of drink (wines, draft beer, liquor).   It is extremely important to have expert advice prior to providing this information to the auditor during the initial interview.  If inaccurate or vague information is given, it will be very difficult to get the auditor to change his or her assumptions later on.

Taking all of these factors into consideration, the auditor will develop an average cost per serving for each category of alcohol sold by the restaurant.  This figure incorporates the allowances described above.  The average cost per serving for a category is matched with its corresponding average category selling price to determine the average category mark-up percentage. 

Putting It All Together

Finally, the auditor takes the total cost of alcohol purchased for each category and multiplies this by the applicable mark-up percentage, to provide an audit estimate of the sales that “should have been” generated from the purchased alcohol.  This is done for all liquor categories.  These total projected sales, calculated by the auditor, are compared with the total alcohol sales reported by the restaurant, for each category.  If the reported sales were lower, the difference is considered unreported sales.  The restaurant will be assessed for the sales taxes on the unreported sales, and will likely be assessed income taxes on the difference, as well.

Auditproofing

Now that we know how the auditor performs the sales projection, we need to perform a similar analysis before the auditor arrives at your door.  Regarding average costs, you should be prepared to invest the time to keep track of the quantity and cost of every bottle of alcohol purchased by the restaurant.  Unfortunately, you will have to manually maintain this list.  I suggest an Excel spreadsheet.  Every item should be listed along with all of the details noted above (date, quantity, bottle size, etc…). 

Once this and the other procedures (average selling prices, sales mix) have been performed, we can prepare analyses similar to those that the auditor will carry out during an audit.  Then, when the audit takes place, you will know the assumptions necessary to support the tax returns that were filed.  These proactive analyses will also be used to document and explain variances from the standard mark-ups on an ongoing basis.  These explanations will be very useful in supporting the reasonableness of the various assumptions made during the audit.

Time is running out if you wish to take advantage of the HOME RENOVATION TAX CREDIT. Take a look at the article below and let me know if you’d like to chat about getting some money back in 2010.

Renovation countdown begins!

If you want to take advantage of the $1,350 home renovation tax credit, you’ll need to get that renovation done before February 1, 2010. So if it’s time for a new roof, new flooring, or a fresh new recreation room… this is the time to get it done.

Here’s the detail. For renovations done between January 28, 2009 and February 1, 2010, you’re eligible to claim a 15% credit against your renovation expenses after the first $1,000. The maximum tax credit is $1,350, which represents $9,000 worth of renovations, and comes directly off your taxes owing. A wide range of renovation expenses qualifies for the credit; go to the Canada Revenue Agency web site at www.cra.gc.ca where there is a list of eligible expenses. If your renovation project includes some energy-saving home improvements, you may also be able to tap into grant money under the ecoENERGY retrofit and other government and local programs. You may therefore be
able to benefit from both of these incentive programs for one renovation project.
But what about the upfront financing for larger projects? If you’ve built some equity in your home, you may be able to unlock the financing you need for those projects. Assuming your current mortgage is $150,000, here’s an example of how you can roll your
renovation cost into your mortgage and have one, easy monthly payment. You can then use your prepayment privileges to pay your renovation project off faster.

Want another reason to renovate now? It pays to renovate. The right improvements will boost the value of your home. So you’re building on your biggest investment – while you enjoy your improvements every day. Before you choose a renovation project, then, it’s
worthwhile to consider what the impact will be on the appraised value of your home –in case you ever want to sell. The Appraisal Institute of Canada (www.aicanada.ca) has a good idea on which renovation projects can maximize the value of your home – and which ones just don’t pay, financially.

To check on the estimated payback, visit the RENOVA section of the Appraisal Institute’s website (click on Client Resources Centre), which has an interactive web- based guide to the value of home improvements. RENOVA is designed to give you a better idea of the return on investment you can expect for a variety of home improvements. You simply input the amount you plan to spend on one of the 25 listed renovation types, and you’ll receive an estimate of the effect this home improvement project may have on the value or resale of
your home. Even if you are renovating for personal reasons only –to improve the livability of your home – it just makes good sense to understand how that investment might payback in the value of your home.

In today’s great interest rate environment, homeowners aren’t renovating just because they want to… but also because they can. Many are taking advantage of the Home Renovation Tax Credit and incredibly low mortgage rates to refinance their mortgages, potentially saving thousands of dollars, while extracting some of that equity for a renovation project or two. If you’re interested in renovating, a great place to
begin is with a call to your mortgage planner.

The Vancouver Foundation hosted 2 more community conversations for us while in BC. Thanks to Faye Wightman and Dan Morin for bringing people together and the warm welcome we and participants received.
 
Here we talked about the opportunity to reinvent ourselves and find better ways of demonstrating the impact of our work. There are increasing demands for accountability and currently we often lack the metrics to be able to show impact.

The discussion also included the need to consistently show the true costs of fundraising. This is part of the increasing demand for transparency and it also ties in with the issue of understating the costs required to run our organizations. The Nonprofit Starvation Cycle recently appeared in the Stanford Journal of Social Innovation, talks about this issue.

We also need to look at different approaches to governance – there are many small organizations which may not be able to meet the demands of accountability and transparency and find members to sit on Boards. The current CRA guidelines and nonprofit legislation have impeded our thinking about how to govern ourselves. We need to think outside the box as to how govern the work of the sector. 
 
We need to learn to speak with one voice on the cross cutting issues. This does not mean that the subsectors (i.e. sports, arts, environment, social service, international cooperation, etc.) will not have issues specific to them; but we are losing out not coming together on the bigger common issues.    
 
Let’s harness the competitive aspects of the sector to work on the bigger issues together.
  
~Brenda