@rein you said
One can deduct reasonable expenses to earn income. In the case of a corporation, if the shareholder in the capacity of an employee uses his or her cell phone in the course of business, they should be able to claim a reasonable portion of that.
Bingo! The original post was about a shareholder, NOT an employee.
Joe, I am absolutely sure that when the original poster said âShareholderâ he also meant that the shareholder was an employee of the corporation. If you were not clear on that then why not ask âWhen you say shareholder do you also mean the shareholder is an employee of the corporation?â But then you would not be able to continue this stupid thread and instead might have to answer his question. Back under the bridge please.
Perhaps it appears that you may have missed reading my earlier post above.
"Bookkeepers cannot simply post entries out of thin air .
Attempting to do so leads to basic fundamental errors, and is why this question has arisen in the first place. "
The question posted was worded to be about a shareholder.
I am not going to spuriously assume that it really was about the contract Janitorâs wifeâs cousin, and answer a different issue.
I donât know what level of training, experience, or expertise, the dissenters on this thread may have, but in theory the CPA responsible for this file would be the best person to be able to get this corp on track.
Also, please try to keep âad hominemâ attack comments to a minimum. Thanks!
Could this thread please be reviewed by AdminsâŠ
As a regular reader, sometimes poster of these threadsâŠI find it absolutely ridiculous that some one has not stopped the one poster⊠whom is going in circles, criticizing and trying to upset everyone.
Shareholder**⊠for the purpose of this forum⊠is generally thought of to mean the person running said incorp business⊠as opposed to a sole prop.**
By constantly insisting that everyone use such specific terminology⊠this forum is almost unusable.
I have working in Public Accounting Practice for over 30 yearsâŠ
my clients whom run corporations are either:
one shareholder/director/employee
or
two shareholders, sharing director responsibilities and are employees
When I refer to shareholder⊠I have always meant⊠whichever hat they are wearing at the time of the transaction.
The purposes of this forum is to reach out when you are uncertain and get some help from your peers⊠it is turning into a nasty stressful belittling forum⊠which is not what I signed up for.
Thank you,
For your new issue, perhaps a new thread for your new topic on potential difficulties with corporate law and the OWNERS of the SHARES of corporate legal entities, would be better.
Propounding of incorrect legal terms on the thread of an incorrect bookkeeping procedure regarding business expenses is less than helpful, IMHO,as it sidetracks and confuses the issue.
(Shareholders have no direct power to ârunâ a corporation, nor to give any direct effect to any actions of the corporation - such things are simply ultra vires).
For the record:
I do believe that @joe.justjoe1 is valuable to this forum. It would be a loss if he would leave. So there shouldnât be any ad hominem attacks. BUT⊠I concur 100% with @rachelavryl.
Since he said CCPC, how can one think that @NiceGuy was referring to someone who holds shares in Bell Canada or Enbridge for example. That would be expenses claimed against property income. But he clearly referred to business purposes.
All that @NiceGuy was trying to find out from this community is whether a private controlled corporation can claim expenses that were incurred by the shareholder in his capacity as director/officer/employee.
GST/HST Memorandum 9.4 #21.
âIn relation toâ
So telling him that the answer is âNoâ because he didnât use the correct terminology is absurd. All that Joe could have said is âYes, as long as it is in his capacity as director/officer/employeeâ and it would have been the end of it. This is not an academic forum - people are just trying to get some help for crying out loud.
And if Joe wants people to stop making ad hominem attacks I would suggest that he doesnât make snide remarks either like âFor your next issue, perhapsâŠâ.
âSince he said CCPC, how can one think that @NiceGuy was referring to someone who holds shares in Bell Canada or Enbridge for example. That would be expenses claimed against property incomeâ
Doesnât matter whether it is CCPC or Bell Canada or Enbridge.
That would STILL be expenses (if any) claimed against property income (or capital cost, as the case may be)âŠ
.
.
.
This is not a forum for âimpressionist paintersâ where one might have latitude in choosing which colors one likes better.
In contrast most things in âourâ subject matter are legally and numerically defined, whether one loves them or hates themâŠ
Iâm with Joe on this one. Terminology is very important. Rules for home office expenses vary considerably between shareholders (as it were), salaried employees, commissioned employees, employed tradespeople, etc. We do our clients and our reputations as tax professionals a disservice by not going into these details.
And Joeâs posts are like a free masterclass on the ITA. I would have skipped the degrees if I found this first!
Oh, since Joe gives free masterclasses it is okay he tells @NiceGuy that his client canât claim cell phone usage because @NiceGuy used the wrong terminology? Please!
Everybody in this form except a few individuals know that âshareholderâ is short for someone that runs their business through a privately controlled corporation. We are therefore absolutely not talking about Enbridge Shares.
If you want to make sure that @NiceGuy uses the right terminology all one needs to do is point out that it can only be claimed if incurred in the capacity as an employee. We can both agree that terminology is important, but telling @NiceGuy his client canât claim it because someone in their ivory tower knows that technically âshareholderâ means something else, is doing a disservice to this forum.
ââŠthat âshareholderâ is short for someone that runs their business through a privately controlled corporationâ
That, of course, is legally not correct, however.
âshareholderâ is short for someone who OWNS A SHARE of a corporation (a different legal persona) which may operate a business.
VERY DIFFERENT from someone who âruns their businessâ
Saw this quote todayâŠ
.
ââA personâs conclusions can only be as solid as the information on which they are based. Thus, a person who is exposed to almost nothing but inaccurate information on a given subject almost inevitably develops an erroneous beliefâŠPeople will always prefer black-and-white over shades of grey, and so there will always be the temptation to hold overly-simplified beliefs and to hold them with excessive confidence.â
Thomas Gilovich"
This is great entertainment⊠who needs the SuperBowl!?!
I think we all knew what @NiceGuy meant. Nonetheless, I do appreciate @joe.justjoe1 's corrections as it keeps us all on our toes!
Thank you Rachel. I am almost not wanting to post on this forum because of one poster. Do we really need to contact a Lawyer and CPA before asking or commenting on this forum to make sure we are saying what we want to say? Even the dissenting poster understands what we are trying to say or ask. I have said before that @joe.justjoe1 is always correct but⊠If we didnât post, he wouldnât have anything to post either. And yes, @joe.justjoe1, I realize that all this should be in a thread of itâs own. I beg you to forgive me!
Thank you everyone for your help and assistance it is greatly appreciated.
I hope everyone has a great tax season and good luck!
It is a question of fact as to whether a shareholder of a CCPC is acting in a given transaction as (a) an agent; (b) qua employee; © qua shareholder or director. In two of those three scenarios most expenses will generally prove, if documented and provided in a proper form, and reasonable in the circumstances, to be deductible. In the third, they may, or may not.
The determination is somewhat different for GST than under the ITA, where ownership or agency must be shown (ITCâs âmustâ be in the legal name of the corporation or its designated agent).
Nonetheless, Iâd say that, regardless, in some 40 years of tax Iâve never seen CRA disallow a reasonably vouched and supported expense for a CCPC.
I think we all recognize (and that includes, generally CRA) that life in a small owner-managed corporation is less âformalâ in most cases that in a medium-to-large corporation. Again, in my experience, they do make allowances for that, as long as those things that NEED to be done are (resolutions for dividends eg).
Tradespeople are an ideal example: they often do things in a simple, personal manner, without always recognizing the technical details of what they are doing âwrongâ . While one can argue that they âshouldâ do everything in a perfect manner, that simply and truly is NOT going to happen. How CRA treats it is often a matter of discussion and negotiation, recognizing this, should it come to that.
Secondarily, there are many banks that will NOT issue a credit card in the name of a small corporation (or for that a large one. RBC and CIBC will not issue CCs to a client of mine that does well over $10 million in business. Cards MUST be in the name of the cardholder employee.) Purchases made online frequently have no name attached to them, just a shipping address. Cash purchases, of course, never have a name attached to them. None of the above make the expenses ineligible in and of themselves.
The real world is not an idealized, academic situation. It is dynamic and filled with imperfect activities. How we deal with them on behalf of our clients is what matters.
âTradespeople are an ideal example: they often do things in a simple, personal manner, without always recognizing the technical details of what they are doing âwrongââ
Of course in general small traders out there of all stripes do not know how to be bookkeepers, accountants and lawyers.
That is why they hire people who they THINK are experts in these areas to assist them and get, and keep them on track, and to avoid liability flowing from being labelled âgrossly negligentâ.
In the case of a corporation, it needs also to hire such assistance if the Director(s) are not themselves capable of such expertise. Again, they would hire people who they THINK are experts in these areas to assist them and get, and keep them on track, and to avoid liability flowing from being labelled âgrossly negligentâ.
However, small traders who ARE accountants and lawyers registered with their professional associations and governed by them (CPA, Law Societies) do NOT have ANY luxury of practicing in a negligent manner, as the governing bodies require them to have certain minimum standards of knowledge,
I would argue that those certain minimum standards of knowledge required by the governing bodies includes how to differentiate between a shareholder, a director, an officer, an employee, etc.
Therefore, in theory, a Director should be able to avoid liability arising from accusations of âgross negligenceâ by having the corporation hire the relevant professional expertise when needed (eg CPA).
In turn, that CPA would know how and through whom a company (a separate legal entity) can act, and how (and through whom) a company can carry out its business.
So all of this means no problem.
Where do bookkeepers fit into this?
They should record ACTUAL REAL entries from ACTUAL REAL source documents.
That is the WHOLE BASIS of bookkeeping.
If a bookkeeper has a problem with some ACTUAL REAL source document, or does not understand a particular ACTUAL REAL source document, they should flag it for review by the corporationâs CPA, who in theory knows what that source document means (failing which their governing body and malpractice insurer would want to know why not).
Yes, the world is not perfect - BUT that is why there are the above procedures, which solve such problems as a matter of course.
What any of this would remotely have to do with the excellent tool of the trade labelled âTaxcycleâ I have no idea whatsoever.
I have closed this thread as I feel it has run itâs course, a reminder to all users to keep discussions civil and professional. This is a forum with a large variety of users in terms of tax preparation experience, letâs keep that in mind when commenting. I would also strongly encourage users from refraining on using personal atacks/condescending/sarcastic comments - those kind of comments are not helpful for anyone and could lead to suspension of user accounts or being banned from the forum. Thanks everyone.
~ Rob