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T2 Gifi codes

I have 2 questions :

1- what is the gifi code for business-use-of-home expenses

2- I Have a physician who works as an independent contractor with the health region in the primary care clinic. He pays monthly rent to the health region (overhead). under what gifi code I can enter this expense (overhead) in schedule 125. the previous accountant put it under( Management and administration fees 8871) last year. but I feel it should be under RENT GIFI 8911or 8912 Occupancy cost . What is correct 8871 or 8911 or 8912 Occupancy costs? and if the code that the previous accountant used last year is wrong do I need to make an amendment to last year t2 tax return or leave it and use the same code this year as long it does not affect the total taxes owing and to avoid any discrepancy between this year and last year. Thank you very much and sorry for the long post

thank you

I would claim it under rent (8911) but I wouldn’t go as far as to amend the prior T2. The management/admin fee is conceivable but, technically, that level of detail isn’t really even required on the T2.

I agree with Kevin regarding your question 2.

For your question 1… I don’t have many corp clients that have “business use of home” type expenses, but the few that I do, I believe I use code 8812 - Office Utilities if the person who owns the home is not filing a personal rental statement.

Technically, the business use of home expense is not a deduction for a corporation. It can be a deduction from an individual’s employment or business income. That’s why there is no GIFI for this expense. Despite that, it is a common claim. I would go with Wayne’s suggestion or even use office expenses. Normally the claim isn’t substantial so I would let the materiality of the claim guide your decision. Just be aware that CRA could deny the claim but the owner would then complete a T2200 and claim the deduction on his/her T1.

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For my Corporate clients who work from home I pick a round amount that I think estimates what the cost would be if they claimed business use of home.

Technically, the right way to do it would be to take that into a rental income schedule on the T1, claim the actual rental use of home expenses and pay tax or take a deduction on the difference.

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" I Have a physician who works as an independent contractor with the health region in the primary care clinic. He pays monthly rent to the health region (overhead). under what gifi code I can enter this expense (overhead) in schedule 125"

I have several problems with this.
… It is impossible for an “independent contractor” to have a schedule 125.

“He pays monthly rent to the health region”
… No he does not. Presumably the legal persona of the corporation does…

The place to start IMHO, is to get all the correct LEGAL ENTITY transactions sorted out as to exactly WHICH Legal persona is doing exactly what legal transactions…

he already has a medical professional corporation

thank you for all who reply

  • he pays rent for the house to the landlord from his personal account what about if we use gifi 8911 rent to business-use-of-home expenses

  • when I fill schedule 125 I have to fill for the current year and the previous year. if i use gifi code for rent 8911 this year instead of ( Management and administration fees gifi 8871) the previous accountant used for the previous year so I will put gifi 8911 for this current year but what I should put for the previous year ( 8911 rent that I used new this year or 8871 management that the previous accountant already used for filling last year

My comments remain the same…:.

"… It is impossible for an “independent contractor” to have a schedule 125.

“He pays monthly rent to the health region”
… No he does not. Presumably the legal persona of the corporation does…

The place to start IMHO, is to get all the correct LEGAL ENTITY transactions sorted out as to exactly WHICH Legal persona is doing exactly what legal transactions…"

.
Furthermore, there seems to be additional problems which are out of whack and makes no sense (from the corporations point of view): “he pays rent for the house to the landlord from his personal account”

The corporation first needs to compile a proper set of books and Financial Statements before coming anywhere close to being ready to prepare a T2 tax return…
(And the director should sign off on same)

After the corp has done so, the GIFI’s should be able to be routine.

joe.justjoe1 ,sorry ur comments are distracting me if u r not able to answer my questions stop sending any comments in my topic, please no need to argue we just help each other. thank you

Gordon, from your posts it is not clear what the situation is. However, I see a few issues:

  1. List item
    If the physician is using an office provided by the health region, and the PC is paying rent to the health region, then home office (business use of home) expense may not be reasonable - typically you can’t claim both. However, I have prepared year-ends for one or two medical PCs where the physician regularly met patients in his/her home in addition to having an office elsewhere. CRA disputed one of these, but allowed it once the situation was explained to them, and after submitting sufficient supporting documentation.

  2. If the PC is not renting an office elsewhere, then it could “rent” a room in the shareholder’s home. I normally report this as “rent” in the corporation (whatever the GIFI code is). If you are filing for two years, I would report it the same on both. But, I would not amend a previously filed T2 just because rent was classified incorrectly - CRA doesn’t review every GIFI code on every return, and as long as it doesn’t change the amount of tax payable, they won’t care.

  3. If a corporation is renting space from the shareholder, then logically the shareholder would be earning personal rental income. However, the shareholder can offset this income with some of his/her housing costs. Per CRA, the amount of housing costs related to the rental income should be based on the area of the “office” compared with the area of the house. So, if the shareholder does not want to report rental income, he/she should establish the amount “rent” paid by the corporation as equal to the calculated amount of reasonable housing costs - this cannot be the full amount of the shareholder’s personal rent/utilities/mortgage/etc.

@gordon
As alluded to above, the LAW absolutely says you CANNOT attempt to do as you are attempting to do. Sorry if you find that inconvenient. However, I do recommend that you check on what I have suggested above. I think that you might find it more useful than perhaps it first appears, and that it is the root of the issues that you are experiencing. Currently, from the posts, it is giving the impression that you appear to continue to be be confused about which legal persona is reporting/paying/earning what. When that is rectified, I think it likely that all the pieces will slide into place.

thank you nezzer, yea the physician using the clinic provided by the health region in addition to an office in the house where he finishes his paperwork and makes a virtual visit during covid 19 . he pays rent for the house to the landlord

can I leave prior year data blank in schedule 125 and schedule 100 ? or I must fill it in the software

I don’t think the numbers in the “prior year” column get sent to CRA - it’s just for your info. Not 100% sure on this, but I have accidentally filed T2 returns with incorrect numbers in the “prior year” column, and nothing changed at CRA. When I review that prior year’s info on RAC, it remains the same as when it was originally filed.
In any case, I would enter the “prior year” column as it was actually filed - so you have it as reference.

P.S. This relates to my request that Tax Cycle implement importing the prior year info from .COR files downloaded from CRA via AFR:

so what about if I choose gifi 8871 of management and I include the prior year amount and include 0 for the current year and then I choose gifi 8911 rent and I include the amount for the current year and I include 0 for the prior year?

If, after considering everything, you have a professional reason for reporting it as rent then what you’re doing is correct. What is the concern?

Just record in last year what was reported last year and use this year what you think is right. So you have a blank on one line last year and a blank on the other line this year. That is just the way it is.