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T2 - Schedule 8

How can I allocate a portion of asset utilization to personal before amortizing it on a T2.
The T1 has the option after entering the asset UCC to select the personal usage however the T2 does not have that. Anyone was able to go around it without manually adjusting?

Thanks

One would think that company property is company property and if any personal use was associated with an asset legally owned by a corporation it would be reflected on a T4 slip as a taxable benefit (box 34, 40 etc).

3 Likes

“however the T2 does not have that.”
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I would observe that I am EXTREMELY GLAD that Taxcycle does not have built-in facilities to enable and encourage illegal tax reporting.
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As snowplowguy has observed, for Corporate owned property, the Corporation’s Directors are under a legal obligation to have reported the appropriate taxable amounts on T4s and submitted them to CRA prior to 28 February. Failure to do so is an Offence.

I am not sure how to respond to these inappropriate comments: Did it ever occur to you that an individual lending his car for a company significant use can depreciate it? therefore any personal use has to be adjusted? It would be nice to refrain from comments that only show your limitations.

Thank you

My response to Snoplowguy is valid for you as well. Maybe you need to understand that you are not that knowledgeable as a tax expert.

Thank you

Sorry Yonin, as far as I can see, your proposed treatment has no basis in law whatsoever.

If you have a different legal source, it would be helpful to refer to it in your post.

IMHO, snoplowguy is correct.
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Regarding internet questions:
If you want to prepare financial statements, books of account, and tax returns solely on the basis of an internet poll, that is of course, up to you.

However, to ask an internet question and then heavily criticize and dismiss the responses you get (and in fact, directly insult the responders) seems counter-intuitive. (Even more so when the responses received were correct).

Wow @yonin - you asked for help and received perfectly valid answers. Blunt maybe, but valid nonetheless.

As to your example of “lending a vehicle to the corporation” and being able to depreciate it. No. If it is not registered in the Corporation’s name, it is NOT an asset of the corporation and is not depreciable.

Your answer is bit more professional and honest than the other folks that would automatically assume fraud without knowing more of the context so I’ll take some time to explain you a little bit.
When a vehicle is used for business, it can be either a corporate asset which will trigger personal benefits for the employee/shareholder that uses it or it can be an individual asset for which expense claims can be done on a standard basis (mileage) or on an actual basis (vehicle costs including depreciation/amortization). I don’t often do it but for some of my clients I used the tax cycle to amortize and have a basis for the amortization claim and then remove the assets from the books as they don’t belong to the business. his has the benefit of recognizing the use and wear of an asset use to generate business which is in line of all accounting principles. I have discussed that with CRA in the past and they agree with the rationale. Plus other tax software have this ability which mean that it is a possible use of the software which is just a tool.

Now, my frustration comes from the fact that I asked if an option was available in the software without providing any context. I did not ask for any tax course from some wanna be professionals and I stand by my comments. I did not appreciate the tone or the liberty they took in providing a judgment when my question is purely on the options offered by the tool (Tax Cycle). Another tone from either one of these people would also have been acceptable while delivering the same message. We are professionals, let’s keep it this way…

@yonin, when I first read your post I was a bit confused about what you were asking (and maybe I still don’t understand it). For any side calculations, such as calculating personal use, I use Excel and put my calcs as part of the working paper. I agree with others that the T2 program should avoid doing personal allocations, even for planning purposes, as it may mislead some users to think this is proper for preparation of a T2 return.

@yonin

No, as I read your description, your description of placing vehicles every which way on a whim, both for legal ownership purposes and for tax purposes, does not seem to have foundation or permission anywhere in property law or contract law. Further, it does not appear to have any foundation in the statute law of the income tax act.

The recording in a corporations books, the reporting for financial statement purposes and for tax purposes, is required to have a foundation in law.
This does not seem to be the case as so far described.

It would be great if some (any) legal basis was referenced in the question/post.

Until such time, however, I remain very pleased that Taxcycle does not cater to such (incorrect) tax reporting.

With the additional information provided I will attempt to further demonstrate my ineptitude;

A vehicle owned personally but used by an individual in the performance of his duties as an employee of his own or someone else’s corporation;

  • Not an asset owned by the corporation so the asset can not be set up on schedule 8 and depreciated by the corporation. You can not legally depreciate an asset that is owned by another person.

  • A reasonable non taxable per kilometre allowance (59 cents / 53 cents) can be paid to the employee for the use of his vehicle in the performance of his duties. The “reasonable allowance” takes into consideration fuel, repairs, licence, insurance, as well as wear and tear on his vehicle (depreciation - Capital Cost Allowance).

  • A taxable “unreasonable allowance” or monthly flat rate can be paid to the employee for the use of his vehicle. In this case, with a signed T2200 the employee would be able to deduct his operating costs as well as Capital Cost Allowance on a T777 based on the number of km’s he drove for business purposes vs the number of km’s he drove in total for the year.

Unless the corporation’s name is on the ownership of the vehicle it has no legal grounds to claim any Capital Cost Allowance on the asset.

A similar example;
If anyone has gone through a GST/HST audit of a business they may have experienced how the auditor reacts to Input Tax Credits being claimed on assets or expenses whereby the invoices are not specifically made out to the entity trying to claim the Input Tax Credits. Expense receipts made out to the shareholder’s personal name that are clearly for expenses of the business can be denied by the auditor because the name on the invoice does not match the name of the entity making the ITC claim.

2 Likes

Hi Yonin:

Both the T2 and the corporate books should exclude any personal use portion. As best practice, I suggest, you should not mix the two. Saying that, vehicles tend to be the only exception but then 100% of the vehicle goes on the BS and T2 with a T4 taxable benefit to the vehicle users using CRA’s prescribed form and associated HST adjustment, if applicable.

I believe a few others have weighed in as well with similar comments.

Greg.

Gregory Marko PEng, MBA, CPA CMA

P:416.527.4431 | F:416.850.4600

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