Arthur Rubin wrote:Cpt Banjo wrote:Number Six wrote:Aside from estate (death) taxes in how many other circumstances does the government require a complete inventory of assets held?
We don't have an estate tax or "death tax" in Canada. Instead we assume that a deceased taxpayer disposed of all of his assets and investments at fair market value immediately before death. So if he had stocks, investment properties, whatever, they are assumed to have been sold at an infinitesimal moment prior to dying. So your last tax return as a living person has to include all the gains and losses you would have incurred on that basis. If you are a billionaire with no losses or gains triggered by the deemed disposition law your entire estate goes to your beneficiaries tax free.
The Canada Revenue Agency has a small specialized section called Valuations to determine the value of intangible assets which are required to be valued on death. The main one is private company shares. What is a shareholding in an unlisted private company worth? Valuations' job is to determine a number.
The "immediately prior to death" point of value stipulated in the Income Tax Act brought up an interesting question. What if a private company had a huge life insurance policy on the principal shareholder and he dies holding most of the shares? Should the value of the policy payout be included in the company and share value since "immediately before death" meant that death was inevitable? A CRA valuator decided yes and the deceased was taxed on a capital gain based on this. The estate took the crown to Tax Court and won, I forget exactly why. However a single Tax Court decision is not considered precedent so the matter was still open. The government chose to end the argument by not appealing the decision and changed the wording of the act from "immediately before death" to "immediately before death but not in contemplation of death".