Law Times

PAGE 6 COMMENT Law Times Group Publisher ....... Karen Lorimer Editorial Director ....... Gail J. Cohen Editor .................. Glenn Kauth Staff Writer ............. Robert Todd Staff Writer ....... Michael McKiernan Copy Editor ......... Heather Gardiner CaseLaw Editor ...... Jennifer Wright Art Director .......... Alicia Adamson Account Co-ordinator .... Catherine Giles Electronic Production Specialist ............. Derek Welford Advertising Sales .... Kimberlee Pascoe Sales Co-ordinator ......... Sandy Shutt ©2010 Thomson Reuters Canada Ltd. All rights reserved. No part of this publication may be reprinted or stored in a retrieval system without written permission. The opinions expressed in articles are not necessarily those of the publisher. Information presented is compiled from sources believed to be accurate, however, the publisher assumes no responsibility for errors or omissions. Law Times disclaims any warranty as to the accuracy, completeness or currency of the contents of this publication and disclaims all liability in respect of the results of any action taken or not taken in reliance upon information in this publication. November 15, 2010 • Law Times Law Times Thomson Reuters Canada Ltd. 240 Edward Street, Aurora, ON • L4G 3S9 Tel: 905-841-6481 • Fax: 905-727-0017 www.lawtimesnews.com Publications Mail Agreement Number 40762529 • ISSN 0847-5083 Law Times is published 40 times a year by Thomson Reuters Canada Ltd., 240 Edward St., Aurora, Ont. L4G 3S9 • 905-841-6481. lawtimes@clbmedia.ca CIRCULATIONS & SUBSCRIPTIONS $159.00 + HST per year in Canada (HST Reg. #R121351134) and US$259.00 for foreign addresses. Single copies are $4.00 Circulation inquiries, postal returns and address changes should include a copy of the mailing label(s) and should be sent to Law Times 240 Edward St., Aurora, Ont. L4G 3S9. Return postage guar- anteed. Contact Jacquie Clancy at: jclancy@ clbmedia.ca or Tel: 905-713-4392 • Toll free: 1-888-743-3551 or Fax: 905-841-4357. ADVERTISING Advertising inquiries and materials should be directed to Sales, Law Times, 240 Edward St., Aurora, Ont. L4G 3S9 or call Karen Lorimer at 905-713-4339 klorimer@clbmedia.ca, Kimberlee Pascoe at 905-713-4342 kpascoe@clbmedia.ca, or Sandy Shutt at 905-713-4337 sshutt@clbmedia.ca Law Times is printed on newsprint containing 25-30 per cent post-consumer recycled materials. Please recycle this newspaper. Editorial Obiter Gov't plays politics with Canadians jailed abroad O nce again, we see how politics are playing a disproportionate role in how Ottawa treats Ca- nadians who get into trouble overseas. As revealed by Postmedia News last week, at least nine Canadians serving time for crimes committed abroad have active cases before the Federal Court challenging the federal govern- ment's decision to deny them transfer to Canada to finish their sentences. Many of them are drug dealers jailed in the United States. The report noted approvals for trans- fers have plunged since the Conservatives took power in 2006, something the gov- ernment is happy to trumpet when peo- ple like Chris McCluskey, a spokesman for Public Safety Minister Vic Toews, declares through tired rhetoric that "the previous Liberal government put crimi- nals first. We put public safety first." Certainly, there's nothing wrong with the government making decisions in the interests of protecting the public, partic- ularly when the issue involves concerns over organized crime should drug of- fenders return to Canada. But the prob- lem is the wide latitude the legislation authorizing prisoner transfers grants the minister. Toews can reject requests, for example, on the basis of the vague notion that someone is a threat to public safety. While such concerns are legitimate, the government could declare virtually any- one convicted of a crime to be a threat to the public on some level. At the same time, denying transfers runs counter to the goal of reducing risks by rehabilitating and supervising people here rather than having them re- turn to Canada after living in what are often harsh conditions in foreign prisons for years. In addition, people who come back still remain in jail or at least the cor- rections system for the duration of their sentences. So even if they're a threat, it's not as if they're free on return. In Edmonton, the family of Perry King battled for years against former public safety minister Stockwell Day's rejection of his transfer request. Con- victed in Cuba of having sex with two girls, one aged 15 and the other 16, Day decided he was a threat, presum- ably given King's conviction of a crime involving minors. But at the time, the age of consent in Canada was 14, which means King's actions wouldn't consti- tute a crime here. So it's not difficult to see that politics were playing a role in Day's denial. What's needed, then, are more de- tailed provisions for approving or re- jecting a transfer so people can see that the government is basing its decisions on consistent and specific legal criteria rather than political optics. Of course, that's not likely in the government's interests. This is the same administration that played poli- tics with the Omar Khadr matter and has applied different standards to cases of Canadians stranded overseas, in- cluding Suaad Hagi Mohamud, Bashir Makhtal, and Abousfian Abdelrazik. Sometimes, the government helps; other times, it abandons Canadians in trouble. That's unfortunate and unfair. — Glenn Kauth ing transactions and identifying sources of income. Thus, timing and choice of investment type are important decisions for investors. A fundamental rule of tax law I is that one pays tax only when one disposes or is deemed to have disposed of investments. Tax planning involves controlling tax- able events. Now is the time for investors to address some deci- sions before the end of the year. The past three years have been volatile for stock markets. The Dow Jones Industrial Aver- age hit a high in April 2007. We then witnessed the rocky declines in response to the American subprime mortgage fiasco. The Dow Jones skidded from its high of 14,087 to 8,451 in October 2008 and then climbed back up to 11,444 on Nov. 5 of this year. Patient investors were rewarded but are likely sitting on both ac- crued capital gains and losses. Now is the time, then, for pruning your portfolio. Indi- viduals should clean out their stock portfolio by mid-December ncome tax is a levy on trans- actions, not on income. Tax planning is about tim- Year-end tax planning for investors Financial to trigger sufficient capital losses so they can offset them against their realized capital gains in the year or carry back to previous years. Similarly, investors should close out their option contracts with accrued capital losses in 2010 in order to shelter their capital gains. You'll need to indicate that you wish to apply capital losses against prior-year capital gains on your 2010 tax return. The Canada Revenue Agency will do the rest for you. If you're sufficiently optimistic and believe your losers will rise some more to become stars in the future, you can "bed and break- fast" them by selling the shares and then repurchasing them. However, you should wait at least 30 days before you buy the shares back. Otherwise, any losses you trigger on the shares will be "superficial," and you won't be able to offset them against capital gains. This is an entirely legiti- mate tax mitigation strategy. At the same time, investors who lost money in private corpo- rations should evaluate whether they can write off their losses Matters By Vern Krishna as allowable business invest- ment losses, which are a special type of capital loss. A business investment loss is a capital loss that arises when one disposes of shares or debt of a "small busi- ness corporation" to an unrelat- ed person. As with capital gains, the deductible portion is only 50 per cent of the loss. The advantage, however, is that unlike ordinary capital losses, which one may deduct only against capital gains, they're deductible against any income source. Restrictions may apply if the individual previously claimed the capital gains exemption. A business investment loss arises when one sells or trans- fers the shares or debt of a corporation that qualified as a small business corporation at any time within the preced- ing 12 months. As a result, www.lawtimesnews.com shareholders in financially troubled corporations or individuals who have lent money to such companies can use these losses if they dispose of their interest be- fore the end of the year. Be sure to claim the capi- tal gains exemption. The $750,000 capital gains provision is one of the richest exemptions in the Income Tax Act. It's avail- able with respect to shares of a qualified small business corpora- tion. The exemption is available when taxpayers dispose of shares of such a corporation if they held them for at least 24 months. People can trigger the gain by selling the shares at their fair- market value to a spouse, a third party or a corporation they con- trol. Taxpayers can also defer cap- ital gains from the sale of shares of a small business corporation if they reinvest the proceeds into another such entity. Finally, review your portfolio mix. Evaluate the risk-reward ra- tio of your investments. The in- come-tax system doesn't treat all income equally. There are four different forms of investment income: capital gains, eligible dividends, ineligible dividends, and interest. Different rates of tax apply to each source. Ulti- mately, only after-tax returns really matter. At the top end, an Ontario taxpayer will pay tax of approxi- mately 23 per cent on capital gains; 25 per cent on eligible Canadian public company divi- dends; 31 per cent on ineligible Canadian dividends; and 46 per cent on interest, rents, royalties, and foreign dividends. Interest income is taxable on an accrued as-earned basis an- nually. As a result, people who invest in compounding Canada Savings Bonds pay tax on the in- terest each year even though they haven't received it. Hence, it's generally better to earn interest income in an RRSP and capital gains and dividends outside of tax-sheltered plans. LT Vern Krishna is tax counsel for Borden Ladner Gervais LLP and executive director of the CGA Tax Research Centre at the University of Ottawa. He can be reached at vkrishna@blg.com.

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• For The Defence
• End Of An Era
• Focus On Labour and Employment Law