Deemed Taxes QRLSP Info (Qualifying Retroactive Lump-Sum Payments)

I sincerely appologize for the word scrambling Peter But 1 of the first things you asked me when i mentioned deemed taxes his morning was I Quote "Deemed taxes what deemed taxes" The feeling I got from other questions to you about this issue by other CSAT members have not been answered. Again I,m sorry my emotions are very high on this issue.

Seal the Deal, I Love Peter!

Call of Duty wrote:Peter stated that the law firms Tax lawyers are not Basically a full service arm of Mccinnes Cooper. Even now he is scrambling to get info on the deemed taxes, after he accepted the GOCs offer of 3.27% notional top up. this is leaving me feeling very uneasy, especially since I emailed Kristine Hunter many months ago about the impending Huge Deemed taxes that were comming, I have been through this in the past ,and have very good incite to the Notional Interest otherwise known as (Deemed taxes). I also told them of fairness provisions that may waive Interest if You were not in contol of the situation and how I failed to get them waived. Yet he tells people to try it on their own, and see what happens. I will post letters from the CRA I received concerning Deemed taxes for your info, but this is something our lawfirm should be doing not me.

Call Of Duty: I gave you the courtesy of a full and frank discussion on my views on the taxes, and I take great exception to your comment that "Even now he is scrambling to get info on deemed taxes". That is simply not true. In fact, we have no duty to communicate with anyone other than the representative plaintiff and we did extensive work in assessing the tax issue. The Court is the ultimate decision maker on the proposed agreement. I am attempting, as I did this morning with you, to assist people understand the negotiated agreement. I

You fail to mention in your posting, that this type of contribution from the Government of Canada has never been ordered by a Court in Canada and there is no legal basis to force the Government of Canada to make this payment benefiting the members. So could we force them to pay more, absolutely not. Is there income tax payable, absolutely. Will the 3.27% cover off the interest in all cases, no. Will some be better off electing to pay in one year, yes. What you fail to appreciate is the standard is the best interest of the class. The Government of Canada was always prepared to 100% of nothing. Now they are paying $888M, including a contribution that they could not be legally forced to make. I asked you several times today how, in law, we could force them to pay this, and you could not answer this. There is simply so legal hammer to force this payment.

I am sorry the tax portion of the agreement does not meet with your approval, but please do not misrepresent our conversation by suggesting we are now "scrambling" to meet with your assessment of the deal and that somehow your advice or QRSLP would have changed the course of the negotiations, as that is simply untrue.

Also i will state that I offered peter all these tax return info on 14/10/2012 to help him in understanding the Huge deemed taxes Zero Sum vets will be facing as a barganing tool on tax Nuetrality. He never asked for it.

please write to the Honorable Judge Barnes if you feel as i Do that the Zero Sums have been ignored in regards to Tax relief by the GOC.

The GOC can not be allowed to profit Huge taxes on something they were totally wrong on and sinse they prolonged to case longer deemed tax years have accrued. Just my opinion.

Yes if you go back over 5 or years but below 5 years The lawyers fees starting away for your total retro .

Example quick calc
i was owed without interest 25000.00
i was owed with interest 26790.00
but i get back 22013.00 after legal fess a lost of $4776.00
then taxes as well see just 27 months retro is a total of 9.9% interest i get back.
but i lose 7.93% interest because lawyers fees are 17.83

It's nice to go back many years and give an example Peter yes lots if interest over time. But what about start in 2007, 2008, 2009 or
2010 like myself where your firm gets $ 4776.00 of my original claw back. leaving me with a lose of 7.93% and yes after all interests and top up.

I lose out and so due many other so we don't get 100% plus like other due

What a poor example looks great on paper everyone see a higher return and more than legal would be but what a crappy example still BS in my mind

After talking with Peter this morning I have decided to send a letter of objection based on the Tax Nuetrality top up of 3.27%.

Heres why: I will show you a QRLSP Tax return I did from 1990-2002 having the income spread out and being assessed with the revised Taxes + the additional Deemed taxes so you can see the impact, that alot of Zero Sums are facing. Note revised tax is also known as the( Tax Difference)

revised tax 2002 = 0 Deemed tax =0 Deemed tax % applied=0
revised tax 2001 =0 Deemed tax=0 Deemed tax % applied=0
revised tax 2000=1202.83 Deemed tax=121.40 Deemed tax % applied=10%
revised tax1999=1830.64 Deemed tax352.29 Deemed tax% applied=19.5%
revised tax1998=1887.64 Deemed tax528.74 Deemed tax % applied=28%
revised tax1997=1823.89 Deemed tax680.15 Deemed tax% applied=38%
revised tax 1996=2490.17 Deemed tax1136.89 Deemed tax % applied=46%
revised tax 1995=2419.79 Deemed tax1350.65 Deemed tax%applied=55%
revised tax1994=2607.23 Deemed tax 1864.78Deemed tax%applied=72%
revised tax1993=4582.84 Deemed tax 3939.43 Deemed tax applied=86%
revised tax1992=1725.44 Deemed tax1733.18 Deemed tax %applied=101
revised tax 1991=0 Deemed tax =0 Deemed tax% applied= Guess 120%
revised tax 1990=678.64 Deemed tax=993.93 Deemed tax % applied=146%

This was just the federal portion. Total Tax Difference= 21,249.11 Total Deemed taxes=12,701.44

Deemed tax % overall= 60% in additional Taxes Tax nuetrality top up + 3.27% ? is it even fair or close?

Thanks , call of duty, it's very interesting and all I am saying is we can't escape the tax man, it's brutal , but hey it's life

looking for a little info here.

this talk about interest or deemed taxes based on previous years... is this if you declare it as income for previous years( i.e. spread it out) only or does deemed interest also apply if you claim it all on next years tax return?

Anyways folks this will be my last post on the tax implications, you can only beat a dead horse so many time lol. I've said my peace and hopely educated a few with my past expience with CRA and QRLSPs. And we shall see how this all turns out.

Navrat do You realize that the further your retro goes back the higher the Deemed tax rates. on year 5 of retro deemed taxes most likely will be 40-50% of the tax owing, and at year 10 back in retro Deemed taxes could be 100% of the tax owing and the further your go Back its even worse. So lets say your have now 30,000.00 New inncome and Cra says ok you owe us 4,800.00 in revised taxes. lets say this same new income is for 10 years in a row. At year 10 your would be possibly paying an additional 4,800.00 .So on 30,000.00 on year 10 expect to pay 9,600.00 in taxes On year 5 6,800.00 on the 30,000.00. just an example thats close to my last QRLSP in 2002 thar went back 12 years. on the 12th year back the deemed taxes were 145% of the revised tax Ie i owed 669.00 and the deemed tax was 993.00 get the gist of how bad the deemed taxes are now, But go ahead and pay it happily but im Not happy with a 3.27% Top up and many vets are gonna see avery bad tax accessment.

We are paying income tax big time, no escape, accept it and lets move on, it's bad, but as these letters indicate nothing can be one, forget about it

Fainess provision response letter

Dear Sir

This is further to our telephone conversation of August 31, 2004.

As discussed, we have received an answer from our legal department concerning whether or not the Notional tax payable (Deemed tax) should be considered under Fairness Legislation.

Issue:
Whether the portion of notional tax payable calculated under paragraph 120.31 (3) (b) of the Income Tax Act (the Act) in respect of certain qualifiying lump sum amounts, is regarded as Interest that the Minister of National Revenue is authorised to waive under 220(3.1) of the Act.

Response from our Legal Department:
"The amount calclated under paragraph 120.31 (3) (b) of the Act is the amount added to an Individual's tax payable. The Deemed tax is calculated using our refund interest rates on the difference between the revised tax payable and the actual tax paid.

We also note that the 1999 Department of Finance Technical notes state the the " notional amount of Interest... is not considered to be Interest for any purpose of the Act." On this basis, we are of the view that the amount determined in paragraph 120.31(3) (b) is not Interest.

We would like also like to note that, even if the amount calculated in paragraph 120.31 (3) (b) were Interest, the pupose of sections 110.2 and 120.31 of the Act is to provide relief to taxpayers by giving them the benifit of paying the lower of the two amounts as discussed above. Therefore, it is not appropriate to consider waiving the amount under subsection 220 (3.1) of the Act"

I trust this clarifies the situation
Yours sincerely,

P ST George
problem resolution coordinator

Letter from CRA Re notice of Objection dated Dec 29,2003

We have completed a review of your income tax return and the related assessment for which you filed the above objection.

Generally, income is taxed in year you receive it. However,for "Qualifiying retroactive Lump Sum payments" (QRLSP) as defined by section 110.2 of the Income Tax Act, we reduce your taxable incomefor the year by the part of payment that relates to the eligible tax years for which you filed income tax returns. An eligible tax year is a previous year during which you were a Resisdent of canada, not bankrupt, an not a farmer or fisher who had used this year in an election for income averaging.

In accordance with Section 120.31. tax is calculated on the reduced taxable income in the usual way, and a tax adjustment is added for the previous- year part of the payment. the tax adjustment consists of the Tax Difference for each of the previous years, plus a Deemed tax that represents the cost to the Gouvernment of the delay in the payment of the tax difference. Deemed tax is calculated using our prescribed refund interest rate from May 1st of the year following the eligible tax year to December 31 of the year before the year in which the payment was received. Section 120.31 of the Income Tax Act provides the authority to calculate this Deemed tax.

Peter stated that the law firms Tax lawyers are not Basically a full service arm of Mccinnes Cooper.  The GOCs offer of 3.27% notional top up. this is leaving me feeling very uneasy, especially since I emailed Kristine Hunter many months ago about the impending Huge Deemed taxes that were comming,  I have been through this in the  past ,and have very good incite to the Notional Interest otherwise known as (Deemed taxes). I also told them of fairness provisions that may waive Interest if You were not in contol of the situation and how I failed to get them waived. Yet he tells people to try it on their own, and see what happens. I will post letters from the CRA I received concerning Deemed taxes for your info, but this is something our lawfirm should be doing not me.