Taxation for Canadian Business

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Module 1: Introduction and Concepts of Taxation

TAX SOURCES OF REVENUES

The following chart shows the Canadian government sources of income which is budgeted for
2018-2019:
ITEM %
Personal Income Tax 49.9%
Corporate Income Tax 14.6%
Employment Insurance Contributions 6.7%
Goods & Services Tax 11.7%
Non Resident income Tax 2.6%
Customer Import Duties 1.7%
Other Tax Revenues 3.7%
Non-Tax Revenues 9.1%
Total Budgetary Revenues 100%

OBJECTIVES OF TAXATION DEPARTMENT OF FINANCE

1. Maximize the growth of output
 Trade-offs
2. Redistribute wealth equitably
 Progressive tax rate system-ie-for every extra dollar you make you pay a higher percentage of tax
on the dollar(eg 10 cents on the first dollar, 20 cent on the second dollar etc)
3. The protection of the Liberty and rights of the individual
 A democratic process
4. Strengthen Federal - Provincial Relations
5. To strive for International Competitiveness

STRUCTURE OF THE INCOME TAX ACT

Part 1: Predominant Tax Provisions
 Taxation System must answers the following questions:
o Who pays?
o What is the tax base?
o What is the tax rate?
o When should the tax be paid?
o What are exemptions and exceptions?

Part 1: Division A
 Who pays the tax(section 2)
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Part 1: Division B
 Rules-income sourcing
 (section 3 and section 4)
 Net Income for tax purposes
 Both individuals and corporations

Part 1: Division C & D

 Computation of taxable income

Part 1: Division E and E.1

 Computation of taxes payable

THE INCOME TAX ACT

The Income Tax Act is broken down into 40 parts, most of which represents specific types of
tax, other than income tax. The largest section deals of course with income tax and is broken
down into Divisions and Subsections. For example the following can be broken into:
 Under Part 1 Income Tax
 Division B Computation of Income
 Subdivision aIncome(Loss) from Office or Employment
 You will find 6(1)(b)(i)(A)
o 6 by itself is called Section 6
o 6(1) by itself is called Subsection 6(1)
o 6(1)(b) by itself is called Paragraph 6(1)(b)
o 6(1)(b)(i) by itself is called Subparagraph 6(1)(b)(i)
o 6(1)(b)(i)(A) by itself is called Clause 6(1)(b)(i)(A)

 See Exhibit One, Two and Three for further examples

ADDITIONALLY IN THE INCOME TAX ACT YOU WILL FIND:

1. Income Application rules (ITAR’s): are transitional Rules-ie rules that applied before a
certain year of tax changes. For example capital gains were not taxed till 1972. If you
purchased a house in 1965 it is not fair to charge the full tax on the sale because you sold it
in 1980. Therefore the transition rules will allow you to pay no capital gains on the sale of
the house from 1965 to 1972.

2. International Tax Conventions: which are tax treaties between two countries-it bridges two
tax systems of 2 countries. The treaties always override any provision of the Income tax act.
This prevents double taxation by each country.
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3. Income Tax Regulation: designed to give specific working rules to the legislation.

4. Judicial Decisions: disagreements between the government and the average citizen over tax
exceptions. Canada Revenue Agency represents the government. See exhibit 4.

5. Interpretation Bulletins (IT): represents the interpretations of the Income Tax Act by
Canada Revenue Agency(CRA). Note that the interpretations by CRA are not law, thus they
can be challenged in tax court. IT will be gradually replaced in the future by a new technical
publication called Income Tax Folios since many IT are now out of date. The first set of
Income Tax Folios were issued in March 2013. Overall IT prevail till ITF are issued.

6. Information Circulars(IC): administration for procedures on how to put together the tax
return. For example the CRA publishes a booklet of instruction on how to put together your
personal tax return.

7. Advanced Income Tax Ruling: when you want to know the tax implications of an
investment before making the investment. You can write to the CRA and get an advanced
ruling ahead of time before you enter a business venture.

8. Technical Notes and Explanations: are issued by Dept of Finance to explain new legislation
when it is introduced. It purposes is to explain the Spirit of the legislation and what the
legislation is trying to accomplish. Judges rely on this area to make their rulings.

9. GAAP-Generally Accepted Accounting Principals and International Financial Reporting

Standards (IFRS) : are used when the Income Tax Act is silent on a particular point. IFRS is
used for public companies while all other companies use GAAP when the ITA is silent.

10. Financial Administration: used by the government as exceptions. Eg: Chrysler was in
danger of going under as a company. Rather than the Government pay out big dollars for
unemployment, the government gave Chrysler specific tax breaks.

11. Income Tax Technical News: CRA issues this periodic newsletter, which provides timely
commentary on recent tax issues(being incorporated gradually into Income Tax Folios).

12. Income Tax Folios: This is a new technical publication which will be used to update
interpretation bulletins. In March 2013 the first folios were released.

RULES OF INTERPRETATION OF THE INCOME TAX ACT

1. Any word in the act has an ordinary meaning unless there is a specific definition to the
contrary.
2. We look at the intention of parliament.
3. We follow strict interpretation. If there is doubt the courts will rule in favour of the
taxpayer.
4. Throughout the act you will find general rules followed by exceptions
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5. STARE DECISIS-means “let the decision stand”. If a court decides something then that
decision will stand till it is overruled by another higher court.
6. Onus of Proof is on the taxpayer. In other words the tax payer must prove that he is
innocent.

TAX PLANNING
 Legitimate arranging of financial activities that reduces or defers tax costs(Not tax
avoidance)
 Within the object and spirit of the “Act”
 Deferred income Plans -RRSP’s, RPP’s

TAX AVOIDANCE
 Deliberate planning of events & transaction to circumvent the law(ie transactions which
do not reflect the real facts).
 A civil wrong doing
 Do not have a bonafide business purpose
 Assessed tax, interest and possible penalties

TAX EVASION
 Fraudulent and a criminal offense
 Willful and deliberate
 An act with an intention to deceive
 Eg: knowingly failing to report revenues, or claiming the deductions of a false expense,
or both
 Tax evasion is enforced under both:
o Criminal Law - fine and a possible jail term.
o Civil Law - payment of the tax, interest and penalties

TYPE OF TAX PLANNING

 The objective of tax planning is to reduce or defer the tax costs.
 All tax planning opportunities fit into one of three categories:
o Shifting income from one time period to another
o Transferring income to another entity or alternative taxpayer
o Converting the nature of income from one type to another(eg shift income to
capital gains which is only 50% taxed).
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WHO’S LIABLE? CONCEPT OF RESIDENCY

Under Part 1 Income Tax, Division A Liability for Tax, subsection 2(1) tells us that every person
“resident in Canada” at any time in a given taxation year is subject to taxation in Canada and the
determination of exactly what is subject to tax is “as required by the Income Tax Act”.

This tells us two things:

1) The determination of residence is vital to the determination of taxation.
2) The determination of what is subject to tax in the case of a resident is a long,
comprehensive process that, at least in theory, requires consultation with all of the Act.

In the tax act a Person is defined in section248(1):

 Individual and corporation, or
 Anybody representing a person(s) (e.g. Family Trust)

Resident is not defined in the “Income Tax Act”

 Residents are taxed on their worldwide income
 You are deemed a resident if you sojourn 183 days in Canada (more on this later in the
lecture)

A Canadian Resident is taxed on his/her worldwide income for the year ie: all income
regardless of where it is earned. This is subject to international tax agreements regarding
double taxation, which are referred to as tax “treaties” and the Canadian foreign tax credit
system which effectively gives credit against Canadian tax for foreign taxes paid on foreign
income also taxed in Canada.

Non Residents Part 1, Division B, Subsection 2(3)

 Are Taxed on their Canadian source of Income
 Must be a non resident for the entire year to fall in to this category
 Therefore, cannot apply for the year of arrival or departure(must look at part time
resident status in these years)
 To be taxable in Canada as a non resident must:
o Be employed in Canada
o Carry on business in Canada or
o Have disposed of Taxable Canadian Property
 Real property ie land and building located in Canada
 Capital property used in a business carried on in Canada
 Shares of a corporations resident in Canada but not listed on a stock
exchange (Canadian or certain foreign exchanges).
 Share of corporation listed on stock exchange for at least 5 years before
the disposition and/or persons related to taxpayer own 25% or more of
issued shares of any class.
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 Exceptions do exist due to tax treaties between countries (Americans can make up to
$10,000 Canadian in Canada without being taxed here (less than 184 days in Canada)-ie
they are taxed instead in the United States ->(Page 65). Note that this deal is reciprocal
where Canadian can earn up to $10,000 US dollar from the United States as long as they
are less than 184 days in the United States->(Page 65).

 Implications of non-resident status For computation of taxes payable no credits are

allowed unless 90% or more of income for the year is included on the Canadian Tax
return ie (90% of income is taxable in Canada).

For example assume that Mr. X resided in Buffalo and carried on a proprietorship business in
St. Catharine’s. What are the implications ignoring tax treaties. Answer: Mr. X would be
considered a non-resident of Canada and would be taxed on his Canadian business profits.

PART TIME RESIDENTS (SECTION 114)

 Taxed on income earned in Canada while they were in Canada
 Deductions on T1 allowed as related to resident period. Credits on T1 are prorated
based on period of residency.

DETERMINATION OF PART TIME RESIDENT

 Transition between resident & non resident
 Resident for part of the year and non resident for other part of the year
 All ties in Canada should be severed
o “clean break”-emigration
o “fresh start”- immigration

FACTORS COURTS CONSIDER

 Regularity & length of visits in Canada
 The ties in Canada
 Dwelling suitable for year round occupant # if leased must look to how quickly lease can be
terminated (usually 3 months notice or more indicates dwelling Not available)
 Location of spouse/other immediate family
 Origin and background of the individual
 Personal property/social ties ie examples are Memberships, banking privileges, etc.
 Intention to return/ return foreseen
 Business or employment ties in Canada
 What other ties- Driver’s Licence, OHIP, furniture, cars, cottages, etc
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No particular length of absence results in an individual becoming a non-resident (Page 49).

Occasional, but not regular, return visits for personal or business reasons would not likely
jeopardize the severance of full time residence.

Resident and Tie Breaker Rules-see page 59 and read page 59 four points on page. Perfect
example is airline pilots.

CORPORATIONS
 Resident if incorporated in Canada after 1965
 Must pay tax on world-wide income
 S.250(4) deemed resident in Canada
 If incorporated before 1965 in Canada you use: Mind and Management Test”
o where Board of Directors meets
o where books and records are located’
o where the registered office located.

RESIDENCE

DEEMED RESIDENT
SOJOURN
 Temporary visit rather than permanent stay
 There is no permanence or continuing relationship
 Includes visitors
 Excludes factual full time residents and continuous half year Canadian/Florida residents

SOJOURNING (SECTION 250(1))

 Individual who sojourns in Canada for 183 days or more in a given taxation year is
deemed a resident and is taxed on his world wide income.
 CRA’s position is that a “day” means any part of a day
 Temporary rather than permanent; character of visit is determinate, not the length of
the visit
 A general rule of thumb is that if come to Canada just to work here on a regular basis
you are not really visiting( and therefore do not fit in the sojourning definition)

Examples
 An individual who continuously lives half a year in Canada and half a year in Florida is
not sojourning while in Canada because there is a permanence to the stay here->full
time resident.
 Canada-U.S. border towns daily commuters are not sojourners since work here on a
regular basis(they have a habitual abode available in the USA see page 59).-Non
Resident taxed on Canadian Source Income.
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See Steps to Addressing Residence Issues (page 60)

See Factors to Consider When Determining Residence (page 61/62)

Excellent Summary of Residency Test-See Page 68 Exhibit 2-1

OBLIGATIONS OF THE TAXPAYER RETURNS - CHAPTER 14

1. Corporations: 6 months after the year end (par 150(1 )(a)). Corporations may choose any
year end which must be filed on a fiscal yearly basis (ie year end is October 31 st of every
year).

2. Individuals: tax returns are based on a calendar year basis.

An individual must file his/her personal tax return (T1) by April 30th of the next year or if a
person is carrying on a business the filing date is June 15th. Note if a person files on June
15th he/she must estimate the taxes owing on April 30th and send it in to avoid penalties.

3. Trusts or Estates: Within 90 days after the end of the taxation year (par 150(1)(C)

4. Death of a Tax Payer: if the person passes away before October 31st, 2018, than the 2018
tax return is due April 30th, 2019 or June 15, 2019 if you are running a business. If you pass
away between November 1st, and December 31st, 2018, the 2018 tax return is due the
later of six months after the date of death or April 30, 2019. Note: that the key test is
always to add six months minimum to the date of death. So if Mr. X dies on December
31st, 2018 then the 2018 tax return is due July 1st, 2019 (assuming they are not running a
business). If the individual carried on a business and they die between November 1 st and
December 15th, 2018, the 2018 tax return is due by June 15th, 2019.

PENALTIES
Subsection 150(1) says the penalty is 5% of the taxes(par 162(1)(a)) unpaid and a penalty of 1%
of the unpaid tax for each complete month(par 162(1)(b)) thereafter up to 12 months(page
852). A penalty of $100 if you fail to provide information required by the prescribed form-ie
failure to provide your SIN #

See Page 854 with class for chart for Third Party penalties.

Summary of Penalties can be found on page 855.

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INDIVIDUALS (ITA 153(1)

An individual must pay quarterly instalments if both the current year and either of the two
preceding years exceeds the amount of tax withheld at source by $3,000. These amounts are
due the 15th of March, June, September, and Dec. Page 858

Calculation of Instalments for an Individual Taxpayer (page 859) has 3 choices:

1. 4 instalments of ¼ X estimate tax payable for the current year
2. 4 instalments X ¼ X tax payable for the preceding year
3. 2 instalments of ¼ X tax payable for the 2nd preceding year
2 instalments of ½ X (tax payable for the preceding year – 1st 2 instalments).
Keep in mind that prescribed interest rates are used which are found in Part XLIII of the
Regulations (table 14-1 page 860).

CORPORATIONS [ITA 157(1), 157(3)]

A corporation is not required to make installments if tax payable for current or preceding year
does not exceed $3,000 [S 157(2.1)] (page 861)
Corporate Instalments due at the end of each month has 3 alteratives (page 861):
1. 12 instalments of 1/12 X tax payable for the preceding year or
2. 12 instalments of 1/12 X the estimated tax payable for current year
3. 2 instalments of 1/12 X tax payable for the 2nd preceding year
10 instalments of 1/10 (tax payable for preceding year – 1st 2 instalments.
Under 248(7) the payments must be received by CRA on the due date to be on time.

QUARTERLY INSTALMENTS FOR ELIGIBLE CANADIAN CONTROLLED PRIVATE CORPORATIONS (IE

SMALL CCPC)
If you have a “perfect compliance history” you are allowed to do quarterly instalments
assuming taxable income does not exceed $500,000 and you have less than $10 million dollars
in capital employed in Canada and you claimed a small business deduction.

Calculation of Instalments for a CCPC (page 861/862) has 3 choices:

1. 4 installments of ¼ X estimate tax payable for the current year
2. 4 installments X ¼ X tax payable for the preceding year
3. 1 installments of ¼ X tax payable for the 2nd preceding year
3 installments of 1/3 X (tax payable for the preceding year – 1st installments)

Example Problems of Corporate installments are shown from pages 862 to 866.
PAYMENT OF TAX FOR CORPORATION-BALANCE OWING [157(1)(B)]
 Balance owing is due two months after the taxation year end
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 Extended to 3 months for a CCPC if:

o A small business deduction was claimed during the current year or previous year
o Taxable income did not exceed $500,000 annual business limit in the previous
year.

Books and Records should be adequately maintained and must be kept for a period of six
years from the end of the last taxation year [Reg 5800 and subsection 230(4)].

ASSESSMENTS AND REASSESSMENTS (Page 867)

Canada Revenue Agency can generally do an audit of an individual or company within:
 Four years from the date of mailing a notice of assessment for all corporations except
for a Canadian Controlled private corporation which is three years
 Three years for an individual or trust from the date of mailing of the notice of
assessment
 Any time if there is misrepresentation that is attributable to neglect, carelessness, or
fraud or if a waiver is signed by the corporation or individual.

RIGHTS OF THE TAXPAYER

 Taxpayer can appeal an assessment they do not agree with:
 The first step is to file a notice of objection which must be filed within 90 days of the
mailing date on the Notice of Assessment or Reassessment. It can be extended for
individuals to 1 year after the filing due date for the year (whichever is later) (page 871)
 If the first appeal fails you may appeal the decision to the Tax court of Canada. You may
continue to appeal to higher courts till you reach the Supreme court of Canada.

ONUS OF PROOF (Page 25)

Note that the Supreme Court has ruled that the taxpayer always has the burden of proving that
an assessment is incorrect.

If penalties are involved on the taxpayer than the onus of proof falls on CRA to prove the
penalties are being applied for a valid reason.
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EXHIBIT 1: STRUCTURE OF THE INCOME TAX ACT

SELECTED PARTS DIVISIONS SUBDIVISIONS SECTIONS

I. INCOME TAX

I.1 INDIVIDUAL SURTAX A. LIABILITY FOR TAX

B. COMPUTATION OF INCOME
a. INCOME(LOSS) FROM OFFICE OR
I.3 TAX ON LARGE CORPORATIONS C. COMPUTATION OF TAXABLE INCOME EMPLOYMENT
D. TAXABLE INCOME EARNED IN CANADA b. INCOME OR LOSS FROM BUSINESS
BY NON RESIDENT OR PROPERTY GENERAL LIMIT-EXPENSE
IV. TAX ON TAXABLE DIVIDEND c. TAXABLE CAPITAL GAINS AND
RECEIVED BY PRIVATE CORP. E. COMPUTATION OF TAX ALLOWABLE CAPITAL LOSSES 67 & 68
E.1 MINIMUM TAX d. OTHER SOURCES OF INCOME INADEQUATE CONSIDER
XIII. TAX ON INCOME FROM CANADA F. SPECIAL RULES APPLICABLE IN
OF NON RESIDENT PERSONS CERTAIN CIRCUMSTANCES e. DEDUCTION IN COMPUTING INCOME 69
G. DEFERRED AND OTHER SPECIAL f. RULES RELATING TO COMPUTATION
INCOME ARRANGEMENTS OF INCOME DEATH OF TAXPAYER
g. AMOUNTS NOT INCLUDED IN
XV. ADMIN & ENFORCEMENT H. EXEMPTIONS COMPUTING INCOME 70
I. RETURNS, ASSESSMENTS, PAYMENTS h. CORPORATE RESIDENT IN CANADA
AND APPEALS AND THEIR SHAREHOLDERS OTHER IMPORTANT SECT
J. APPEALS TO TAX COURT OF CAN AND i. SHAREHOLDERS OF CORPORATIONS
XVI. TAX AVOIDANCE THE FEDERAL COURT NOT RESIDENT IN CANADA 74-80
j. PARTNERSHIPS & THEIRS MEMBERS
XV11. INTERPRETATION k. TRUSTS & THEIR BENEFICIARIES
This whole box belongs to Part 1 tax

This whole box belongs to Division B

Income

EXHIBIT 2: STRUCTURE OF THE INCOME TAX ACT

SELECTED PARTS DIVISIONS SUBDIVISIONS SECTIONS

I. INCOME TAX

I.1 INDIVIDUAL SURTAX A. LIABILITY FOR TAX

B. COMPUTATION OF INCOME
a. INCOME(LOSS) FROM OFFICE OR
I.3 TAX ON LARGE CORPORATIONS C. COMPUTATION OF TAXABLE INCOME EMPLOYMENT
D. TAXABLE INCOME EARNED IN CANADA b. INCOME OR LOSS FROM BUSINESS
BY NON RESIDENT OR PROPERTY BASIC RULES
IV. TAX ON TAXABLE DIVIDEND c. TAXABLE CAPITAL GAINS AND
RECEIVED BY PRIVATE CORP. E. COMPUTATION OF TAX ALLOWABLE CAPITAL LOSSES 5
E.1 MINIMUM TAX d. OTHER SOURCES OF INCOME INCLUSIONS
XIII. TAX ON INCOME FROM CANADA F. SPECIAL RULES APPLICABLE IN
OF NON RESIDENT PERSONS CERTAIN CIRCUMSTANCES e. DEDUCTION IN COMPUTING INCOME 6&7
G. DEFERRED AND OTHER SPECIAL f. RULES RELATING TO COMPUTATION
INCOME ARRANGEMENTS OF INCOME DEDUCTIONS
g. AMOUNTS NOT INCLUDED IN
XV. ADMIN & ENFORCEMENT H. EXEMPTIONS COMPUTING INCOME 8
I. RETURNS, ASSESSMENTS, PAYMENTS h. CORPORATE RESIDENT IN CANADA
AND APPEALS AND THEIR SHAREHOLDERS
J. APPEALS TO TAX COURT OF CAN AND i. SHAREHOLDERS OF CORPORATIONS
XVI. TAX AVOIDANCE THE FEDERAL COURT NOT RESIDENT IN CANADA BASIC RULES
j. PARTNERSHIPS & THEIRS MEMBERS 9,10, & 11
XV11. INTERPRETATION k. TRUSTS & THEIR BENEFICIARIES GENERAL INCLUSIONS
This whole box belongs to Part 1 tax 12-17
GENERAL DEDUCTIONS
18-20
CEASING TO CARRY
ON BUSINESS
This whole box belongs to Division B 22-25
Income SPECIAL CASES
26-37
includes Scient Res.
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EXHIBIT 3: STRUCTURE OF THE INCOME TAX ACT
SELECTED PARTS
I. INCOME TAX
I.1 INDIVIDUAL SURTAX
I.3 TAX ON LARGE CORPORATIONS
IV. TAX ON TAXABLE DIVIDEND
RECEIVED BY PRIVATE CORP.
XIII. TAX ON INCOME FROM CANADA
OF NON RESIDENT PERSONS
XV. ADMIN & ENFORCEMENT
-are an extension of the tax act
-modifies provisions of the act,
they do not change them
XVI. TAX AVOIDANCE
XV11. INTERPRETATION
DIVISIONS SECTION
A. LIABILITY FOR TAX
B. COMPUTATION OF INCOME
C. COMPUTATION OF TAXABLE INCOME 150 RETURNS(CORP, IND, TRUST, DEATH)
D. TAXABLE INCOME EARNED IN CANADA
BY NON RESIDENT 151 ESTIMATE OF TAX
E. COMPUTATION OF TAX 152 ASSESSMENTS-includes reassessments
E.1 MINIMUM TAX 153 WITHHOLDINGS
F. SPECIAL RULES APPLICABLE IN
CERTAIN CIRCUMSTANCES 154 AGREEMENT FOR TAX TRANS PAYMENT
G. DEFERRED AND OTHER SPECIAL 155-
INCOME ARRANGEMENTS 160 INSTALMENTS AND PAYMENTS
161-
H. EXEMPTIONS 162 INTEREST AND PENALTIES
I. RETURNS, ASSESSMENTS, PAYMENTS
AND APPEALS 163 FALSE STATEMENTS OR OMMISSIONS
J. APPEALS TO TAX COURT OF CAN AND
THE FEDERAL COURT 164 REFUNDS
165 OBJECTIONS TO ASSESSMENTS
166 GENERAL-EG EXTENS OF TIME BY COURT
FILE NAME ="TAXIND4.XLS"
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Exhibit 4: Judicial Decisions and How it Works

INCOME TAX LEGISLATION IF OFTEN SUBJECTED TO INTERPRETATION. IN
CASES WHERE DIAGREEMENT ARISES THE COURTS ARE ASKED TO RULE.
AS AN ACCOUNTING PROFESSIONAL YOU SHOULD RECOGNIZE YOUR
LIMITATION IN ATTEMPTING TO ADVISE A CLIENT BASED ON A READING
OF CASE LAW. A TAXPAYER OR CRA CAN APPEAL EACH TIME THEY LOSE
TO A HIGHER COURT UNTIL THEY REACH THE SUPREME COURT.

LOWER COURT
TAX COURT OF CANADA (TCC)-AFTER 1984
TAX REVIEW BOARD (TRB)-BEFORE 1984
TAX APPEAL BOARD (TAB)-PRIOR 1972
Went through several name changes over the years

MIDDLE COURT
FEDERAL COURT OF CANADA, TRIAL DIVISION-(FCTD)

HIGHEST COURT
FEDERAL COURT OF APPEAL (FCA)
SUPREME COURT OF CANADA (SCC)

REPORTED IN

DOMINION TAX CASES (CCH)

TAX APPEAL BOARD CASES (ACB)
CANADA TAX CASES (CARSWELL)

LAST REPORTED DECISION TAKES PRECEDENT. NOTE THAT

THE HIGHEST AUTHORITY IS THE SUPREME COURT

GOVERNMENT CAN AMEND TAX ACT AFTER THEY LOSE THE CASE
BUT IT IS NOT RETROACTIVE. SO ALWAYS CHECK TO SEE IF
CHANGES TO TAX ACT AFTER THE CASE OCCURRED TO SEE IF
THE CASE IS RELEVANT.