Chartered Professional Accountant, Experienced Bookkeepers, Personal and Business Tax Return Specialists - Whitby ON - Call - Toll Free: 1-800-942-5558 or Local: 905-666-5071
Cottage Life: Preparing for Tomorrow Requires Some Thinking Today

Cottage Life: Preparing for Tomorrow Requires Some Thinking Today

As you lounge on your dock this summer it might be a good idea to give some thought about the future fate of your cottage hideaway. While cottage life is fabulous, it does come with some potential issues that could cause heartache down the road for you or your family if you don’t address them now.

Your Family Trust Might Need Some Tweaking

If you own a home or cottage through a trust you should speak to a Chartered Professional Accountant to ensure that your family trust structure meets the requirement of the recent CRA tax law amendments. You might find that you need to make some changes to ensure that your estate planning is still appropriate. Here’s an example: if your trust is no longer eligible to designate a property as a principal residence under the new rules, but owned that property at the end of 2016, then it must separate its gain into two components:
1) The gain accrued to 31 December 2016 (which may be sheltered by the principal residence exemption)
2) The gain accruing from the beginning of 2017 to the date of disposition (this portion will be subject to tax).

Do You Plan to Live at Your Cottage Full-time When You Retire?

If your plan is to sell your home and eventually use your cottage as your principal residence, it’s a good idea to sketch out that plan to forecast the tax implications of various scenarios.  If you were to sell your principal residence and then move to your cottage to live, you do not have to pay capital gains tax on the sale of your house, but you would need to report the sale because CRA (the Canadian Revenue Agency) now requires the reporting of your sale on your income tax return for tracking purposes.

Once you move to your cottage it would become your principal residence. However, if you chose to sell your cottage at some future date you will trigger a capital gain tax bill because it has not been your principal residence for the entire time you have owned that property.  In order to calculate the tax you owe, CRA would use the following calculation:

(# of years home is principal residence + 1)  x capital gain
# of years home is owned

Do you plan to pass down the cottage to your kids?

If your wish is to pass along your cottage to your children, then you will need to give careful thought regarding how you intend to do this and what implications it may have for your children. You can pass down the cottage as a part of your estate:

Scenario One: You have been living full time in your cottage at the time of your death. In this scenario, the capital gains tax owed by your estate will be calculated as though you sold the property (see calculation above).

Scenario Two:  You have NOT been living full time in your cottage at the time of your death.  The tax triggers for each property will be based on their status as property: principal residence (home) and personal-use property (cottage). Both properties will be treated as though they were sold and the tax owing will be determined thusly:

  • Your Principal Residence –  exempt from capital gains tax
  • Your Cottage –  your estate will be required to calculate the increase in the value of the cottage from the purchase date to the date of death. If the cottage has been owned since before 1972, only the increase in value since December 31, 1971 is taxable, because taxation of capital gains began with the 1972 taxation year.  December 31, 1971 is the valuation day for properties owned prior to that date.
If you are worried that your estate may not have the funds to pay this tax bill and your kids might be forced to sell the cottage because of it, you might want to think about getting a life insurance policy that can be used to pay the tax bill when the time comes.
 Note: Remember life insurance premiums gets more expensive as you get older, so don’t wait too long to buy or you’ll be paying more!  You can think of creative ways to pay the premiums like sharing the cost with your kids or having them pay it entirely.  Just be sure to discuss this with everyone before buying anything, to ensure that each person agrees with this plan.

Sell The Cottage to Your Kids at a Bargain Price

Some people favour selling their cottage to their kids for a small amount to avoid capital gains tax. The reality is that it doesn’t matter if you sold it to them at a bargain price, CRA will still calculate the capital gain based on the fair market value of the property to determine the tax bill. And just to add to the fun, CRA will use that low purchase price as the calculation for capital gains if they should ever sell the cottage. Ouch!  So basically, there is no getting around it, someone will have to pay the taxes one way or another.
Aside from tax implications there are other scenarios that you might want to chat about with your kids to make sure everyone is happy with the unique dynamics that result from a shared family cottage:
  • How will the taxes, running and maintenance costs be shared/paid for?
  • How will the usage time at the cottage work?
  • What if one of your children decides he/she wants to sell their portion? Or is forced to because of a divorce scenario?

Cottages are wonderful places for families to gather, share experiences and make memories, so it’s important to take some time to plan for a smooth transition into the future. There is a method that can accommodate the unique structure of your family.

As a shared family cottage owner myself, and Chartered Professional Accountant, I can understand the situation from both sides.  If you would like to chat about your cottage or estate planning issues, and determine the best tax planning structures  for you and your family,  please email me at  so we can arrange a time to meet.



Succession Planning – Protects your business and retirement… don’t put it off

Succession Planning – Protects your business and retirement… don’t put it off

Succession Planning/Retirement Requires Advance Planning… don’t put it off


I fully confess to not being an enthusiastic winter person. So, it is not surprising that as I watch the first snowflakes of the season falling, my thoughts immediately leap to sticking my feet into the sand on a secluded, tropical beach. Winters in a warm climate; that’s a common daydream when envisioning retirement.

For many people, retirement means attending their farewell party then heading home to enjoy their new-found freedom funded by a good pension. But for those of us who own our own businesses, the road to retirement can be an uncertain and confusing one. How can you transform those years of hard work and accumulated equity in your business into a pension fund? It is at this point that the complexities and confusion can become overwhelming. The reality is that if you don’t have a succession plan in place this could leave you dangerously unprepared for retirement, or even disability or death.


A Well-Funded, Relaxing Retirement Doesn’t Just Happen… It Takes Planning


A succession plan is a must for every small business owner who wants to protect their years of hard work and dedication to their company. Don’t put it off – it is good, responsible business management. The first step in creating your succession plan is to think about the future of your business. Do you see your business: providing you with a retirement income, being passed onto your children, or being sold to a third party?

So, what is a succession plan? A plan should determine how your business will ultimately be transferred in various scenarios and detail the steps necessary to prepare for each of those transitions – because we can’t predict the future, but we can prepare for it. If done properly, your plan should map out the path to your retirement and address the scenarios of your sudden death or profound disability to ensure your wishes are carried as you want them.

As any business owner knows, the reality is that the financial management of their company is indeed separate from their personal financial side, but the two are intensely connected. Consequently, it is necessary to view your business succession planning as an extension of your personal estate planning but with the twist of looking at it through the lens of the future operations of your business. Depending on the future you envision for your business, your plan must be sculpted accordingly:

 Are my business and family protected in the event I should become disabled?
 What happens if I should die suddenly?
 What happens to my business when I am ready to retire?
 What is the best path to get the kind of retirement I want?
 What are the tax implications of each scenario?
 Are there ways I can start building a bigger retirement nest egg?
 How and when can I start preparing for a financially secure retirement?

Consider these questions carefully. As you enjoy the upcoming Christmas season with cherished family, friends and employees, remember your planning protects all of them as well. So, give yourself and them the gift of making the commitment to begin your succession planning with the arrival of the New Year. Then go, relax and relish the magic of the season knowing you’ve done something good.

In the New Year I will have more tips on succession planning so keep an eye open. If you are eager to get a jump on it sooner drop me a line. I am also considering running Succession Planning workshops to help clients get started on the planning path – let me know if that’s something that would interest you.

All the best of the season,


If you would like to speak to us regarding your retirement or tax planning, tax returns, bookkeeping or any of your other accounting or financial planning needs, please contact us anytime – we’d love to chat with you.

Kelly Melanson Professional Corporation – Chartered Professional Accountant, CPA 11 Stanley Ct, #13 Whitby, ON L1N 8P9 – (905) 666-5071 Toll-free: 1-800-942-5558 – Email:

Knowledge is power at tax season!

Knowledge is power at tax season!

Learn how to set up your My Account with CRA

You can better manage your finances if you have up-to-date information. That is why I am encouraging all my clients to make sure they sign up for their “My Account” with CRA. It is fast and easy. You can watch the video on my site where I show you, step-by-step, how to to set up your My Account with CRA You will be happy you did, because once you sign up you can:

Knowledge is Power – Get it with your CRA My Account:

• Find out your RRSP limit, home buyer’s plan balance and Tax Free Savings balance
• Print off your notice of assessments going back to 2005
• See if any carryover amounts like tuition
• See if you owe any money, if you made installments how much, etc.
• Request information through sending CRA a message
• Check your child tax benefit payments and when they were paid
• Check your HST credits, disability credits working income tax benefits, Ontario trillium benefits, so if it says they mailed you a cheque and you didn’t get it, you can call and ask where they sent it to… maybe you didn’t change your address?
• Submit required documentation to CRA when there is a request for information from you. Simply scan it and submit it electronically via your account!
• Save yourself money because you can do all these things yourself and save yourself service fees
• MOST importantly – protect yourself and your money! There have been a lot of scams recently so if you receive a request that seems a little strange you can log into your account and review any letters sent to you from CRA through the view mail function to ensure that it is a legitimate request from CRA.

Extended Hours for Tax Season!

To make it more convenient to drop off your tax return files to our offices, we are offering extended hours:

March 2017

  • Tuesdays and Thursdays until 7pm
  • Saturday March 11th and 25th from 10am to 2pm

April 2017

  • Mondays to Thursdays until 7pm
  • Saturdays from 10am to 2pm

And, as always, you are free to drop your files through door slot anytime after hours. If you have any questions, please feel free to contact the office.

Happy Tax Season!


If you would like to speak to us regarding your tax planning,  tax returns  or any of your other accounting or financial planning needs, please contact us anytime – we’d love to chat with you.

 Kelly Melanson Professional Corporation – Certified Chartered Accountant,CPA 11 Stanley Ct, #13 Whitby, ON L1N 8P9 – (905) 666-5071 Toll-free: 1-800-942-5558 – Email:

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