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Delean: Breaking down eligibility for Quebec's cost-of-living cheque

Also: Claiming losses on worthless stock and is it OK to move to the U.S. without telling your bank?

An economic update presented by Quebec Finance Minister Eric Girard in November includes new payments to anyone eligible for the Solidarity Tax Credit.

Quebec’s newly announced cost-of-living payout and the tax treatment of worthless over-the-counter stocks were among the topics raised recently by readers. Here’s what they wanted to know.

Q: I’m still trying to figure out Quebec’s fiscal update. Will I be eligible for the cost-of-living cheque?

A: It hinges on whether you’re now receiving, or eligible to receive, the Solidarity Tax Credit from the province. The $200 special payment to help offset the recent spike in living costs will go out automatically on Jan. 24 to people who have been getting the credit since July 2021. It will be $400 if the recipient reported having a spouse or common-law partner on his or her 2020 tax return. (The rules of the credit limit payment to one person per couple). Someone living alone will get a slight bump to $275.

According to the 2020 tax guide, to be eligible for Solidarity Tax Credit payments as of last July, you needed to be at least 18 on Dec. 31, 2020 and your net income for that year could not exceed $53,886 for a single person or $58,659 for a couple. If you’re not getting the credit because you didn’t file your 2020 tax return yet, get cracking. You have until Dec. 31 to do so and still be eligible for the special payment. Otherwise, it’s lost. Cheques will be sent even to those with an unpaid balance from their 2020 provincial taxes (remember, those who got COVID assistance in 2020 were given until April of 2022 to pay any amount owing without penalty). If you do have a balance, why not use this money to pay it down? April won’t be far off at that point.

Q: I purchased an over-the-counter stock years ago that now has zero value and cannot be traded. How do I claim a capital loss for this on my 2021 taxes? I am familiar with reporting capital gains and losses from publicly-traded companies but have never before reported an OTC stock.

A: Canada Revenue Agency says the procedure is to elect, under subsection 50(1) of the Income Tax Act, to deem to have disposed of the shares at the end of the tax year for nil proceeds and to have immediately reacquired them at a cost of nil. You’ll need to attach a signed letter to the tax return with a description of the shares and indicating you want Subsection 50(1) to apply. That particular section of the Income Tax Act specifies that, at the end of the year, the corporation must be insolvent and does not carry on business, the market value of the shares is nil and it’s reasonable to expect the corporation will be dissolved and not commence business again.

“If these conditions are not met, the election cannot be made and there is no disposition,” CRA said.

Q: I moved to the U.S. many years ago and filed a final Canadian tax return, but I maintained all my investments at my old bank in Canada and never notified them of the change of address as all mail is sent to my family here. I collect my RRIF and investment income and Canadian pensions without non-resident withholding tax. Am I in violation of any rule by doing this? Could the government tax me retroactively if I change to a U.S. address now? I have been filing U.S. tax returns.

A: You are playing with fire here. Canadian financial institutions are required to withhold non-resident tax at a rate of 25 per cent on certain types of Canadian-sourced income they pay or credit to non-residents. Interest, dividends and pension amounts are included on the list. There are even requirements relating to Old Age Security (OAS) because of the clawback rules. There is a tax treaty between the countries that mitigates double taxation, but that’s no excuse for misrepresenting your residency status to your Canadian income sources. It certainly could come back to bite you. CRA could tax you retroactively as of the date you ceased to be a resident.

The Montreal Gazette invites reader questions on tax, investment and personal finance matters. If you have a query you’d like addressed, please send it by email to Paul Delean at gazpersonalfinance@hotmail.com

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