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Interac e-transfers
January 26, 2020
8:43 am
Norman1
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Wealth One Bank is not that big and may not have an army of accountants and lawyers, like RBC Royal Bank has.

There's also a chance the correct answer got distorted on its way from the legal/accounting department to the customer agents.

January 27, 2020
12:01 am
Loonie
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Well, it only takes one lawyer or accountant to notice and deal with the issue.

I remember BrimleyChen warning us against this bank when it first opened as s/he seemed to know the backgrounds of some of the players.

Toto, be sure to keep us informed on how this plays out!

January 27, 2020
5:31 am
canadian.100
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Loonie said
Well, it only takes one lawyer or accountant to notice and deal with the issue.

I remember BrimleyChen warning us against this bank when it first opened as s/he seemed to know the backgrounds of some of the players.

Toto, be sure to keep us informed on how this plays out!  

Loonie - Don't assume they have even one competent lawyer or accountant. It is true that there was a shady story about the establishment of this bank in Canada by wealthy mainland China individuals (I believe one in particular had a "shady" reputation) and who contributed funds to Justin Trudeau during his first mandate - incorporation of this bank was approved by the Liberal govt (of course!) One can find all the press info on the internet. As I posted earlier, this bank has not turned a profit. (Source: statements on the OSFI site.)

January 27, 2020
7:16 am
Bill
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I had a GIC mature on Saturday, this morning still sitting there as a GIC. I called at 10:00 am, message said to call back during business hours then hung up, called back and rep told me her computer's frozen so she'll have to call me back. I said don't bother, just put the funds in my savings account as my maturity instructions had indicated. We'll see.

January 27, 2020
7:27 am
Bill
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Update. Rep just called back and said because no transaction in last 6 months my savings account is inactive status thus GIC proceeds couldn't be put into it. Rep has done her thing and she thinks I should see it there tomorrow, it's an overnight process apparently.

January 27, 2020
7:40 am
Bill
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Update. Rep called back, it's in my savings accounts (I confirmed it), so all resolved within half an hour, I like Wealth One again, we're buds once more.

January 27, 2020
1:17 pm
toto
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I've been checking my CRA account to see if tax forms for my promo money got posted, but nothing yet, I decided to call wealth one again, they put me on hold for quite a while, a manager came on the line and said only the interest I accrue will be taxable, the promo money does not fall in that category and therefore is tax free!

January 27, 2020
3:54 pm
Bill
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If Wealth One is saying this is not interest income, is just a promo gift, and they are not reporting it to CRA as interest income of recipients then who's to say otherwise? Plus CRA won't even know about it. I wouldn't report it, as advised by Wealth One more than once to toto.

I also do kind of view it as Norman1, i.e. as getting a $100K GIC for $99K, after promo discount/rebate, so triggering a capital gain when it matures. But, again, CRA would never know about it.

Norman1, why do you say it doesn't meet criteria 3 of "gift"?:
"The donee confers no right, privilege, material benefit, or advantage on the donor or on a person designated by the donor." What right, etc has toto conferred on Wealth One?

January 28, 2020
8:51 pm
Norman1
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toto loaned Wealth One Bank a substantial amount of money by purchasing those GIC's. That counts as a material benefit.

Return of capital, cashbacks, or rebates are not reported as income in the year received. Wealth One Bank is definitely correct about that.

But, I think someone there jumped to the incorrect conclusion that "not taxable as interest on receipt" implies "no tax consequences at maturity."

It is up to the recipient to record the reduction in cost and report accordingly later when the item is disposed of or capital cost allowance is claimed. Yes, that $1,000 rebate on a new truck does reduce the cost of the vehicle for tax purposes!

Just because no T5 slip was issued for the cashback doesn't mean there is no record of the payment. Wealth One likely recorded the payments as marketing expenses or operating expenses and deducted them.

January 29, 2020
10:03 am
Bill
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I don't agree that whenever someone buys a GIC that that's viewed as a benefit to the fi in CRA's eyes. The GIC issuer is paying going rate interest and has an outstanding liability to offset the cash received, no net gain, just raising cash, just added equally to assets and liabilities on balance sheet. But I do agree that there's a capital gain to report by GIC holder at time of maturity.

When Wealth One records a marketing, etc expense there is no detailed reporting to CRA as there is in the case of T5s, etc. CRA would not know in detail what comprises Wealth One's deducted expenses so would not know about these rebates, unless Wealth One recorded these rebates/discounts as a separate identifiable expense item instead of buried in marketing, etc, and even then CRA would have no information who these amounts were paid out to. Unless CRA conducted an audit of Wealth One, as far as I can tell.

January 30, 2020
5:35 pm
Norman1
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Being loaned money, through an GIC or a bond, is a material benefit to a financial institution or borrower. That the loaned money is eventually repaid and interest is paid during the loan period does not change this.

That "renting" of money is quite similar to the renting of appliances, cars, and houses.

That's correct. There is no routine reporting to CRA of cashbacks and rebates. If one doesn't report the capital gain when the GIC matures, then one is hoping CRA doesn't audit Wealth One or any of the other recipients of the cashback and see the issue!

January 30, 2020
7:13 pm
Bill
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Norman1, even though in this transaction I disagree with your reading of the 3rd condition in the ITA section you cited (some jurisprudence or other authority re the meaning of "material benefit" as intended by that specific section could change my mind) we still end up at the same place. That is, no income tax for the recipient of the rebate at time of receipt but capital gain to be reported at time of GIC maturity.

And I'm pretty comfortable CRA wouldn't pick up on this unless it became widespread practice for a few decades.

February 2, 2020
7:43 am
Norman1
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It says "material benefit" and not "material net benefit". Letting someone use $300,000 for some years is a material benefit. I'm not sure how anyone could take a position it is not.

As well, anything that is part of a bargain is not a gift. One sees the expression that the law "presumes bargains, not gifts" in many court decisions.

The bargain that toto and Wealth One Bank struck was that toto would give Wealth One Bank use of the money for an agreed period of time. In return, Wealth One Bank would pay toto that cashback and interest. Consequently, neither the interest nor the cashbark can be a gift.

February 2, 2020
9:11 am
Bill
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I do understand your opinion, Norman1, just saying I don't necessarily share it. For example, letting someone use $300,000 is, to me, not necessarily a material benefit when there are more requirements, i.e. that person has to pay you (maybe even handsomely) interest & then also pay you back by a certain date. Your wider interpretation of "material benefit" (especially as it's in an ITA provision dealing specifically with gifts) means that phrase would apply to pretty much every single transaction arm's length parties freely enter into, plus the benefit would exist for both parties, not just to one, so the argument that the phrase, instead of applying so generally so as to almost render it of little use, has a more specific meaning in this case is one that could be argued. Not saying it would prevail, just my opinion. You obviously know more about jurisprudence, and the concept of presuming bargains instead of gifts is informative to me.

I am coming around, however, to the view in your last two paragraphs. The cashback is only available if you buy the GIC, thus it contravenes the general principle that a "gift" is given freely with no strings attached, not connected to another required action.

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