Fighting Online Defamation in Canada: Top 3 Things You Can Do Without Going to Court for Combatting the Really Horrible Terrible Things People Say on the Internet

He’s a real ___________, his actions show him to be __________, his wife and children are _____________. He’s a _____, a ______ and definitely a ________. His morals and ethics are ________. If you’re thinking of doing business with his company __________, you should be aware of _________. Don’t believe me? I can give you lots of names of others who will back me up. I can’t tell you everything here. Send me a private message and I’ll give you the full scoop!

As posted by A(ngry)W(riter) on (pick your favourite social media).

Sound familiar?

That people say terrible, malicious, untruthful things about other people is nothing new. That they may now have an easy audience of millions rather than dozens for their spiteful attacks has only happened since the rise of online social media that lifted the rants of the misguided out of the dark corners of society.

We’ll peg the dawn of the new defamation age as 26 September 2006 - the date Facebook went fully public. 

Why’s the Internet So Nasty?

Is it just the ease of the Enter key push that makes people so damned nasty on the Internet? Or is there something deeper at work in the psyche? 

Cited a mere 2775 (!) times, an academic paper published by psychologist Dr. John Suler argues Internet disinhibition really is a thing: “The disinhibition effect can then be understood as the person shifting, while online, to an intrapsychic constellation that may be, in varying degrees, dissociated from the in-person constellation, with inhibiting guilt, anxiety, and related affects as features of the in-person self but not as part of that online self” (John Suler, “The Online Disinhibition Effect” 7 CyberPsychology and Behaviour No. 3, 2004). Even if Dr. Suler’s language is a little heavy going, his fundamental conclusion that people really do let it all out online has profound implications for just how nasty, abusive, and hateful some commentary can get. 

How are Defamation, Libel and Slander Defined?

The definition of defamation (under which both libel and slander fall) couldn’t be simpler: “A false written or oral statement that damages another’s reputation” (Black’s Law Dictionary, 10th ed). Libel involves a permanent record, whereas for slander there’s no recording. Thus the difference between the two terms in the always recorded electronic age isn’t the usually assumed to be written versus spoken message. But practically there isn’t much difference between them in terms of what can be done, since legally it’s all defamation. 

So if you run a restaurant, and someone who actually ate there leaves you a bad review about the food, that isn’t defamation. If someone who never ate there calls you a Nazi who won’t serve blacks, that’s another story. 

Top 3 Things You Can Do About Online Defamation Without Going to Court

I’m often consulted by potential clients who have fallen victim to social media weaponization - either through others posting attacks against them, or their being attacked over their sometimes pretty innocuous comments about others. Here’s my top three tips I give them on dealing with it short of going to court, derived from my own legal practice helping people with exactly these kinds of problems. 

1. Write Your Own Takedown Demand Letter to Poster & Service Providers

I find it’s hard to gauge in advance people’s reactions to being called to account in writing. Some will go down fighting to the bitter end no matter how many written demands are presented to them. But others will crumple like Kleenex, even if not admitting they’re wrong. So don’t assume the direct approach is a total waste of time. 

I’ve had entire websites taken down as a result of a single letter from me. At other times, major Internet service providers have yanked posts I objected to without blinking a cursor at my request.

Yes, a letter from a lawyer might enhance the potential for results (see action tip #2 below). But I maintain it’s more what you say than who is saying it that leads to results.

The key points are:

  • write a coherent letter to both the offensive poster and the service provider hosting the content;

  • lead by reaffirming your support for principles of free speech, and that you’ve very carefully considered the merits of the content of the offensive post prior to sending the letter;

  • explain carefully and in detail what is offensive about the post, why it goes beyond the boundaries of free speech, how it affects you personally, and why it’s their duty to take it down (get specific here, not just that you don’t like it or disagree with it);

  • explain exactly what you require to be done and by when (“require” is a good word, rather than “request” - it’s mandatory, but more polite than “demand,” nobody likes demands);

  • ask for the least possible remedy - usually just removing the post - don’t ask for an apology, or for damages, as you’re unlikely to voluntarily get anything that requires real effort;

  • politely explain the consequences of non-compliance: reporting to government, retaining legal counsel, starting a court action - don’t make hollow threats, as they’ll undercut the force of the rest of the letter, only mention things you actually have the means to do, even if you ultimately might not do them;

  • put this into a real paper letter you mail to a real address, which should be possible at least for the Internet service provider, and also email, direct message and fax the letter.

As you want to ensure the defamatory poster hears your comments, it might take some digging to find out contact details. But even if the direct approach to the poster proves fruitless, I’ve found that a paper letter directly to the service provider can work wonders, perhaps because they get so few of them. There’s usually a physical mailing address hidden deep in their “about us” pages.

2. Hire a Lawyer to Write a Takedown Demand Letter

Lawyer letters occasionally have the effect of scaring people a lot more than letters from ordinary citizens. Truth be told, they have no magical powers. And some people will just ignore them anyway. But if you have the money, they might lend more power to online defamation action tip #1 above.

I always tell my clients that lawyers can be a bargain so long as you keep them out of court. As soon as they are in court, costs can soar because of the amount of time that is burned through preparation and attendance at multiple court hearings. Letters don’t burn that kind of time. However don’t expect a lawyer to be able to knock off a powerful letter in 30 minutes, since it usually takes longer than that just to understand the issues, more time to develop a strategy, and yet more to produce polished prose which the client has been able to offer input to prior to sending.

My own online demand letters simply follow the principles I’ve already set out for you above, however lawyers are paid to write for a living so you could get a more finished and persuasive demand letter product than through the DIY route. And you’ll have the lawyer “push.”

But if you hire me to help with your written takedown demand, don’t expect me to put “DO GOVERN YOURSELF ACCORDINGLY” in bold caps at the bottom of the letter. See my article “How to Write Like a Lawyer, & Why You Never, Never, Ever Want to Do That, Even if You’re a Lawyer” for an explanation of why I don’t do that.

3. Make a Complaint to the Police

Criminal libel is actually a thing at ss. 297 to 317 of the Criminal Code. But prosecutions are rare, and parts of those sections have been struck down as unconstitutional in some provinces.

The better ground of complaint is criminal harassment, which only requires “threatening conduct,” not the specific threats of bodily harm or death which the Criminal Code charge of threats requires. Harassment remains a bit difficult to define under Canadian law, but even if the police aren’t willing to lay a charge because of uncertain evidence of intent, they might be willing to contact the poster or service provider to express your concerns. And when the police call I find people tend to pay even more attention than when a lawyer sends a letter.

So rest assured, you’ve got effective options short of going to court. I know the possibly perceived power of a court action might be appealing, but I find that once court action starts you’re less likely to get the other party to voluntarily do anything you ask. Whereas with a proper letter, I’ve seen some amazing results.

Gordon S. Campbell is a trial and appellate civil litigation lawyer practicing throughout Ontario, who has appeared on cases as high as the Supreme Court of Canada. Learn more at acmlawfirm.ca

Must I Consent to a Police Search Request? And the Uncontrollable Urge to Say "Yes"

"No." Unlike some of my what can unfortunately seem like long winded and not as definitive as clients might like answers, consent to search spawns a clear cut single word answer. At least in Canada. 

Police questioning is totally different from police searches as to whether you have a choice or not in responding. While my default advice is always “say nothing” in response to police questions, unfortunately the real world is much more nuanced than that. Sometimes you must answer police questions, depending on what they are asking about (like insurance automobile questions). And sometimes it's in your best interests to answer police questions in an attempt to clear up suspicions and avoid being charged, even if you aren't obliged to answer (though often its not a good idea to do so). But never do you have to consent to a search.

Either the Police Have a Power to Search or They Don't

Either the police have powers and grounds to search, or they don't. It's only when they don't have grounds that they might ask you a question after a highway speeding stop like: "you mind if I take a look in your trunk?" And sometimes if you do say "no", you might get a response like "hey, if you don't have anything to hide, why would you say no?" Your best response is to remain firm and polite in your "no." At the very least, call a lawyer for advice. 

Sometimes, the police might even pull out a form for you to sign, which says that you've been told: (1) you don't have to consent, (2) that you can withdraw your consent at any time, and (3) anything found during the search can later be used against you as evidence in court. Now reading this, you might be thinking: "Why would anyone consent? I would certainly never consent! I'm not that stupid!"

Why Do So Many People Consent to Police Searches?

But thousands of people a year throughout Canada (and in other countries with similar constitutional protections against unreasonable search and seizure, like the United States) do just that, and consent to searches where the police have no grounds to search. Some even carefully read those forms, do understand them, but sign anyway. Why?

It seems to be something to do with people feeling that: (1) they have no choice, (2) they have nothing to hide, or (3) even though they do have something to hide, the police won't find it, and this is the best way to get rid of them. These "yes" men and women are wrong on every count. 

First, you do have a choice if the police ask if you mind if they do a search. Be it a search of your vehicle, a search of your house or office, a search of a bag you are carrying, or a search of your person, just say that you do mind. Be polite about it. You can even ask whether the police will go ahead without your consent, because they believe they have some kind of other authority?

The Police May Already Have Other Authority to Search Anyway

Sometimes the police will already have - or have sufficient grounds to obtain - a search warrant to search your vehicle, house or office. If they do, then your consent is irrelevant. Don't try to stop the police from executing a warrant (or otherwise conducting any kind of search), unless you want to be charged with obstructing justice. But they must get the warrant from a judge or justice before conducting a search, or have some other kind of lawful power to search without consent. 

Sometimes the police will already have grounds and powers to search incident to arrest without a warrant. Again, if they do then your consent is irrelevant. But they must have first arrested you, told you what you are being charged with (unless it is an emergency), and not exceed the limits of the search incident to arrest power (usually limited to your person and what you are carrying - though occasionally it might extend to a vehicle you are in; it will never extend to your whole house or office). 

Sometimes the police will be able to invoke exigent circumstances to search without a warrant or arrest if there is an emergency situation, where the search just can't wait. Again, your consent will be irrelevant. Though be aware that true exigent circumstances searches are very rare, since the police do have investigative detention powers to hold you, your vehicle, or even your home or office for a reasonable period of time pending the arrival of a search warrant. 

All Consent Searches are Vulnerable to Challenge

If my police powers to search explanation is starting to sound a bit complicated, that's because it is complicated. Lawyers and judges disagree frequently about when particular powers exist, and well intentioned police officers can certainly get it wrong if the judges are having trouble getting it right. Though throughout the training I still do for police officers on search and seizure, the best mantra for those officers to repeat is: "if in doubt, get a warrant." I especially teach my police students: never rely on consent, it's too uncertain of an authority, with too unpredictable later results. 

If you are the subject of a police search - by consent or otherwise - and something incriminating is found that leads to you being charged, my recommendation is to consult a lawyer about your prospects for challenging the search in court. I'm not saying you are guaranteed success on such a challenge, but in my experience most people never challenge police searches. Sometimes a search will be completely legal, and sometimes it won't be. But only by involving a lawyer will you be able to find out which category your search falls into.

No One Would Believe This In a Movie Script

While serving as a Federal Crown Prosecutor I once was involved in a case where a BMW speeding along the TransCanada Highway was stopped by police for a traffic violation. The stopping officer only had grounds for a traffic violation, but his suspicions were quite appropriately aroused.

The occupant of the fancy car seemed overly polite when stopped. And overly nervous, constantly shifting in his seat, eyes darting about, hands tightly gripping the steering wheel. Plus the vehicle had out-of-province plates, and the conscientious officer remembered from his training that fast food wrappers strewn about a car might be a sign that the occupants were driving non-stop over a great distance for illicit purposes (yes, there is a course on that, I've seen the materials; it might motivate all of us to tidy our vehicles). 

So, after giving him a speeding ticket, the officer asked the driver if he minded if the officer took a quick look in the trunk of the car. This officer was very well trained, and made it clear to the driver that he didn't need to consent, that he was free to go, and that anything he found could be used against the driver in court. The officer even pulled out a consent form for the driver to sign. Now what the officer definitely didn't know in advance was that the driver had 10 kilos of coke and $100,000 in cash in the trunk. And what do you think that driver did? He signed, and popped the trunk!

Gordon S. Campbell practices criminal defence law throughout Ontario, with a focus on search and seizure cases which he has appeared on up to the level of the Supreme Court of Canada. He also trains law enforcement agencies throughout Canada on search warrant & wiretap drafting, and is author of The Investigator's Legal Handbook series of books.

Le droit de garde et d’accès pour les grands-parents : trois erreurs à éviter

Le rôle des grands-parents dans la vie des petits-enfants

Les grands-parents peuvent jouer un rôle essentiel dans la vie d’un enfant et soutenir les parents dans l’éducation de ce dernier. Beaucoup de grands-parents offrent de s’occuper de leurs petits-enfants sans rémunération et prennent le temps de faire des activités avec ceux-ci. De plus, les grands-parents peuvent représenter un point de référence culturel pour que les petits-enfants comprennent mieux l’histoire de leur famille. Par ailleurs, certains grands-parents contribuent aux dépenses financières des parents pour offrir de meilleurs opportunités éducatives, religieuses ou sociales aux enfants, ce qui finit par aider l’enfant à s’épanouir.

Les éléments pris en compte pour obtenir la garde ou l’accès aux petits-enfants

Au cours de l’histoire du droit de l’enfance, deux tendances se sont développées : d’un côté, les décisions en faveur de l’autonomie parentale, de l’autre côté, les décisions favorisant l’intégration des grands-parents dans la vie des enfants. En Ontario, depuis 2016, la Loi portant réforme du droit de l’enfance autorise de manière explicite les grands-parents de réclamer la garde et l’accès de leurs petits-enfants.

Lorsque les grands-parents présentent une requête pour avoir des droits de garde ou d’accès à leurs petits-enfants, les tribunaux prennent en considération les facteurs suivants :

  • l’amour, l’affection et les liens affectifs qui existent entre l’enfant et les grands-parents
  • le point de vue et les préférences de l’enfant, dans la mesure où il est raisonnablement possible de les déterminer
  • la durée de la période pendant laquelle l’enfant a vécu dans un foyer stable
  • la capacité et la volonté des grands-parents de donner des conseils à l’enfant, de s’occuper de son éducation, de lui fournir les objets de première nécessité et de satisfaire ses besoins particuliers
  • le projet des grands-parents relatifs aux soins et à l’éducation de l’enfant
  • le caractère permanent et stable de la cellule familiale où l’on propose de placer l’enfant
  • l’aptitude des grands-parents à agir en tant que parent et
  • les éventuels liens familiaux entre l’enfant et les grands-parents

Malgré l’évolution du droit, les tribunaux continuent souvent à privilégier le droit d’accès des parents par rapport à ceux des grands-parents. Cela dit, en plus d’analyser la relation des grands-parents avec l’enfant, les tribunaux regarderont aussi si les parents ont décidé de nier l’accès aux grands-parents de manière arbitraire. Pour que leurs droits d’accès ne soient pas réduits ou supprimés, les grands-parents doivent éviter de commettre les trois erreurs suivantes.

1. Les grands-parents ne doivent pas remplacer le rôle des parents

En aucun cas les grands-parents doivent usurper le rôle du parent. Même si les parents souffrent de difficultés financières, psychologiques ou émotionnelles, le rôle des grands-parents n’est jamais de venir prendre la place des parents pour éduquer et élever les enfants. Bien sûr, les grands-parents sont toujours bienvenus pour assister dans le développement de leurs petits-enfants. Cependant, l’intervention des grands-parents dans la vie des petits-enfants doit être limitée et doit être approuvée par les parents.

Imposer un régime alimentaire ou une religion quelconque à l’enfant ou encore, inscrire un enfant à une activité ou un établissement scolaire spécifique sans consulter les parents sont des exemples de comportement qui seront réprimandés par les tribunaux judiciaires.

2. Les grands-parents ne doivent pas adopter une attitude hostile envers les parents

Bien que la législation ontarienne prévoie que les tribunaux doivent prendre en considération les droits des grands-parents lorsque ceux-ci présentent une demande d’accès aux petits-enfants, le droit d’accès aux petits-enfants n’est jamais automatique. Ainsi, il est important pour les grands-parents de garder une conduite qui est raisonnable envers les deux parents, notamment si les deux parents se séparent.

Parfois, des tensions peuvent se bâtir entre les grands-parents et le parent qui a la garde des petits-enfants, surtout si ce parent n’est pas leur enfant. Lorsque les grands-parents adoptent une attitude hostile envers le parent qui a la garde de l’enfant, ils réduisent leurs chances d’avoir gain de cause en cour. Souvent, les tribunaux préfèreront éviter de mettre de l’huile sur le feu en obligeant le parent en question d’autoriser l’accès de l’enfant aux grands-parents.

3. Les grands-parents ne doivent pas ignorer les petits-enfants

Pour maximiser le temps d’accès avec leurs petits-enfants, les grands-parents doivent s’assurer de bâtir une bonne relation avec l’enfant dès sa naissance. Dans les cas où l’enfant ne connaît presque pas ses grands-parents, un tribunal pourrait décider qu’il n’est pas forcément dans le meilleur intérêt de l’enfant de donner des droits d’accès aux grands-parents.

Il incombe aux grands-parents bâtir une relation positive avec l’enfant et ses parents. Visiter l’enfant de temps à autre est insuffisant pour créer ce type de relation. Les grands-parents doivent créer des liens affectifs réels et participer de manière très active dans la vie de leurs petits-enfants. De façon générale, les tribunaux sont prêts à accorder des droits d’accès aux grands-parents lorsque l’enfant a vécu chez eux ou lorsqu’il a passé une période considérable avec eux peu de temps avant les procédures judiciaires.

Avant de présenter une requête devant les tribunaux, il peut être judicieux de retenir les services d’un avocat pour connaître ses droits et ses obligations par rapport aux petits-enfants.

Karen Kernisant est avocate à Aubry Campbell MacLean et pratique dans le domaine du droit de la famille, du contentieux civil et du droit criminel.

Canadian Taxes A to Z (2018): "U" is for UCC, "V" is for V-Day, "W" is for Withholding Tax, "X" is for X-Mark, "Y" is for Year End, "Z" is for ZBB

Today is the last in the series of Canadian Taxes A to Z (2018) posts. Yes, I know you're sad. I'm sad too. But at least you can look forward to receiving that big tax refund generated through your newfound interest in Canadian tax law!

I'm combing the last six letters of the alphabet into one post, rather than stretching them out into six separate posts, because we're down to the wire for filing deadlines. So I hope you'll forgive me for the combination of the last six tricky letters of the alphabet. 

If you run into trouble with the CRA out of the 2017 taxation year, I urge you first to consult a designated accountant or tax planning lawyer. You may need to file an objection, or seek other relief; you'll be subject to strict time deadlines in doing so. 

If you still can't sort things out, and need to go to the Tax Court of Canada or the Federal Court after exhausting the CRA's internal remedies, given me a call, or drop me a line. 

UCC STANDS FOR MORE THAN UNIFORM COMMERCIAL CODE

"U" is for for Undepreciated Capital Cost (UCC). It's very important to keep track year to year of your UCC for each capital asset (within each class) that you own. It's not enough to simply know how much you paid for the capital item, and what percentage of depreciation can be claimed each year, since each year the depreciation claimed will be a slightly smaller figure (the same percentage of a lower number), whereas in the first year the depreciation claimed will be a much small number (half the normal depreciation rate) because of the half year rule. Keep all your UCC receipts organized by class, and year of acquisition. 

"V" ISN'T JUST FOR VICTORY

"V" is V-Day. No, not Victory Day. Not Victoria Day. Definitely not Valentines Day. V-Day stands for Valuation Day in tax speak. V-Day is any day when you needed to determine a fixed financial value for something that you'd owned for a while, and planned to own for a while longer, but which didn't have a readily apparent value (like a share price). 

For example, if you bought a commercial property back in the 1960's prior to capital gains being taxable, and then planned to sell it now, you'd need to establish a value for it as of the end of 1971 after which capital gains became taxable. There could be other tax reasons for a V-Day, like making a particular election under the Income Tax Act. In any case, you may need to later defend your V-Day value if challenged by the CRA, so ideally you'll employ a professional to establish a fair market value.

ENSURE YOU WITHHOLD TAX WHEN REQUIRED

"W" is for Withholding Tax. Canadian law stipulates many situations where a payor of money is required to withhold a certain percentage of that money, and instead of paying it over to the person to whom it is owed, must remit it to the government for estimated taxes owning. The most common type of tax withholding is that of employers who are required to withhold a percentage of employee wages as income taxes, with the percentage of withholding rising with the level of the employee's wages. Other kinds of common withholding taxes are those required by financial institutions on RRSP withdrawals, and those required on foreign residents for Canadian income. 

At tax filing time, the government may determine that there was too much or too little withholding, leading to a refund or additional taxes owing. The trick to navigating withholding rules is to try to bring yourself within the conditions where no withholding is required, or to keep the payments you receive below the threshold where a higher level of withholding is triggered. 

X MARKS THE SPOT

"X" is for ... well ... er ... I don't know what X is for. I've look in the Income Tax Act. I've studied accounting term glossaries. And none are big on the letter X.

Perhaps Taxgirl (who gave me the inspiration for all these Canadian taxes A to Z posts) can help out? Her X word is sometimes the name of an IRS form which doesn't really help in the Canadian context. In other years she cited financial terms involving X, but I like her 2012 post the most: X is for X-Mark (Signature): http://www.forbes.com/sites/kellyphillipserb/2012/03/28/taxes-from-a-to-z-x-is-for-x-mark-signature/

Taxgirl quite rightly points out that a tax return in the U.S., just like a return in Canada, isn't valid unless it's signed! It's easy to forget that last step, after putting in all the up front work on the numbers. Electronic returns also need to be "signed," but there are deeming rules that you signed it if you submitted it in the correct way through the electronic portal. 

BEWARE OFF-CALENDAR YEAR ENDS

"Y" is for Year End. Many organizations (including corporations) have off-calendar fiscal years. Often, the timing of the year-end is to coincide with a time of the year when business is slow and employees are not on holiday, and thus there are more resources available to close the year-end books. Tax consequences of having a non-calendar fiscal year can be to shift some income to a future taxation year, and thus defer tax. 

However, unincorporated individuals operating as sole-proprietors or partners can generally no longer benefit from a permanent income/taxation shift. While they might initially defer some tax in the first year of business, that tends to get picked up in the second year of business (possibly pushing the businessperson into a higher tax bracket by capturing more than 12 months of income). Definitely get professional accounting advice prior to deciding to go with a Year End other than December 31.

ZERO BASED BUDGETING LOOKED SO GOOD ON PAPER

"Z" is for Zero Based Budgeting (ZBB). Yes, not really a tax term. But like the letter X, there aren't a whole lot of Z tax terms. And zero based budgeting could ultimately affect your tax situation by increasing (or decreasing) your net revenues.

The concept was first deployed on a large scale by the Texas Instruments corporation in the 1960's in the private sector, and later championed in the public sector by Jimmy Carter (prior to his becoming U.S. president). 

It's another of those looks great on paper, not so easy to practically implement concepts. For any business (or government), the theory goes that instead of a new fiscal year's budget starting with the previous year's budget as a base (and thus being prone to incremental budget creep), each year should start with zero, with every line item being required to be justified all over again year after year. The theory is that ZBB is a great way to eliminate waste. If you can't justify why you've got a budget line, then "poof" you're eliminated. 

The problem with ZBB is that rebuilding a budget every year from the ground up can become an overwhelming, all consuming task. And valuable parts of an organization with less tangible outputs could get snuffed out, to the detriment of the entire organization. 

Gordon S. Campbell practices Federal and Ontario court litigation and dispute resolution, including tax, immigration & citizenship, business, property, criminal, family, professional conduct, and farm law. Learn more at www.acmlawfirm.ca/gordonscottcampbell

Canadian Taxes A to Z (2018): "T" is for Terminal Loss

In today's Canadian Taxes A to Z, T is for Terminal Loss. Twenty letters down, six to go. And yes, I'm aware there's only one day left!

For some reason, I've always liked the term Terminal Loss. Maybe because it conjures up travel images of train and bus terminals. Perhaps because of its finality. It's another of those "tax terms" that if you're not in the know, you'd never guess at what it means.

SELLING FOR LESS THAN UCC GENERATES A TERMINAL LOSS

When depreciable capital property is sold for a value lower than its undepreciated capital cost (UCC) at the end of a fiscal year, then it can general a terminal loss if there are no other assets left in the class. A terminal loss is fully deductible against other income.

Say you buy a Big Purple Machine, take some depreciation over a couple of years that reduces its UCC to $10,000, but then sell it for only $5,000. Perhaps because Big Purple Machines were an industry fad for a couple of years, but ultimately didn't make anyone any money. Thus the low resale value.

If nothing is left in the Big Purple Machine class, you can claim another $5,000 terminal loss deduction for the difference between the UCC and what you sold it for. Pretty good, eh?

BEWARE RECAPTURE INSTEAD OF TERMINAL LOSS

But watch out. Terminal Loss has an evil twin called Recapture. If you sell the Big Purple Machine for $11,000, but have already depreciated it to a $10,000 value, and nothing is left in the class, then you wind up with a $1,000 recapture that you've got to include in income!

The moral of the story is try to sell used business assets for amounts lower than the depreciation you've taken on them. You'll be able to deduct any loss you take, and won't wind up getting stuck with paying taxes on any sale profit.

Gordon S. Campbell has argued tax cases as high as the Supreme Court of Canada. He also litigates civil, criminal and family law cases in Ontario & Federal courts, as well as practicing immigration & citizenship law. Learn more at www.acmlawfirm.ca/gordonscottcampbell

Canadian taxes A to Z (2018): "S" is for Small Business Deduction

In today's Canadian Taxes A to Z, we finally get to the letter "S". Arguably the most useful of Scrabble letters, and not too shabby from a tax perspective either. S is for Small Business Deduction.

THE SMALL BUSINESS DEDUCTION REDUCES TAXES TO INCREDIBLY LOW RATES

The Small Business Deduction reduces taxes for Canadian Controlled Private Corporations (CCPCs). It unfortunately does nothing for you if you're operating as a sole proprietor or partnership. The reduction is available on the first $500,000 of income. It results in a significant tax reduction off the base corporate tax rate.

This Small Business Deduction is in addition to the already generous Federal Tax Abatement knocked off the base corporate tax rate. What this means is an incredibly low 10% federal tax rate for 2018, plus another few percent provincial tax (in Ontario the rate has dropped to 3.5%). This combined rate can make United States taxes look high by comparison.

WHAT'S THE CATCH TO THE SMALL BUSINESS DEDUCTION?

So what's the catch? First, the corporation must be private (meaning not publicly trading shares) and controlled by Canadian residents. Neither of these are very onerous requirements for incorporated small businesses.

The bigger catch is that you'll get taxed again as an individual when you withdraw income from the corporation, such as being paid as an employee. There are various ways to structure the means through which you pay yourself from the corporation to minimize the taxes paid, but there is always a risk of double taxation: once in the hands of the corporation, and then again when the money passes into your own hands.

Likely the most important factor to keep in mind in considering whether incorporating your business is going to do much for you from a tax perspective is whether you'll be in a position to shelter net income in the corporation, or will need to withdraw all the profits each year for your own living expenses. If you're able to shelter income, then you'll be able to invest those excess profits after losing only 10.5% of them to tax.

So it's kind of like an RRSP, but one where you lose a small amount off the top. Unlike an RRSP, you aren't claiming a deduction for the income you shelter in the corporation, but the effect is the same because you won't personally pay any tax on that income until you take it out of the corporation and place it in your own hands.

While there can be other legal and tax benefits to incorporation, like limiting your personal liability and taking dividends out of the corporation that are taxed at a lower rate than salaries, you should get accounting advice on whether incorporation is really going to save you any money at tax time. It's possible that it might actually cost you money (after increased legal and accounting fees are taken into account).

2016 BUDGET INTRODUCED NEW SMALL BUSINESS ANTI-AVOIDANCE MEASURES

The 2016 Federal Budget introduced a variety of anti-avoidance measures targeting corporate and partnership structures established to take advantage of the Small Business Deduction even though notionally their related incomes supposedly exceed the $500,000 Small Business Deduction threshold. There already were measures in place to address such issues, so it remains unclear how the new measures will affect not only tax planning but legitimate business structures implemented for reasons beyond purely income tax minimization. Read the government's take on the new measures here: Federal 2016 Budget .