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Taxation

How to read the Income Tax Act

Continuing the new post series where I answer readers’ questions they’ve Googled to find my site, as logged by 103bees.com, the next one is sent chills down my spine: “How to read the Income Tax Act?”

The last time I cracked open the Act, it was probably tax class in university. Once you’re done those classes, there’s really no need to delve into the swirling mass of dense legalese again. There are many more comprehensible sources for tax information, so don’t read the Income Tax Act. In its place, do these things:

  • Read the Canadian Revenue Agency’s website. They write about tax in plain English (most of the time) and it’s reliable information since it is from the source.
  • Read accounting firm websites. All the major firms have sections on their websites that offer regular tax facts and updates, detailing bits of tax law applicable to your situation, whatever it may be. Again, plain English (for the most part, although we do tend to introduce jargon from time to time).
  • Read tax textbooks. I still do this when I want a refresher. Textbooks are occasionally dense, but usually still much easier to read and understand than the Act.
  • Call in to tax related TV call-in shows. These seem to be on regularly, on CityTV especially and other fringe channels that predominantly have call-in shows. They feature knowledgeable experts sharing advice for free.
  • Use tax software. If you own one of the tax packages people use to do their own taxes, these can be used to answer your questions in a meaningful way: with your numbers, or with dummy data as examples.

Reading the Act is best left to the professionals who have specialized in tax. As you can see, there are many alternatives, most of which are available on the web, that the average person can use instead to find guidance on any particular issue.

4 replies on “How to read the Income Tax Act”

I was going to add that you may need to open the Income Tax Act when you are writing the SOA exam or the UFE. I certainly had my copy well tabbed and ready to look at. However, when I think back, I only referred to it once during the SOA, and did not open it during the UFE.

Yeah I gave that some thought too, but I realized I haven’t read it since school. The cases in the SOA related to tax were all I really needed for that exam, and the same applied to the UFE (the cases provide good tax coverage).

My question: My mum wants to give my 2 brothers and I one house each (they were purchased many years ago) but the capital gains is going to be extreme (not quite sure how this is calculated since no one seems to know). Someone said something about deferring the capital gains tax for 10 years. Are you experienced in this and if not can you refer me to someone who is? Thanks.
Helen

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