Personal Services Business Tax Return Case Studies
6 worked Personal Services Business Tax Return case studies — the position a client typically comes to us with, what we do, and what it is worth. Each is an illustrative example built on the rules that apply to personal services business tax return work, not a specific client's file.
Case Study 1 · Deadline rescue
$81,000 Late-Filing Penalty Cancelled On Relief Application — Import and Distribution Corporation, Calgary
Client: An import and distribution corporation · Where: Calgary, Alberta · Engagement: 4 weeks, fixed fee
Penalty cancelled$81,000
Relief applicationGranted
ReturnAccepted as filed
The situation — An import and distribution corporation, Calgary, Alberta
An import and distribution corporation in Calgary, Alberta had already missed one deadline and was about to miss a second. Behind it sat dividends moved up to a holding company year after year with no safe-income support on file. A penalty of $81,000 was accruing.
What we did for An import and distribution corporation, Calgary, Alberta
We split the work into what had to happen before the deadline and what could follow it. Then we reviewed each capital cost allowance pool and set the claim at the level that kept the small business deduction fully used rather than wasted.
The result — An import and distribution corporation, Calgary, Alberta
The outstanding return was accepted as filed, and the taxpayer relief application cancelled $81,000 of the penalty already assessed on the earlier year.
Case Study 2 · Objection and relief
Notice Of Objection Allowed In Full, $107,000 Reversed — Holding and Operating Companies, Regina
Client: A holding company and its operating subsidiary · Where: Regina, Saskatchewan · Engagement: 11 weeks, fixed fee
Amount reversed$107,000
ObjectionAllowed in full
Account balanceNil
The situation — A holding company and its operating subsidiary, Regina, Saskatchewan
A holding company and its operating subsidiary in Regina, Saskatchewan had been reassessed for $107,000. 20 days were left on the objection deadline. The reassessment rested on a small business limit quietly shared across three associated corporations nobody had mapped.
What we did for A holding company and its operating subsidiary, Regina, Saskatchewan
We filed the objection inside the deadline with a complete submission rather than a placeholder. Alongside it, we rebuilt the instalment schedule off the current year rather than the prior year, ending the interest accrual.
The result — A holding company and its operating subsidiary, Regina, Saskatchewan
The appeals officer allowed the objection in full. $107,000 was reversed and the account returned to a nil balance.
Client: A technology CCPC approaching its first profitable year · Where: Mississauga, Ontario · Engagement: 10 weeks, fixed fee
Annual saving$45,000
ReorganisationTax-neutral
StructureMatches operations
The situation — A technology CCPC approaching its first profitable year, Mississauga, Ontario
The structure at a technology CCPC approaching its first profitable year in Mississauga, Ontario needed fixing. The file was carrying passive investment income that had crossed the $50,000 grind threshold unnoticed. Every option for fixing it ran through a reorganisation that had to be done without triggering tax.
What we did for A technology CCPC approaching its first profitable year, Mississauga, Ontario
We worked with the client's lawyer. Together, we reconstructed the capital dividend account from the underlying transactions and filed the subsection 83(2) election before the next distribution left the company. We also prepared the elections, resolutions and valuations the structure needed to stand up.
The result — A technology CCPC approaching its first profitable year, Mississauga, Ontario
The structure now matches the business. Annual saving of $45,000, and the reorganisation itself was tax-neutral.
Case Study 4 · Backlog brought current
Collections Halted And $117,000 Cut From A 5-Year Backlog — Non-Calendar Year-End Corporation, Red Deer
Client: A corporation with a non-calendar fiscal year-end · Where: Red Deer, Alberta · Engagement: 4 weeks, fixed fee
Balance reduced by$117,000
Backlog cleared5 years
CollectionsHalted
The situation — A corporation with a non-calendar fiscal year-end, Red Deer, Alberta
By the time a corporation with a non-calendar fiscal year-end in Red Deer, Alberta called, 5 years were outstanding. The CRA had assessed on estimates. Underneath it sat a balance-due date the owner believed was the same as the filing date.
What we did for A corporation with a non-calendar fiscal year-end, Red Deer, Alberta
We reconstructed the records year by year. We mapped the association rules across the group, allocated the business limit deliberately on Schedule 23, and corrected the prior year by adjustment request. Each filing replaced an arbitrary assessment with a real one.
The result — A corporation with a non-calendar fiscal year-end, Red Deer, Alberta
The account is current. Filing on real numbers rather than CRA estimates reduced the balance by $117,000, and a relief application addressed part of the accumulated interest.
Case Study 5 · Sale and succession
$635,000 Sheltered By The Lifetime Capital Gains Exemption — Incorporated Consultancy, Ottawa
The situation — An incorporated consultancy, Ottawa, Ontario
An incorporated consultancy in Ottawa, Ontario had an offer on the table and 11 months to close. The shares did not qualify for the capital gains exemption. A minute book with no resolutions behind a decade of dividends was part of the reason.
What we did for An incorporated consultancy, Ottawa, Ontario
We purified the corporation so the shares met the qualifying tests. We modelled salary against dividends across both the corporation and the shareholder’s personal return, then set the remuneration mix for the year. All of it was done well ahead of the closing date.
The result — An incorporated consultancy, Ottawa, Ontario
The sale closed on schedule with $635,000 sheltered by the lifetime capital gains exemption across the shareholders.
Case Study 6 · Missed incentive claimed
Incentive Review Recovered $36,500 Across 3 Open Years — Corporation Holding Investments, Windsor
Client: An operating company holding surplus investments · Where: Windsor, Ontario · Engagement: 11 weeks, fixed fee
Recovered$36,500
Open years claimed3
Ongoing trackingIn place
The situation — An operating company holding surplus investments, Windsor, Ontario
An incentive review at an operating company holding surplus investments in Windsor, Ontario started from a simple question: what has never been claimed? The answer ran to 3 years. It was driven by retained earnings building in the operating company with no plan for extracting them.
What we did for An operating company holding surplus investments, Windsor, Ontario
We documented safe income before the inter-corporate dividend was paid, so subsection 55(2) had no room to recharacterise it as a gain. We documented eligibility to the standard a reviewer would apply rather than the standard a claim form requires.
The result — An operating company holding surplus investments, Windsor, Ontario
The credits produced $36,500 across the open years. The tracking now in place means the following year's claim is documented as the work happens rather than reconstructed afterwards.
Reviewed by Udit Gupta, Founder and Tax Accountant for the 2025 tax year. These case studies are illustrative worked examples composed from the CRA rules that apply to this type of work, not specific client files; figures are representative and outcomes depend on your own facts.
