6 worked Sole Proprietor 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 sole proprietor tax return work, not a specific client's file.
Case Study 1 · Records and systems rebuilt
15 Months Reconciled And $10,000 Of Input Tax Recovered — Unincorporated Trades Business, Kelowna
Client: An unincorporated trades business · Where: Kelowna, British Columbia · Engagement: 7 weeks, fixed fee
Months reconciled15
Input tax recovered$10,000
Close time8 days
The situation — An unincorporated trades business, Kelowna, British Columbia
Nothing reconciled at an unincorporated trades business in Kelowna, British Columbia. Every filing started with 15 months of cleanup. The file was carrying business income reported entirely on one spouse’s return despite shared operations.
What we did for An unincorporated trades business, Kelowna, British Columbia
We rebuilt from source rather than correcting on top of the existing file. We filed the section 85 election with correct elected amounts and rolled the assets in without a taxable disposition. Then we set the routine that keeps it clean.
The result — An unincorporated trades business, Kelowna, British Columbia
15 months reconciled to the bank. The close now takes 8 days, and $10,000 of previously unclaimable input tax was recovered in the process.
Case Study 2 · Scaling without breaking
Second-Province Expansion Handled, $55,000 Of Cash Released — Property Joint Venture, Calgary
Client: A joint-venture property partnership · Where: Calgary, Alberta · Engagement: 11 weeks, fixed fee
Cash released$55,000
New registrationsComplete on day one
Compliance gapsNone
The situation — A joint-venture property partnership, Calgary, Alberta
Revenue at a joint-venture property partnership in Calgary, Alberta was up sharply and cash was tighter than ever. Underneath it sat three partners operating on a handshake, with no written agreement covering allocations or a departure.
What we did for A joint-venture property partnership, Calgary, Alberta
We restructured the draw policy so no partner’s adjusted cost base went negative again, and reported the deemed gain correctly for the year it arose. Every new obligation was set up before it was triggered, not after. That covered registration, remittance frequency and provincial filing.
The result — A joint-venture property partnership, Calgary, Alberta
$55,000 of cash was released from the working capital cycle. The expansion completed with every registration and filing obligation covered from day one.
Case Study 3 · Sale and succession
$735,000 Sheltered By The Lifetime Capital Gains Exemption — Freelance Developer, Ottawa
The situation — A freelance developer, Ottawa, Ontario
A freelance developer in Ottawa, Ontario had an offer on the table and 21 months to close. The shares did not qualify for the capital gains exemption. A single shareholder holding every share, with no room to multiply the exemption was part of the reason.
What we did for A freelance developer, Ottawa, Ontario
We purified the corporation so the shares met the qualifying tests. We split the shared overhead on a documented basis, so each partner’s reported share carried only the expenses that belonged to it. All of it was done well ahead of the closing date.
The result — A freelance developer, Ottawa, Ontario
The sale closed on schedule with $735,000 sheltered by the lifetime capital gains exemption across the shareholders.
Case Study 4 · Objection and relief
$142,000 Of Penalties And Interest Cancelled On Relief — Corporate-Partner Partnership, Halifax
Client: A partnership with a corporate partner · Where: Halifax, Nova Scotia · Engagement: 8 weeks, fixed fee
Penalties and interest cancelled$142,000
Relief groundsAccepted
AssessmentAdjusted to filed position
The situation — A partnership with a corporate partner, Halifax, Nova Scotia
An assessment of $142,000 landed at a partnership with a corporate partner in Halifax, Nova Scotia following a desk review. It turned on a partnership that crossed the T5013 threshold two years before anyone noticed. The auditor had not seen the records behind it.
What we did for A partnership with a corporate partner, Halifax, Nova Scotia
We kept the proprietorship on a December 31 fiscal period and moved the year-end question into the incorporation plan where it could actually be answered. We then set out the legislative basis for the position alongside the documents supporting it.
The result — A partnership with a corporate partner, Halifax, Nova Scotia
$142,000 of penalties and interest was cancelled under the taxpayer relief provisions, and the underlying assessment was adjusted to match the filed position.
Case Study 5 · Cash and remittance control
$35,000 Of Working Capital Freed From The Tax Cycle — Food-Truck Proprietorship, Brampton
Client: A food-truck sole proprietorship · Where: Brampton, Ontario · Engagement: 6 weeks, fixed fee
Working capital freed$35,000
On-time remittancesEvery period since
Forecast horizon13 weeks
The situation — A food-truck sole proprietorship, Brampton, Ontario
A food-truck sole proprietorship in Brampton, Ontario was profitable on paper and short of cash every month. A partner taxed on an allocation in a year they had drawn nothing at all explained most of the gap.
What we did for A food-truck sole proprietorship, Brampton, Ontario
We reconciled each partner’s allocation, capital account and drawings, so what was reported for tax matched the agreement instead of the cash taken. We also built a thirteen-week cash view so tax payments stopped competing with payroll for the same dollars.
The result — A food-truck sole proprietorship, Brampton, Ontario
$35,000 was released back into working capital. Remittances have been on time every period since, and the forecast shows the tax outflow before it lands.
Case Study 6 · CRA review defended
$140,000 Proposed Adjustment Withdrawn In Full — Incorporating Proprietor, Victoria
Client: A proprietor preparing to incorporate · Where: Victoria, British Columbia · Engagement: 4 weeks, fixed fee
Adjustment withdrawn$140,000
File closed in4 weeks
Penalties assessedNone
The situation — A proprietor preparing to incorporate, Victoria, British Columbia
A proprietor preparing to incorporate in Victoria, British Columbia received a proposal letter opening a review of sole proprietor tax return. The CRA had identified partner draws that had pushed one partner’s adjusted cost base negative. It proposed an adjustment of $140,000, with 30 days to respond.
What we did for A proprietor preparing to incorporate, Victoria, British Columbia
We treated the response as an evidence exercise rather than an argument. We rewrote the partnership allocation to match how the practice actually operated, effective for the following fiscal year. We then indexed every supporting document against the specific line the auditor had questioned.
The result — A proprietor preparing to incorporate, Victoria, British Columbia
The proposed adjustment was withdrawn in full — all $140,000 of it. The file closed in 4 weeks with no change to the assessed amounts and no penalty.
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.
