Generally, the rules introduced in Bill C-208 were designed to allow a sale of shares that otherwise qualify for the capital gains exemption to be sold to a non-arm’s length corporation (referred to here as the “business transfer rules”). The business transfer rules allow the vendor to benefit from the capital gains exemption without being recharacterized as a dividend under …
Budget 2023 The Federal Budget 2023 introduced several amendments to strengthen and modernize the General Anti-Avoidance Rule (“GAAR”). Some of the more notable amendments include the changes to the definition of “Avoidance Transaction” as well as the introduction of the concept of “Economic Substance”. Avoidance Transaction – This test has been significantly broadened by replacing the “primary purpose” test with …
The Federal budget for 2020-2021 was initially scheduled to be presented in the House of Commons on March 30, 2020. This was of course delayed as a result of Covid-19. Fast forward to January 2021, and a lot has changed with Canada’s economic situation. Are tax increases coming? Most likely. The Federal government has been very open that the typical “1%”, …
There are are at least 5 strategies that can be executed under existing tax legislation to use COVID-19 to generate tax relief. These strategies were originally posted by us 7 weeks ago on March 19th. In particular, strategy No. 5 discussed below anticipated a reduction in the prescribed interest rate to 1% from the current rate of 2%, which will now be …
What Happens on Death? For illustrative purposes, we will assume that a taxpayer dies (with no surviving spouse) owning shares of a private company with a $1M capital gain. On death, there is a capital gain of $1M on the deemed disposition of the shares owned by the deceased, half of which is taxable. This would result in approximately …
Caplan v Agence du revenue du Quebec[1] (Caplan) concerned distributions allocated from a discretionary trust to beneficiaries of a trust and then transferred to their father (also a beneficiary). The court found that the children acted as an “accommodating party, whether as an agent or nominee, for their father.” Moreover, they never had control over amounts paid to them by …
As the personal tax rates have increased to 53.53%, the tax spread between dividend income and capital gains has widened significantly. As a result, planning has evolved whereby a taxpayer creates a capital gain as a means of extracting corporate funds instead of paying themselves a dividend, which would be taxable at a higher rate. For example, if an …
Solicitor-Client Privilege Generally Solicitor-client privilege (also known as “legal advice privilege”) operates to protect communication between a lawyer and his/her client from disclosure to third parties. The privilege belongs to the client and can only be waived by the client. Solicitor-client privilege is not time sensitive and does not expire. Communication is subject to solicitor-client privilege when three …
Over the past 4 years or so, we have experienced an unprecedented increase in the complexity of private company taxation. With another Liberal government recently elected, which is supported by the NDP and Green Party, we can certainly expect further tax changes which will more likely than not include increasing tax rates. Of particular concern is the rumor that both …
On July 18, 2017, Finance Minister Morneau announced changes to the Canadian tax system. The announced changes were marketed at being aimed at improving fairness in the tax system. The announcement targeted the following: Income (dividend) sprinkling and multiplying the lifetime capital gains exemption (LCGE); Converting dividend income into capital gains (known as “surplus stripping); and Passive investment income …
