In this blog, we will continue our detailed review of the approaches that the Government is considering with regards to the tax treatment of passive investment income.  We’ve already touched on the first approach which is the 1972 approach.  Here is the 2nd one. 1.    Deferred Taxation – As an alternative to the 1972 approach, the current regime of refundable taxes on passive investment income could be replaced with one that will maintain a tax rate on the passive investment income of private corporations equal to the top personal tax rates, as is the case under current rules, but which would...
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Last week, we took a detailed look at the proposed measures of the Government to address income sprinkling.  This week, we’ll focus on the proposed measures to address the holding of passive investments inside a private corporation.  According to the Department of Finance, holding passive investments inside a private corporation provides the business owner with a significant tax deferral advantage – an advantage not available to most Canadians.  In addition to this, the Department of Finance says that the current system does not achieve its objective of removing incentives to hold passive investments within a corporation in a broad range of...
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In this second part of our blog series, we are looking further into the last 2 proposed measures to address income sprinkling.  1.    Constraining multiplication of claims to the lifetime capital gains exemption (LCGE): The Government is concerned with the use of family trusts to facilitate arrangements under which the LCGE limits of multiple family members of a family may be used to reduce capital gains tax.  There are 3 proposed measures to address LCGE multiplication. -      Individuals would no longer qualify for the LCGE in respect of capital gains that are realized, or that accrue, before the taxation year in...
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For the past few weeks, we’ve already covered a lot of the developments surrounding the latest Government announcement regarding their proposed changes to address tax planning strategies used by private corporations.  As promised, we will look into each tax planning strategy to let you know more about what exactly these proposed measures entail. We’ll start with the first tax planning strategy which is Income Sprinkling. According to the Department of Finance, income sprinkling describes a range of tax planning arrangements that result in income that, in the absence of the particular arrangement, would have been taxed as income of a high-income...
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