GTA Succession Planning Services – Is Spousal Rollover the most valuable tax plan? (Part 1)

Capital gains are the most reliable way to generate durable wealth. Capital gains present two benefits that build wealth. First, the tax is deferred on capital gains, so the benefits can continue compounding. Second, only half of the increase in value is taxed, the other half is exempt. Unfortunately, capital gains cannot compound indefinitely. If you would like to know more about the benefits of capital gains, GTA succession planning services offers comprehensive advice and planning services to numerous clients. When a person dies, the Canada Revenue Agency (CRA) “deems” there was a disposition. Which essentially means that the CRA pretends that a sale or transfer of the assets occurred and levies a tax based on the value at the time of the transfer. The “deemed disposition” presents two problems (aside from the obvious that the CRA is pursuing you for taxes while you mourn the loss of a loved one). First, the compounded tax deferral ends and, second, most people don’t have the cash to pay the tax. Spousal Rollover Luckily, the Income Tax Act provides that if there is a surviving spouse then the property can be “gifted” to the spouse and the benefits of capital gains continue. Specifically, the CRA will no longer insist that a “deemed disposition” occurred. This useful rule is a critical tool in any estate or tax plan. Spousal rollovers are also broadly interpreted to include, rather than exclude, transactions. The spousal rollover applies to gifts during life and bequests at death. However, any income earned on those gifts are attributed back to the person who received them. Additionally, the law interprets...

GTA Corporate Tax Planning for Active Business Income

Active business income is, generally, any income that is derived from an active business activity. For example, income from the sale of products or services, income on the sale of patents, trademarks, or copyrights. It also includes income that is incidental (i.e. unrelated) to the business activity. Active business income excludes passive investments, for example, interest on investments. The Canada Revenue Agency (CRA) specifically excludes income from “specified investment businesses” or “personal services businesses” from eligibility for the small business deduction. To avoid this classification, you may want to retain the assistance of GTA corporate tax planning, a division of Accountable Solutions. Small Business Deduction (SBD) The SBD allows eligible businesses to take a deduction that reduces their Part 1 tax. The SBD is 15 (Ontario)  percent or the lesser of any of the following categories of income: Taxable income on line 405; The business limit on line 410; Income from an active business carried on in Canada; or The reduced limit on line 425 from which is deducted the business limit that was assigned on line 427. Specified Investment Business and Personal Services Business A specified investment business is any business that draws the principal amount of its income from property, dividends, rents, royalties, or interest. A personal services business is a corporation that exists to provide services to another entity that an officer or employee would normally provide. However, the CRA will permit a specified investment business and personal services business to take the SBD if either employs five or more full-time workers for the years or an associated corporation provides managerial, financial, administrative, or similar services...

Why Proper Corporate and Personal Tax Planning Services Are So Important

“A dying man summoned his Lawyer and Accountant to his bedside. He turned to his Lawyer and said, “I’d like to change something in my will before I go.” The lawyer responded, “Of course, anything you wish. What change needs to be made?” To this, the dying man replied, “Instead of having a burial, I want to be cremated.” The man’s lawyer asked him what he would like done with the ashes. The dying man answered, “I want you to deliver my ashes to my Banker and the CRA/IRS; they have taken everything from me, I might as well give them my ashes – they’re the last tangible things I’ve got!”

Business Succession Planning – Family Trust vs. Holding Corporation (Pat 1 of 2)

In the event, you are thinking about starting a new business your primary concern is probably regarding the overall success of your business. Therefore, you are likely focused on mitigating costs wherever possible. A simple way many people reduce costs is to simplify their corporate structure. However, sacrificing corporate structure to save some money may not be worth it.