Tax Law

Proposed Legislation Could Push Back Tax and Corporate Deadlines Amid COVID-19 Pandemic

On May 19th, the Government of Canada published draft legislative proposals aimed at creating greater flexibility on certain statutory timelines in the midst of the COVID-19 pandemic. If implemented, the proposed Time Limits and Other Periods Act (COVID-19) (the "Proposals") would give the federal ministers the authority to extend or suspend certain time limits and deadlines set out in certain federal legislation. The Proposals are broad sweeping and may impact deadlines set out in the Bankruptcy and Insolvency Act (Canada), Canada Business Corporations Act, Canada Labour Code, Income Tax Act (Canada), Excise Tax Act (Canada) and other federal legislation, as...

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Tax Law

2018 Federal Budget: What Private Companies Need to Know

Click here to view in PDF. Introduction On February 27, 2018 the Department of Finance (“Finance”) released its 2018 federal budget (the “Budget”). Given the climate surrounding private companies, this Budget in particular was eagerly awaited by owner managers and tax advisors. While the Budget contains many items of interest for large private companies and high net-worth individuals with corporate-held investments, it is not as punitive as some have feared. Specifically, Finance proposed rules affecting private corporations that hold investments generating passive income. These rules appear to be less harmful and are narrower than the approaches that were outlined in...

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Tax Law

Will the Senate stop Liberals’ tax changes?

Click here to view in PDF. On December 13, 2017 the Standing Senate Committee on National Finance released its report on the July 2017 tax proposals announced by the Liberal government. Over eight weeks, the Senate committee heard from 138 witnesses and received 32 written briefs. The evidence heard by the committee identified several significant problems created by the July tax proposals. Witnesses condemned the complexity, ambiguity and uncertainty introduced by these proposals. Witnesses also condemned the unintended negative impact the proposals will have on Canada’s economy.  One witness testified that “these proposed tax changes are a disaster. They will...

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Tax Law

Family Limited Partnerships

Click here to view in PDF. A Family Limited Partnership (FLP) is nothing more than a limited partnership, created as a vehicle to transfer income and title to assets from the family head to other family member, rather than to a non-family business associate. When the owner of a business is in a high income tax bracket, this transfer can drastically reduce any personal liability and taxes. In the case of an FLP, property with a high appreciation potential is the best type of contribution. It can be transferred in under a freeze-style transaction with all taxes deferred. At first...

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Tax Law

The Limited Partnership Protective Shield

Click here to view in PDF. In contrast to a general partnership, a limited partnership must by law be composed of at least one general partner, who serves as the managing partner, and one or more limited partners. Provincial legislation sets out the general rights and responsibilities of the limited and general partners between themselves, the public, and all other individuals with whom they have business dealings. This law protects the limited partners from the broader liability of a general partner – unless the limited partner actually takes an active part in management and control of the business. It further...

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Tax Law

General Partnerships

Click here to view in PDF. Family limited partnerships offer tax benefits, lawsuit protection, and financial control. To gain a full understanding of a family limited partnership, let’s first consider the general partnership, which is a device used mainly for active business purposes rather than for private family asset protection. In the broadest sense, a general partnership is an association of two or more persons formed to conduct an active business for mutual profit. “Persons” in this case includes other legal entities. The concept of a general partnership is long established in English common law. In a general partnership, each...

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Tax Law

The Prescribed Rate Loan Strategy

Click here to view in PDF. You might wish to consider using an irrevocable inter vivos trust to implement a prescribed rate loan structure. This strategy can facilitate income splitting by taking advantage of the marginal tax rate of family members with a lower income. For this strategy to work, you need to play out the following scenario involving a mythical Canadian, Alex. Alex will make $100,000 loan to such a trust at a prescribed rate, which is currently 1%. The trust will then use this money to purchase portfolio-type investments such as stocks. The net income earned by these...

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Tax Law

Irrevocable Inter Vivos Trusts

Click here to view in PDF. The settlor who wishes to avoid the pitfalls inherent in a revocable inter vivos trust should create an irrevocable inter vivos trust. An irrevocable trust denies a settlor all but indirect control over assets settled on the trust from the moment the trust is created. For this reason, as a scheme for protections against creditor attack or attachment, the irrevocable trust is virtually perfect. The settlor no longer holds the title to the property once it’s settled on the trust, and neither does he or she have any way to reacquire the settled property....

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Tax Law

Revocable Inter Vivos Trusts

Click here to view in PDF. What are the principal differences between a living (inter vivos) trust and a testamentary trust created by death? A living trust is just what the term implies, a trust created while the settlor is alive. Also known in lawyer Latin as an inter vivos trust (“between the living”), such trusts come in two basic forms – revocable and irrevocable. Because the form you choose has a significant impact on trust operation and asset protection, it’s imperative you understand the consequences of each choice before opting for one over the other. One big advantage of...

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Tax Law

Wealth Accumulation Trusts

Click here to view in PDF. A wealth accumulation trust strategy can lower your taxes, produce steady guaranteed annual income, and help your favourite charity all at once. This is an extraordinary tax saving and income producing trust. To make the wealth accumulation trust work, you give to your chosen charity, and establish an irrevocable living trust that ends your ownership of the donated assets. The terms of the trust provide that the trustee’s sale and reinvestment of those assets will produce an income for life for you. You will also receive a charitable tax receipt which will enhance your...

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