Taxation

What If I Don't Agree with Revenue Canada's Calculations:  Upon being assessed or reassessed, a taxpayer has the right to appeal by filing a Notice of Objection with the government. There is however a time limit and individuals should not delay in obtaining professional advice immediately upon receiving the Notice of Assessment or Reassessment. If satisfaction is not obtained at the appeal division level, there is a further right to appeal this decision to the Tax Court of Canada. This Court is a tribunal independent of the Canada Revenue Agency. Such an appeal also includes strict time limitations and individuals should take immediate steps to ensure limitation periods are not missed.

Can I transfer Wealth to my Company or Family:   There are certain procedures available that allow the transfer of various types of property on a tax deferred basis. For example, the Income Tax Act (of Canada) allows an individual to “roll” certain types of property to a spouse in certain circumstances. There is also a method of transferring the possible future wealth of a corporation to another individual (commonly referred to as an “estate freeze”) without incurring tax consequences. It is suggested that an individual contact a tax specialist in order to review the various options that may be available in their own circumstances.

Tax Benefits to Incorporation:  There may be tax advantages that exist if your business is operated by a corporation. It depends on the specific circumstances. Some facts to consider include:

1. whether the business profits are in excess of an individuals personal financial needs;
2. whether an individual wishes to share the business profits with a spouse (commonly referred to as “income splitting”); and
3. whether the individual shareholder and the business would qualify upon the sale of shares in the corporation for the lifetime capital gains exemption relating to small business corporation shares.

Sell Shares or Sell the Assets:  Generally, it is more advantageous for the vendor to sell shares of the operating corporation than to sell the assets of such a corporation. From a tax perspective, a significant tax advantage exists in the form of a $500,000.00 lifetime capital gains exemption that may apply to each individual shareholder if the shares qualify. Selling assets may also trigger certain tax consequences (a common form of tax liability for example, being referred to as “recapture”). There may also be a liability advantage to the seller.

What is a "Life Time Capital Gains Exemption":  This is an exemption found in the Income Tax Act (of Canada) that relates to certain capital gains realized in the sale of qualified small business corporation shares (and certain farm properties). It is available over an individual’s lifetime to a limit in the amount of $500,000.00. The exemption may be claimed many times, but only until this limit is cumulatively reached.