Most Canadians, and no doubt all small business owners, have heard a lot over the past few months about income sprinkling. On December 12, 2017, the Department of Finance released its final proposals concerning this issue.
Here is what you need to know:
We have some exciting news to share to start off 2018 with a bang!
As of January 1, 2018, we are proud to welcome Konstantin Neykurs to our Partner group! After working at Pivotal LLP (formerly Heywood Holmes & Partners) for nearly 7 years and receiving his CPA while with us, we know that this will be a great fit for Konstantin as well as the firm as a whole.
Holding a passive investment portfolio inside a private corporation
The current system allows for a tax deferral of the individual tax payable if the shareholder leaves funds in the corporation for passive investment purposes instead of being distributed to the shareholders, through taxable dividends or salary, for the shareholders to invest personally.
Converting a private corporation's income into capital gains
Anti-surplus stripping rules
Changes are proposed to prevent individual taxpayers from using non-arm's-length transactions that increase the cost base of shares of a corporation and avoid the application of Section 84.1. Section 84.1 is intended to prevent corporate surplus from being removed at the lower capital gains tax rates instead of the higher dividend tax rates where an individual sells shares of the corporation to a non-arm's- length corporation.
The government is proposing a review of tax planning strategies in three areas:
- Income sprinkling using private corporations
- Converting a private corporation's income into capital gains
- Holding a passive investment portfolio inside a private corporation
Since 1971, Canadians have been taxed on the gain realized when capital assets - real estate, stocks and mutual funds and other investments - are sold. There are a few exceptions, and the one we are most familiar with is the sale of a residence.
The sale of a "principal residence" is specifically exempted from tax in the Income Tax Act. Here are a few things to keep in mind when selling your home or vacation property: