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:

Canada's tax incentives for charitable donations are designed to encourage support of your favorite charities.   Did you know that in Alberta, the tax credit you receive may result in a refund of over half the contributed amount?

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With more than 190,000 members, Canada's accounting professional network is now represented by the Chartered Professional Accountants of Canada (CPA Canada).

The Canadian Institute of Chartered Accountants (CICA) and the Society of Management Accountants of Canada (CMA Canada) established CPA Canada, which in October 2013, signed an agreement to merge with Certified General Accountants of Canada (CGA-Canada). This merge took place on October 1, 2014, integrating the country's national accounting bodies.