CALGARY TAX STRUCTURING + PLANNING LAWYER
Contact Neufeld Legal PC at 403-400-4092 or Chris@NeufeldLegal.com
Your business' financial success doesn't necessarily mean increased taxes. Instead, corporate financial success should be the stimulus for heightened tax planning and improved transactional tax strategies.
The Income Tax Act (Canada) provides significant opportunities to improve tax efficiencies (i.e., legitimate means to reduce your tax burden), wherein the prospect of attaining greater wealth should motivate you to retain knowledgeable tax legal counsel. Effective tax planning is essential to maximizing business and personal wealth, as it can provide a legitimate means to structure your business so as to reduce its effective tax burden. This is achieved through intelligent, transparent tax strategies that are consistent with the Income Tax Act (Canada) [and other pertinent tax laws] and are intended to withstand Revenue Canada scrutiny.
Likewise, business transactions (sales, mergers, acquisitions, transfers) and the incidence of taxation that arise from said transactions, demand appropriate tax strategies so as to optimize the financial returns attainable by each of the parties to the transaction. Through the more efficient structuring of a business transaction, significant tax savings can be realized.
Among some of the more prominent corporate tax structuring and tax planning strategies:
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Share-for-Share Exchange [section 85 of the Income Tax Act] - A section 85 rollover enables a taxpayer to elect to transfer “eligible property” to a taxable Canadian corporation in exchange for consideration that includes at least one share of the corporation. “Eligible property” includes most capital property, Canadian or foreign resource property, eligible capital property and inventory, other than inventory that is real property. Where the taxpayer and the corporation agree upon an amount that does not exceed the fair market value (FMV) of the exchanged property disposed of and is not less than the FMV of any non-share consideration that is received, the amount agreed upon becomes, subject to certain specific limitations, the taxpayer's proceeds of disposition and the corporation's cost of the exchanged property. By choosing an appropriate amount within those limits the exchanged property can be transferred on a tax-deferred basis, whereby the corporation assumes the taxpayer's potential income tax liabilities for the exchanged property.
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Exchange of Shares by a Shareholder in course of Reorganization of Capital [section 86 of the Income Tax Act] - A section 86 share exchange facilitates a tax-free rollover in the situation where, under a reorganization of the capital structure of a company, a taxpayer disposes of all the shares of any particular class of the capital stock of the company in consideration for which property is receivable by the taxpayer from the corporation that includes other shares of the capital stock of the company.
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Share Conversion [section 51(1) of the Income Tax Act] - A section 51(1) exchange permits a taxpayer to exchange a convertible property issued by a corporation for shares of the corporation on the basis of a tax-free rollover. Convertible properties are capital property such as a share, bond, debenture or note of the corporation that contains a conversion privilege. In the course of an exchange of convertible property, a taxpayer may be entitled to receive a fractional interest in a share.
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Amalgamation [section 87 of the Income Tax Act] - A section 87 amalgamation facilitates a tax-free fusion into the continued corporate entity, where (i) the pre-amalgamation corporations were taxable Canadian corporations, (ii) all of the shareholders of the pre-amalgamation corporations received shares of the fused post-amalgamation corporation, (iii) the shareholders only received shares in the fused post-amalgamation corporation (no other consideration is allowed), (iv) the original shares held by the shareholders of the pre-amalgamation corporations must be held to earn capital gains rather than business income, and (v) all the assets and liabilities of the pre-amalgamation corporations (other than intercompany balances) are transferred to the fused post-amalgamation corporation.
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Estate Freeze is primarily undertaken with the intent of transferring the future growth of an asset (i.e., private company shares, investment portfolio, family cottage) to other taxpayers, while concurrently converting the current value of that particular asset to a fixed amount for the original owner. The original owner thereby freezes his/her interest, while conferring unto his family (i.e., spouse, children, grandchildren) the future growth associated with that particular asset.
Providing strategic tax-driven legal advice and direction to Calgary businesses looking to optimize their business structures and corporate transactions. Contact our law firm at Chris@NeufeldLegal.com or 403-400-4092 to schedule a confidential initial consultation for your business' tax structuring and tax planning initiatives.