My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned.

Monday, July 24, 2017

Tax Planning Using Private Corporations - The New Liberal Proposals

I am going to set aside my summer "Best of The Blunt Bean Counter" series for one week, to provide my comments on the new tax proposals for private corporations set forth by the Liberal government last week.

Tax Planning Using Private Corporations - The New Liberal Proposals


On July 18th, Finance Minister Bill Morneau released a consultation paper and related draft legislation proposing changes to how private corporations will be taxed moving forward in the name of tax fairness. I would suggest most private business owners and professionals using PC's in particular (the government seems to take umbrage with professionals) are going to be very upset by these proposals.


Fairness is subject to personal interpretation. I could argue it is not fair government workers get gold plated pension plans while the rest of us have no company plans or restricted defined contribution plans and need to save for retirement through RRSPs and TFSAs. I could also argue that is not fair entrepreneurs who risk their life savings will now under these proposals end up tax neutral with their employees who take no risk. Rant over, let's get to the proposals

Income Splitting


Many private business owners pay salaries to family members and have structures where family members own shares. The government is proposing that effective for 2018 and later, any salaries or dividends paid to a spouse or child regardless of age (currently there are kiddie tax rules for children under 18) will be subject to a reasonableness provision (what an arms-length person would be paid) and any remuneration in excess of the reasonable amount will now be taxed at the top marginal personal rates of the parent. How the government will determine reasonableness is a good question. In any event, income splitting will be severely curtailed

Some specific reasonableness proposals include:

1. Determination of labour contributions by children. The rules will be different for those 18-24 than for those are 25.

2. Review of capital contributed to the business. Again based on age bracket tests.

These rules will significantly change how many families remunerate the family unit.

In addition to restricting salaries and dividends, the proposals will also restrict the use and multiplication of the capital gains exemption ($835,716 for 2017). Children under 18 will no longer qualify for the LCGE ("Lifetime Capital Gains Exemption") and for other family members that were subject to the reasonableness provisions; the LCGE will be restricted or eliminated.

Capital gains allocated out of a family trust will now generally not be eligible for the LCGE.

These rules will be effective for 2018, however, transitional rules are being proposed.

Passive Investments in Corporations


Currently if a corporation earns less than $500,000 the company pays tax at 15.5% in Ontario and a similar amount in each province. This results in a tax deferral, not a tax saving of up to 38%. This deferral provides corporations money to grow and invest and create jobs. The government is concerned that where this money is not used to grow the company but invested passively in GIC's stocks, others companies, real estate, etc. it is unfair when compared to a salaried person. The government is proposing to now tax this 38% deferral.

The proposals of how to do this are beyond complicated and I really don't understand the concern here (the government is asking for feedback to determine to how best implement this, thus, there is no timeline on these provisions as of yet). This is a tax deferral on risk capital and not an absolute tax saving. As per my various posts on whether to use a RRSP or leave the money in your corporation, many small biz owners are leaving money in their corporations and using this money to fund their retirement; so this will have a huge impact on many people.

Converting income into capital gains


The proposals include various provisions to prevent income from being converted into capital gains. I have no issue with this general provision as much of the planning is a pure tax play. However, as of now, some tax commentators suggest the proposals appear to have potentially created possible double tax on death where standard "pipeline planning" is undertaken. Essentially where the estate would have had a capital gain, that gain may become a dividend which is taxed 15-20% higher than the capital gain. Many private business owners have purchased insurance to cover their estate tax and the insurance may now be insufficient.These measures will be effective as of July 18, 2017.

What Now?


The proposals are very complex and I have simplified them for discussion purposes above. We need to see the final legislation after the consultation period and work through the implications before definitive answers and planning can be undertaken.

That being said, will you have to close down or wind-up your private corporation or professional corporations or wind up your family trust?

My preliminary thoughts are if your corporation has large retained earnings there would be a significant tax cost to wind up your corporation and thus you would likely still maintain the company (I say this because it appears the proposals will not impact prior earnings and/ or prior refundable taxes earned and thus, these retained earnings would not be subject to the potentially punitive rules). If your company's retained earnings are not significant, the answer will be less obvious and there will be other issues to consider such as asset protection and the adjusted cost base of partnership interests for professional corporations etc.

While new corporations will not have the same income splitting and tax deferral benefits, they will still likely make sense for asset protection purposes and if you may be able to access even one LCGE exemption and /or you will be using profits to invest back in the business and not for passive purposes.

The incorporation of new professional corporations likely will no longer make sense for tax deferral purposes if all the PC income is taxed at the highest marginal rate, but they may still make sense for other reasons, but I would expect their use to be curtailed.

Family Trusts will likely continue to make sense for ownership and estate planning purposes but may no longer be useful for tax only purposes

It is too early to definitively answer any of the above questions, but those are my initial thoughts.

In conclusion, the impact of these proposals is potentially massive. This is in essence a regime change and not a tinkering of the current rules. Unfortunately, I don't think most small business owners have any idea what is about to hit them in the next few months.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.

58 comments:

  1. Do you think that the changes in taxation for CCPCs will have any impact on Individual Pension Plans? Will IPP's become a more attractive investment vehicle (from a tax perspective)?

    ReplyDelete
    Replies
    1. Hi Anon

      As far as I know the new rules will not affect IPPs and I already had a couple people ask me if they will be a more attractive vehicle. I cant confirm at this time until the final rules come out, but yes, they may be an alternative for some small biz owners.

      Delete
  2. Don't most government employees trade a below market-rate salary for increased job stability and a better pension?

    I work as a software developer, employed full-time. Some others in my industry reasonably choose to work as independent contractors. If a contractor is doing the same work as me on a long-term contract, why should they be able to split their income with their family? What is the economic benefit to letting the contractor do that but not the employee?

    ReplyDelete
    Replies
    1. Hi Kspaans

      I cannot argue that in circumstances such as you describe above the current rules may be unfair. Note, in these situations, the contractor is taking a huge tax risk they may be a personal service business by not being an employee.

      However, in cases where people are creating business that create jobs, I think part of the risk incentive is that they can defer tax once they become successful. Risk needs reward, the more rewards you remove, the less risk people take, the less new business, the less jobs the less tax people pay and the more that leave the country to those that reward risk and entrepreneurship.

      Delete
    2. @kspaans - I'm a software engineer that does contracting almost exclusively.

      I think the answer to your question is clear if you consider why you're opting not to switch into contracting yourself - or if you are considering it, what might be holding you back from pulling the trigger immediately.

      Mark obviously highlighted the basics above.

      Higher risk should come with relatively higher reward because the risk does not always pan out. You hear about the successful cases, but probably not about the failed freelancers.

      Delete
    3. Thanks for your input Mark and Anonymous. I agree that contractors take on more risk than full-time employees, and I agree they deserve some special tax breaks.

      Delete
    4. Governments employees and 'semi-permanent' contractors are unfortunate example of issues that go well beyond tax code.
      To be blunt - most government IT employees have below market skills, which incidentally creates perpetual demand for semi-permanent contractors. ( I'd met IT people in Gov of Ontario who flatly and openly refused to upgrade their skills from 90s COBOL to web development, met programmers who show up at 11 and leave at 15:30. )

      Putting disfunction of public sector unionized IT aside - contractors is responsible for her/his own skills upgrade, as well as running the 'HR side' of their business, family members frequently pay role in that. Full time employees also split the revenues they generate with office support stuff, what they see on their cheque is just net amount - cost of office, HR, training, corporate insurance are all deducted before salary is calculated.

      On practical side:
      IT contractors have marketable skills, if the tax burden increases too much they will move to the US, they can get a job offer and TN visa in matter of weeks. We seen it in late 90s and it is about to happen again.

      Delete
  3. I actually had an argument about this last night. Another person with private corporations himself, thought that the new rules would create tax fairness by squeezing CCPC's that were splitting income to adult children which he saw as brazenly unfair. However he saw no issue with his plans to set up a charity to put his adult child as CEO of the charity and pay her a salary.

    Most tax criticisms will fall into "don't tax me, tax them" arguments. But these new changes leave me shaking my head.

    ReplyDelete
    Replies
    1. Hi Anon:

      Ha ha, your anecdote made me chuckle. My head is shaking, but maybe my perspective is warped.

      Delete
    2. Had to laugh as well as that about sums up my attitude tax the rich just don't make me pay

      Delete
  4. I honestly think that more and more business owners will pay themselves payroll income and less dividends. RRSPs will be on the the new normal by small biz owners. The writing is on the wall.

    In my opinion, it will be the medical doctors and the Ontario Medical association that will have the most clout in this battle. There as an interesting article in the Financial Post about this over the weekend. I am not sure if you allow external links...I could find it if you want.

    ReplyDelete
    Replies
    1. Hi Kevin

      I have no problem with external links, I use them myself. I think you are correct regarding the OMA, they seem to have an overweighted power compared to all the other professional organizations, but not sure that will be the case in this situation as the Liberals seem to be targeting professionals.

      Delete
    2. In my opinion increases to CPP rates and rollout of mandatory Ontario Retirement Pension Plan in 2020 will make salary payments quite expensive when compared to dividends.

      While CPP and Ontario retirement plan will provide some payment upon retirement, rate of the return (assuming max CPP payment for ~20) seems very poor compared to expected market return 5-6%.

      Lets face it - CPP is not an individual savings vehicle it also provides social safety net (disability insurance ) and income redistribution function (clawback). This money has to come from somewhere.

      Delete
    3. Hi Mi

      The Ontario pension plan was cancelled with the Fed increase in CPP rates.

      Delete
  5. Hi Mark,

    Will you or your firm be submitting a letter or any other correspondence during the consultation period? Based on the messaging from Mr. Morneau and the general 'tax fairness' (or more accurately, 'tax the rich'), I'm not sure it'll make any difference, but I'm curious if there will be any efforts made by the accounting industry to try and oppose this. Thanks!

    ReplyDelete
    Replies
    1. Hi Anon

      My firm and multiple accounting/legal bodies will be submitting responses. Like you, I am not sure anything will help, the best bet is probably pressure from the OMA as Kevin noted above.

      Delete
  6. http://business.financialpost.com/personal-finance/taxes/ottawa-cracking-down-on-loopholes-that-create-major-tax-breaks-favoured-by-wealthy-families/wcm/481ba137-ac18-46da-893d-21dce841c176

    ReplyDelete
  7. Hi Mark, thanks for your insightful articles. Regarding the proposed changes to income sprinkling, do you think that retained earnings from income in prior years will not be subject to the reasonableness test when distributed as dividends in 2018 and beyond? Or do you think that the corporation will have to prove that a family member did an amount of work in a past year (or present year) that is commensurate with the dividend paid to that family member?

    ReplyDelete
    Replies
    1. Hi Andre

      My understanding is that prior years retained earnings and refundable balances will not be affected. We will have to see the final legislation to confirm, but that seems to be the consensus opinion of tax commentators currently.

      Delete
    2. Thanks for the reply, I hope that ends up being the case because we have plenty of retained earnings from years ago and neither my spouse nor I do much work for that business anymore and active income is quite small (we are just drawing down the past retained earnings through dividends over time). It would seem neither of us would pass a reasonableness test in 2018 and beyond!

      Delete
  8. If it is becoming difficult to treat one's private corporation as if it were a pension plan, why not simply set up a Personal Pension Plan? It provides 7 additional ways to make corporate tax deductions effectively negating the proposed tax changes...plus, it can help purify a CCPC for the lifetime capital gains exemption as a bonus.

    ReplyDelete
    Replies
    1. Hi JP

      I think this will be a boon for your personal pension plan biz.

      Delete
    2. Only if accountants do not recommend shutting down professional corporations due to the anti-dividend, anti-corporate investing tax changes...

      Delete
    3. I think most PC's will remain due to the quantum of retained earnings, insurance policies in them etc. but we shall see.

      Delete
  9. Sorry for asking advise inside your blog. But, as a physician, I have a PC. My wife runs her own separate (very successful) billing company inside the umbrella of my PC. Does that mean that the liberals are about to try to tax her full income at the highest rate simply because her company is inside my PC?

    ReplyDelete
    Replies
    1. Hi John

      I do not provide specific advice on this blog since I do not know all the facts. You should speak to your accountant. That being said, the Liberals are trying to reallocate income transferred to spouses and children who are not involved in a business. The proposal have a labour contribution test. I would think she would likely meet the labour criteria and thus the income would not be allocated, but as noted above, speak to your accountant who knows the exact details and we still must await the final details to understand how all of this is going to work.

      Delete
  10. nice summary, thanks for taking the time away from your summer!

    really nervous about passive investment piece

    i was planning on using my CCPC to hold about 2/3 my retirement portfolio (the rest being RRSP, TFSA). From what I can see the potential growth overall just got cut by about 15%. I'd love to see what government employees (and their unions) would have to say if their pension was cut by 15%

    ReplyDelete
    Replies
    1. Hi Tim,

      Many small biz owners were planning on doing the same. I think you are good on current retained earnings the future earnings may be a diff story. No comment on the last part, I dont want to get myself in trouble.

      Delete
  11. Thanks for the post. Will look forward to your detailed overview of passive investment changes this fall. May I request an updated post about the pros/cons of corporate owned universal life insurance this fall too

    ReplyDelete
    Replies
    1. Hi Anon

      I was actually planning on such an article. will wait to see however, if these changes impact the considerations of such

      Delete
  12. As a doctor, it's funny to hear other people's confidence that the Canadian Medical Association will be able to defeat this. We were counting on the other professionals, since our organizations seem to take our money without negotiating anything useful for us.
    Let's all make sure we write to fin.consultation.fin@canada.ca
    Thanks for informing us, Blunt Bean Counter. Very informative.

    ReplyDelete
    Replies
    1. Hi Melissa

      thx for your kind words. I think the confidence is based on the past in which the government gave the Drs income splitting advantages other professionals such as accountants and lawyers were not provided.

      I think the Liberals are targeting professionals so I am not holding much hope, my sole hope is the passive piece becomes so complex they say it is not worth it.

      Delete
  13. Funny that nobody has addressed the fact that a potentially ill advised, I'll equipped CRA person is going to tell me how much myself and my spouse can earn as dividends. There is the underlying concern that "excess earnings" will only be attributed to a single spouse whereas there is a lot of merit to suggest it should be equal. How can someone determine how to split excess earnings? Excess earnings is the goal not the current reality and how much is return on capital for the debt against the couples home that's joint ownership? They both carry the same risk of losing their house if it goes bad. Too much that's nuts in these punitive tax grabs to know where to start.

    ReplyDelete
    Replies
    1. Hi Carl

      Besides the philosophical bent of these anti small business rules, you have hit the nail on he head at what appears to be a potential arbitrary enforcement of them.

      Delete
  14. Mark thank you for your fantastic blog, which has provided practical information to me and other high income, high net worth people for years. Congratulations on taking time off as well.

    A quick one. I'm not an accountant by any stretch just a business owner. In this case, my CCPC owns an interest in an operating business and receives considerable active income from it, pays the General (not small biz) corporate tax rate owing, and retains the considerable earnings for passive investment in Canadian dividend paying stocks.

    The CRA position paper appear to only use examples for passive investment change proposals with the personal taxpayer at the TOP tax rate for comparison purposes.

    Do you have a view of the basic implications on someone in my position: CCPC pays General not SB tax, passive income created from investing retained earnings in Canadian dividend paying stocks, those passive incomes taken by the owner (me) each year at less than the top personal tax rate.

    My layperson noodling thinks the implications are limited by the fact that the CCPC is paying the General tax rate, so the potential hit is relatively small but I could be way off.

    Any insights very welcome before this shakes out....thanks in advance!!

    ReplyDelete
    Replies
    1. Hi Anon

      Thx for the kind words about the blog.

      Even if you pay the general rate, say 26%, these rules will impose another 27% tax on those earnings if they are not distributed to you. So conceptually, it will not make sense to do anything other than distribute all your earnings and you will not be able to grow any passive income earned from 2018 onward, we think pre-2018 income can still grow under the old rules.

      Again, we need to see the final rules, but if you do not remove the funds from 2018 corporate earnings, that remain after you pay 26%, my understanding after reading a summary by a leading tax law firm is there could be a double tax.

      Delete
  15. A quick question on this:
    I've a non trivial sum(say a few million) in my CCPC and I use investments to generate some income.
    What happens if this income is ploughed back into the business in the form of rent, IT expenses, staff salaries and even my own personal salary?
    All this while I fund my new business ideas. Would this be a kosher use of investment income?

    ReplyDelete
    Replies
    1. Hi Anon

      Many tax accountants and tax lawyers are not only upset at the proposals, but the lack of clarity for these proposals. We are still in the dark as to what would be considered business use, however, the examples above would appear to at least meet the conceptual criteria for biz use. As I say to my clients, we can offer no definitive answers at this point unfortunately.

      Delete
  16. A few comments.

    1. This government campaigned as tax and spend Liberals. All the small business owners who voted for them should have thought about their actions.

    2. The government is using a blunt force tool to go after high income professionals especially doctors. Doctors take on very little risk and don't put their life savings on the line to take advantage of income sprinkling and deferred taxes. The same comment applies to high income lawyers and accountants who work in big firms.

    3. There has to be a better way to separate the two groups. It might be a maximum threshold of passive assets or simply remove the small business tax rate.

    4. No doctor will leave the country because of these changes. Going to the land of Trump and Obamacare where S Corps pay personal tax rates and having to deal with many insurance companies instead of a single payer won't yield material benefits.

    ReplyDelete
    Replies
    1. Hi Anishmakim:

      Thx for your comments

      1. agree
      2. Dr's were provided this advantage in lieu of fee increases in prior negotiations. Gov then should increase their fees. As for large firm professionals, they employ 100's of people and spend tons of money. the partners are pro rata owners in those businesses and do not get the small biz rate, but pay at 26% general rate, thus only tax deferral used in general to save for retirement.

      3. As noted above, only Dr's would benefit from the SB rate, large firm partners do not in general

      4. I agree, most people suck it up and stay in Cda. that does not mean a government that taxes highly is not hurting investment and spending long term

      Delete
    2. While most will remain in Canada, they can and will change the nature of the work they do. I intend to cut out all work that is not interesting or too time consuming even though some clients need this service. Perhaps someone else can take that on. This reduction in scope of practice will result in at least one layoff and allow me to lease a smaller space. Will earn less, pay less in taxes and enjoy a more balanced life. Time to try out this 40 hour work week I hear so much about.
      The passive income piece will just mean that tax cannot be deferred. So, the current govt. will have more revenue but future govts will have less revenue (I'll be taking out tax paid money from the corp in retirement). Doesn't seem smart as the boomer retirement wave is about to crest and the tax payer base is about to shrink.

      Delete
    3. Hi Anon

      And your situation will be like many others, whether they cut back or dont start new or additional businesses, the gov proposals will be detrimental to the economy.

      Delete
  17. What about CEOs and other high-income Canadians who receive deferred compensation in the form of stock options, of which only 50% is ultimately taxed? This is supposed to cost Ottawa way more (approximately $840 million per the linked March 2017 CBC article) than income sprinkling. According to this article, most of the taxpayers who benefit from this measure are not even from the high-tech or other start-up industries.

    According to Minister Morneau, we “all [must] pay our fair share of taxes --- with no exceptions”, and so “our Government ... is taking steps to address tax planning strategies and close loopholes that are only available to some—often the very wealthy or the highest income earners—at the expense of others.” “... such practices can undermine confidence in our economy by giving tax advantages to a select few. We don't think that's fair.” " ... some of the highest-income earners are effectively being taxed at a much lower rate than everyone else.”

    Are these stock option recipients paying their fair share of taxes? Are they paying roughly the same tax as their neighbor who earns the same? Are they not effectively being taxed at a much lower rate than everyone else? Is this the “level playing field” that Minister Morneau claims is necessary?


    http://www.taxfairness.ca/en/blog/close-stock-option-loophole-why-should-we-subsidize-super-rich-ceos

    http://www.cbc.ca/news/business/stock-option-deduction-tax-rate-1.4030442

    https://www.pressprogress.ca/bay_street_pressured_liberals_to_break_promise_to_close_ceo_tax_loophole_documents_show

    ReplyDelete
    Replies
    1. Thx Anon, I am not as worried about getting the tax elsewhere as I am the Liberals hurting small business and the incentive to start a small biz.

      Delete
  18. I'm trying to understand in particular the farmers' anger about the proposed barriers to LCGE multiplication. If some of their adult children who have already been working on the farm are going to inherit and continue as farmers, will there be a significant increase in capital gains liability. And relatedly, in circumstances when a farm transfer currently uses the LCGE on the children, and not just the parents, why is it in the children's interest to use their LCGE at that moment? Don't they leave themselves open to a major c.g. tax bill later in their life, at the next intergenerational transfer? I don't have a dog in this race, but I do like to understand what people are angry about.

    ReplyDelete
    Replies
    1. Sorry I don't have any farmers as clients working in Toronto so I cannot comment

      Delete
  19. One issue I have not seen addressed anywhere, including this excellent blog BTW, is that many contractors are FORCED to incorporate. As companies reduce full time employees to reduce cost/FTE and show increased production per FTE etc., those wishing to work for them must either give up a huge proportion of their income to a recruitment firm which effectively incorporates them if they are sole proprietors, or not get the work. This forced incoporation costs an individual thousands of dollars a year in tax/legal/paperwork. Morneau would have us believe that you have a choice when in fact, you often do not.

    Secondly, the scarcity of actual details makes these proposals worrisome (ie. what exactly is the test to determine contribution; what happens if the contribution changes over time as where a woman takes a "leave from the PC to raise the couple's children, etc.).

    And lastly, the overall tone of Morneau's comments are insulting: using the current tax code is not "cheating" nor not paying a "fair share".

    ReplyDelete
    Replies
    1. All great comments that I agree with. Your second comment is the key one these proposals are not only lacking clarity but have not considered multiple issues they seem to impact. SIGH

      Delete
  20. Great blog, I have a question regarding retained earnings. If a small business owner is trying to grow their business and has accumulated retained earnings, while they seek avenues or the right opportunity to grow their business by acquisition or through other direct investment means.... it is conceivable to have retained earnings accumulating passive income in the interim. Are the Liberals trying to 'tax' retained earnings? If so, how are businesses supposed to grow if they are penalized by a new tax that will diminish their ability to do so?

    ReplyDelete
    Replies
    1. Philosophically if a Corp is trying to grow they are not supposed to be impacted , however your example is one of many situations where the rules get complicated since what happens if u wait and don't reinvest I can't help you the passive rules are so complex I expect this to be where the Liberals give if they do anywhere

      Delete
  21. Vert Nice informative blog for the layperson I am. One current strategy is to detain whole life permanent insurrance in the PC. The proceeds upon death Being passéd on throught the CDA tax free. If the CDA is nicked, does that affect the whole life insurance gist? These heavy paid premiums would the générate a négative return. Dosent make sense.

    ReplyDelete
  22. I just finished watching a re-broadcast of Minister Morneau's tele-townhall held yesterday on his Facebook page. One of the examples he gave regarding passive investments in a Small Business Corp. was this: Suppose you have two individuals who want to invest $100k in a hardware business. Person A who does not have a corporation would be taxed on his $100k needed to invest at 40% and would have $60k left to put towards the investment in the hardware business. Person B who has a corporation would be taxed in the corporation at 15% and would have $85k left to invest in the hardware business. The Morneau tax changes aims to address this 'unfairness'. Am I missing something here? Does this make sense? Does any other Western Democratic Government look at retained earnings & investments in a corporation this way?
    On another note, just read in the Globe & Mail yesterday that Buffett's Berkshire Hathoway in the US is holding $100 billion USD in cash. I'm very confused by the goal here.

    ReplyDelete
    Replies
    1. Hi Anon

      You are not alone, many do not think most of the Liberal proposals make any sense. The whole premise of comparing an employee to an employer shows the Liberals are missing the point of risk and entrepreneurship.

      Many biz people have pointed out that they hold excess cash for not only retirement, but to smooth down periods and to invest when the proper opp arises. So I really dont get the premise of the passive rule changes, mostly because it is only a deferral and not absolute tax.

      Delete
  23. Thank you for the post.
    How does the proposed tax changes affect Capital Dividend Account (CDA)? Will it completely eliminate CDA? if so should the stocks held in corporate account with unrealized gain be sold before end of 2017 and distributed as Capital dividend?

    ReplyDelete
    Replies
    1. Hi Anon:

      Most tax professionals do not think the CRA's intention is to eliminate the CDA for arm-length transactions and typical stock portfolio gains.

      However, there are some drafting issues relating to capital dividends based on the proposed liberal legislation. So unfortunately I am not commenting on this topic until clarified.

      Delete