tag:blogger.com,1999:blog-4402283548766807872.post7578564942747742581..comments2024-03-20T02:26:06.500-04:00Comments on The Blunt Bean Counter: Prescribed Rate Loans – One Last Kick at the 1% RateThe Blunt Bean Counterhttp://www.blogger.com/profile/11358868550072516313noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-4402283548766807872.post-226119202948346422018-03-27T21:14:59.292-04:002018-03-27T21:14:59.292-04:00Hi Nan
My understanding is that the loan actually...Hi Nan<br /><br />My understanding is that the loan actually has to be made before by March 31st. I have never really looked into this issue, so I am not 100% certain, but it makes common sense or everyone would make a promise to make a loan whenever the rate was rising. But for certainty, you can get your accountant to check it or check with the CRA.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-75374528073508011742018-03-27T15:00:04.552-04:002018-03-27T15:00:04.552-04:00Hi Mark - I have a substantial Bonus payment comin...Hi Mark - I have a substantial Bonus payment coming due at the end of April and I am considering taking advantage of the reaming few days at the 1% rate to set up a loan to my wife - does the loan need to be funded on the day the agreement is entered into or is it permitted to enter into a loan to be funded using the current 1% prescribed rate at a future date? I can always pull from an LOC to fund before the end of March but if it is permitted to delay funding until I receive the funds, I would prefer to do that? Thanks!nanhttps://www.blogger.com/profile/01381966560344774965noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-30583544008687403932018-03-01T00:14:08.844-05:002018-03-01T00:14:08.844-05:00Hi Anon
I am lazy, so here is a blurb from a RBC ...Hi Anon<br /><br />I am lazy, so here is a blurb from a RBC publication that addresses your question.<br /><br />Attribution and adult children<br /> <br />The income and capital gains earned on funds transferred as a gift to an adult child is not attributed back to the parent; therefore, any outright gift will achieve family income splitting. <br /><br />When a gift is made, it is generally not revocable and consequently, the parent making the gift loses control of and access to the funds. As a parent, you may not be comfortable with that for a number of reasons. <br /><br />In order to retain access to the funds, you may want to loan funds to your adult child, instead of making a gift, as you can always recall a loan. However, when a low or no-interest loan is made to adult children and one of the main reasons for making the loan was to reduce or avoid tax by causing income from the loaned property to be included in the income of your adult child, then generally interest and dividend income, but not capital gains/losses, that is earned on the loaned funds (or substituted property) will be taxed to the parent who made the loan instead of in the hands of the adult child. <br />You can avoid these rules by charging interest on the loan at the CRA prescribed rate. These rules also apply to low- or no-interest loans that you make to non-arm’s length individual where one of the main reasons for the loan is income splitting.<br />The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-1959447766702212322018-02-28T23:51:48.000-05:002018-02-28T23:51:48.000-05:00Hi Unknown:
I don't provide personal tax plan...Hi Unknown:<br /><br />I don't provide personal tax planning advice on the blog. Speak to your accountant who knows your specific facts, as in some cases it may make sense to sell for tax, but be careful not to let the tax dog wag its tail.<br /><br />You cannot make a prescribed loan from your corp to yourself, it is just a shareholder loan subject to repayment<br /><br />The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-37763880124706781622018-02-28T23:45:24.654-05:002018-02-28T23:45:24.654-05:00Hi Nathan
No, there were no updates and yes, we n...Hi Nathan<br /><br />No, there were no updates and yes, we need clarity on how the income splitting rules will apply to optco/holdco setups, with or without trustsThe Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-7717278650632489652018-02-28T22:20:20.766-05:002018-02-28T22:20:20.766-05:00Hi Mark,
Thanks for all the useful and informative...Hi Mark,<br />Thanks for all the useful and informative posts on your blog.<br /><br />You mentioned spouses and minor children. What about adult children? Do the attribution rules apply? Does the prescribed interest rate need to be charged, or can the loan be interest free?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-91168520901626900562018-02-28T10:49:06.499-05:002018-02-28T10:49:06.499-05:00Hi mark;
Another budget question. For people who ...Hi mark;<br /><br />Another budget question. For people who saved a lot In the corporation, does it make sense to liquidate the capital gain (7 figures) this year before upcoming tax changes? How about lending to self at 1% so the passive income would be capped indefinitely? <br /><br />Thanks. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-57923076747580829482018-02-28T00:53:20.690-05:002018-02-28T00:53:20.690-05:00Hey Mark,
Was there any update to the income split...Hey Mark,<br />Was there any update to the income splitting changes today that I missed? The clarity and improvements on the passive income rules were welcome, but there's still a lot of uncertainty around how the income splitting rules will apply to optco/holdco setups, with or without trusts.Anonymoushttps://www.blogger.com/profile/13903169117125578441noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-58306403907601671722018-02-27T23:31:22.178-05:002018-02-27T23:31:22.178-05:00Thanks for the response, that's a relief!Thanks for the response, that's a relief!anonhttps://www.blogger.com/profile/15784355839357514135noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-81540004594242759382018-02-27T22:39:30.303-05:002018-02-27T22:39:30.303-05:00Hi Unknown
Based on what I read today (subject to...Hi Unknown<br /><br />Based on what I read today (subject to a more detailed read), the new rules will not apply to you and me (thank god). However, there will be some changes to the RDTOH when paying dividends, but they in most cases should not be that material.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-51360142499541648082018-02-27T17:00:48.579-05:002018-02-27T17:00:48.579-05:00Hi Mark, off topic but I have a question about the...Hi Mark, off topic but I have a question about the update to the passive income rules in the federal budget. My company is not entitled to the small business tax rate deduction (partner in national law firm). Can we ignore the $50k income per annum rule, or do these provisions somehow still apply to us? thanksanonhttps://www.blogger.com/profile/11613763233115271593noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-64102241394421868962018-02-26T12:37:38.168-05:002018-02-26T12:37:38.168-05:00Hi Anon:
The private share concern relates to the...Hi Anon:<br /><br />The private share concern relates to the revised Income Splitting Rules from December.<br /><br />This is complicated and you need to speak to your accountants and make sure they do not feel these rules will have any impact on your plan. <br /><br />I have read where others have some concern and suggest it may be safest to stay away from private company transactions, however, you need to speak to your accountants, I am just raising a concern and they may not feel the revised rules are applicable. I cannot advise you.The Blunt Bean Counterhttps://www.blogger.com/profile/11358868550072516313noreply@blogger.comtag:blogger.com,1999:blog-4402283548766807872.post-55511390653797446452018-02-26T10:54:39.604-05:002018-02-26T10:54:39.604-05:00Hi Mark
Thank you for the article and for the remi...Hi Mark<br />Thank you for the article and for the reminder of this quickly approaching deadline. <br />You mention at the end that "based on what we know" proceeds of such loans be invested only in public securities.<br />I'm not clear on the reasoning for this and wanted to see if there was any information you could share to shed light on this comment. <br />I am contemplating using such a loan to have my spouse buy shares of a private holdco that owns real estate and my accountants didn't raise a concern. We have a recent sale of shares by an arms length party that held a large percentage of shares thus a fair valuation for the private shares. <br />Am I missing something as this seems a reasonable option to income split depending on how the new rules in the budget come back. The thinking on my part was that issuing shares without a s.87 rollover would have a tax consequence and this might be another way to get shares in the spouses hands that is compliant with the new provisions since capital is contributed. They would then be able to share in future gains and distributions with minimal tax consequences.Anonymousnoreply@blogger.com