Preparation for the future.
The undertaking of legitimate transactions or arrangements with a view to avoiding or minimizing the payment of taxes.
Some or all of such efforts could also be referred to as Tax Avoidance. Care must be taken to ensure the steps taken are not abusive of the provisions they are making use of.
Depending upon your situation one or more tax planning opportunities may be reasonable. Some tax planning transactions include, but are not limited to:
Tax deferred sale of certain assets to a corporation (a section 85 rollover)
Recapitalization of a corporation to minimize punitive taxes such as tax on split income “TOSI”
TFSA versus RRSP
Salary versus dividend compensation
Division of assets in a tax deferred manner (so called Butterfly transactions)
Tax deferred rollovers
Normally when you sell something tax is triggered and is payable.
Even when you sell something you own personally to a corporation you own and control. However, there are several special elections available within the income tax that can cause some or all of the tax that would normally now be payable to be deferred to a date sometime in the future.
The most common of these transactions is where you sell assets to a corporation but instead of being paid all in cash your payment is made at least in part with shares of the corporation. This is often called a section 85 rollover as it relates to the section of the income tax act that allows this election. The tax will eventually become calculated and payable when the shares are sold or transferred.
The tax traps and pitfalls
The tax traps and pitfalls that exist are numerous when one is looking for a plan on how to pass a corporation from the current ownership team to the next. There are a number of tried and true strategies out there, but the trick is finding the strategy that achieves the transition plan to your successors in a manner that minimizes the tax payable when executing on that plan. Call us to book a meeting to help turn your goal of a smooth transition into reality.
Personal tax planning
Built with an individual in mind
Within the income tax act the least number of tax planning opportunities are built with an individual in mind.
However, just because there are fewer options available doesn’t mean that a sound tax plan cannot be put in place to keep the taxes you will have to pay to the lowest legal amount possible. Contact us to book a meeting to start getting your personal finance optimized for tax.