Tax Reorganization
Common Assignments
We get involved, and have experience, advising on taxation matters with the following types of reorganization assignments:
- Asset Protection
- Income Splitting
- Purchase & Sale of a business
- Intergenerational Transfers
- Succession Planning
Our typical involvement per type of assignment...
Asset Protection
Several strategies can be implemented to minimize potential losses in the event of a legal claim against a client's business. Most strategies involve modifying the ownership of capital-shares or the ownership of assets (tangible or intangible). As any legal practitioner will tell you, it is important to have the proper structure in place before the event which may lead to litigation occurs. Obviously, the new structure is put into place with a desire to avoid any immediate tax consequences. Thus, it may be appropriate to consult to ensure this is the case.
Income Splitting
The latest proposed federal tax reform aims to reduce opportunities in this area. Consequently, your client's current corporate structure may need to be review in light of recent amendments to tax legislation. New legislation will widen the scope of the "kiddie tax" to adult family members. In order to avoid the automatic application of the maximum personal tax rate, adjustments to clients' current legal structure may be required.
Purchase and Sale of a Business
For the seller of a business, certain tax provision should be avoided. Furthermore, the latter will benefit from their shares being eligible for the capital gain exemption.
On the other hand, the purchaser will have tax considerations which will be to the opposite of those of the seller. Moreover, either side of the transaction may benefit from having his own tax adviser. The latter's assignment may be to ensure that his client's interests are being sought.
Inter-generational Transfers
The purchase and sale of a business to a member of family is referred to as a "non-arms length" transaction in the Income Tax Act ("ITA"). As you may be aware, our tax authorities are more vigilant when they believe that parties involved may be prone to artificially manipulate tax facts for the benefit of a family group. As a consequence of specific tax legislation, transfers between related individuals may be recharacterized, to your client's disadvantage, from an income tax perspective.
Succession Planning
When shares of a private corporation may become part of an estate, a notary should ensure that his client's will as well as the legal ownership of his private shares are optimally owned. Life policies and shareholder agreements must also be given proper consideration from a tax perspective. In order to minimize taxation, it is crucial that the same asset only gets taxed once. Situations giving rise to double taxation (firstly by the deceased and secondly by the succession) may occur and should be avoided. Although, these situations were not intended by tax authorities when legislation was drafted; they nevertheless occur and are enforced by tax examiners.
Who we serve
Our tax planning services are sought by professional clients, in particular business lawyers and accountants, involved in reorganizing their corporate client's affairs. Additionally, private business owners and entrepreneurs may also contact us directly if they wish for us to assess the tax efficiency of their corporate legal structure. We can assist you in reorganizing your affairs in a tax efficient manner.
Why consult with us
Because taxation is increasingly complex, professionals may be out of their comfort zone with respect to these matters. Consequently, they often have three options. They can either:
- Ignore the potential issue and hope you never hear about it again;
- Spend an enormous amount of time seeking a solution without knowing in advance whether a satisfying solution will ever be reached; or,
- Request external expert assistance and get the right answer within a reasonable delay.
Obviously, the first option should be avoided at all cost as Murphy's Law always seems to prevail in the end. And because the second option may not represent the best use of your time, we strongly recommend that you give option three a try.
Moreover, you risk being pleasantly surprised by the value of the service you receive. If acting on behalf of a client, the latter will likely appreciate the soundness of the guidance and advice you are providing to them. Please keep in mind that solutions to specific problems or risks may be identified by virtue of a sound tax oriented research.