// RRSP, TFSA & TAX PLANNING
The Department of Finance has proposed a three-part tax planning strategy to address these alleged “loopholes”. 1. Income sprinkling: Expand the rules for income splitting among family members.
HASKAYNE
Executive
MBA
‘‘
I decided on the Alberta Haskayne Executive MBA for my education because of the local learning community created within the Haskayne School of Business. The ongoing face-to-face interaction with faculty and classmates was instrumental in the development my skills and knowledge. The Alberta Haskayne Executive MBA network has been a great resource for me to draw upon, both in and outside of the classroom.”
Rachel Moore, EMBA’15 Vice President, Human Resources Encana
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2. Passive investments held inside a private corporation: Prevention of corporate tax deferral to hold such investments inside the corporation. 3. Convert income into capital gains: Eliminate tax plans that convert dividend income into lower-taxed capital gains. MNP was quick to publish a three-part Proposed Tax Update and a Summary Analysis of the Proposed Changes for Private Corporations to help their clients, and the general public, better understand what could become the new reality. “As a leading national accounting, tax and business consulting firm in Canada, MNP will be preparing a written submission to the federal Department of Finance on the technical aspects of the proposed legislation. The proposed changes will have a negative impact on small and medium sized businesses in Canada,” said a spokesperson from the firm. Currently, with income sprinkling, also known as income splitting, the entire family is involved in the company’s ownership, either directly or via a trust. This is advantageous for tax planning and succession. MNP’s documentation notes: “The tax on split income has now been expanded. There are now specific exemptions for minors and adult children who have income due to the death of a parent, or for any person who is disabled or attending school fulltime.” MNP points out how the changes will impact the capital gain deduction for qualifying farm and fishing properties, and for qualifying small business corporate shares: • Capital gains deductions will no longer be available to minors. • Capital gains deductions will no longer be available for capital gains allocated to an individual by a trust governed by an employee profit sharing plan. • Capital gains on shares held by an individual while they were a minor are not eligible for the capital gains deduction. • Capital gains that are split income will not be sheltered. • Any gains accrued from shares held in a personal trust will not be eligible for deduction. On the issue of passive investments held inside a private corporation, MNP’s summary document notes, “In their paper, the Department of Finance indicates that the corporate tax deferral should not be used to accrue passive investments inside a corporation…[there is] a discussion [on] several options to eliminate
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SEPTEMBER 2017 // BUSINESS IN CALGARY // BUSINESSINCALGARY.COM