Stuart Bollefer is a longtime Toronto, CA, tax advisor who works closely with various businesses and professionals. Stuart Bollefer helps clients navigate the complexities of Canada Revenue Agency (CRA) rules and achieve tax savings.
One common strategy for handling assets after death is "pipeline planning,” a strategy used to minimize the double tax that can otherwise arise upon death. For example, in normal circumstances, shares in a company that the deceased owned are deemed disposed of at market value at the time of death. The resulting capital gain is subject to tax based on the individual’s tax bracket. Then when the company owned by the individual sells its assets a second level of tax is payable. and the proceeds are distributed accordingly. A pipeline plan seeks to avoid these two levels of tax by setting up a new corporate entity. The shares of the company owned by the deceased can then be transferred into this company, with a promissory note provided in return. The two companies can then later merge and potentially bump up the cost of the investment assets. This strategy can allow the investment assets to be converted into cash, with the promissory note then paid off and no further tax assessed other than the gain initially realized in death This is a complicated strategy and advice should be sought before implementing. For example, the Canada Revenue Agency requires at least one year before the two companies can be merged and then the promissory note must be paid out over time.
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AuthorExperienced Toronto Attorney Stuart Bollefer. Archives
September 2022
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