Proceed with caution

Article Abstract:

Reorganizing firms are advised to safeguard their dividend income from being recharacterized into a taxable capital gain in accordance with the anti-avoidance provisions of the subsection 55(2) of the Income Tax Act. Subsection 55(2) converts tax-free dividend into a taxable capital gain or proceeds of disposition to prevent tax deferrals from corporate shareholders who wish to convert a capital gain into a deductible intercorporate dividend. Chartered accountants must accurately calculate the amount of 'income earned' as this may be paid to a shareholder as a tax-free dividend.

Tax Law, Dividends, Corporate reorganizations

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Taking the vexation out of taxation

Article Abstract:

The new Revenue Canada audit program which was initiated in 1997 is designed to elicit more cooperation from corporations during the audit season. Moreover, the new protocol seeks to establish a more honest and straightforward relationship between companies and the government. The companies develop, together with Revenue Canada, an audit program created specifically based on each companies' needs. The audit program includes Revenue Canada's major function such as real estate evaluation, international tax, goods and service tax, scientific research and experimental development.

Corporate Tax Administration, Canada, Corporate taxes, Tax administration

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Building in flexibility

Article Abstract:

The ongoing changes in the Income Tax Act demand that accountants deliberate on how to structure the buyout of an estate following the demise of a shareholder. Changes to subsection 112(3) of the act stipulate, except when specific grandfathering provisions are applicable, that share proceeds can no longer be achieved on a tax-free basis. Shareholders' agreements should be flexible to realize the best tax result and to accommodate prospective amendments in income tax provisions.

Corporate Income Taxes, Laws, regulations and rules, Tax planning, Income tax, Estate planning

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