SimpsonWigle Law LLP Tax News

The following article appeared in a recent edition of the Hamilton Law Association Law Journal.

Why have separate classes of shares in the capital of a corporation for new investors? Creating separate classes of shares creates its own problems both from a tax and non-tax perspective. Nonetheless, for tax purposes it is sometimes desirable to have different groups of investors subscribe for different classes of shares in the capital of a corporation. (more…)

You need to purify a corporation of its bad assets so that the corporation’s shares will be qualified small business corporation shares for the purposes of the $750,000 capital gains exemption. Let’s assume that you are confident about the values of the assets involved, so that you can leave bad assets with a value equal to exactly 10% of the total gross value of all assets of the corporation. How do you calculate the amount to remove, given that what you remove reduces both the gross value of the bad assets and the gross value of all of the assets of the corporation? The following formula seems to work: (more…)

In Exida.Com Limited Liability Company v. The Queen, 2010 FCA 159, the Federal Court of Appeal dismissed the appeal of the taxpayer from the decision of Justice Woods (see “Contradiction“). The Federal Court of Appeal’s reasoning is surprising and, perhaps, disturbing. (more…)

I am sometimes asked whether investors who propose to subscribe for shares in the capital of a corporation that has been operating for some time should acquire shares of a separate class. I’ve written a memo that attempts to describe the reasons why using a separate class might be prudent. The memo also mentions briefly some of the problems created by using multiple classes.

Assume that A and B, who deal at arms length, own 55 and 20 common shares in the capital of Opco respectively. A and B also own 95 and 5 common shares in the capital of Holdco respectively. Assume that B’s tax adviser suggests to her that she can sell her common shares in the capital of Opco to Holdco for a purchase price equal to $400,000 cash. What could possibly go wrong? See Emory v. The Queen, 2010 TCC 71, for the answer to that question. (more…)

I’ve seen a number of cases where a family member consents to be a director of a corporation—exactly why nobody seems to know after the fact—and then ends up being assessed for unremitted source deductions. The family member might be uneducated and barely able to speak English, but that won’t stop the assessments. The CRA and the Ministry of Revenue are unsympathetic. The courts are less cold-blooded it seems. (more…)

Don’t forget the triangular amalgamation. While these types of amalgamations are more typical in the public company context, they can be a useful tool for private company deals too. (more…)

Last week, I gave a presentation for the Hamilton Law Association on eligible dividends at its annual Corporate Commercial update. You can find a copy of a sample resolution for eligible dividends here. Use at your own risk!

The following article appeared in the latest edition of the Hamilton Law Association Law Journal. (more…)

In a post I wrote about a year ago, I complained about the CRA’s then-recent pronouncements on control premiums. The CRA, at the most recent Canadian Tax Foundation BC Conference, recanted this position, at least in part, as follows: (more…)