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January 18, 2022

New law brings tax relief when you pass your business on to family

If you are a business owner, and have thought about passing along your business or shares of your business to a family member, this announcement is for you! 

According to a recent article in MoneyWise by Clayton Jarvis, there have been recent changes that will make a big difference to the selling of shares of your business to a family member. 

Below are some of the key points to note. If you have questions about this, and how it could impact your business & your family, be sure to ask us. 

Excerpts from: New law means significant tax relief when you pass your business on to your kids by Clayton Jarvis. 

Read the full article here. 

Bill C-208 was given royal assent, becoming Canadian law and amending the ITA, in June 2021. Families looking to transfer shares of family farms, fishing corporations or small business corporations to their children and grandchildren are now in line for what could be significant tax relief.

Now that sales of company shares to family members receive capital gains treatment, sellers may also be able to take advantage of the lifetime capital gains exemption (LCGE), which allows them to realize tax-free capital gains on proceeds totalling up to $892,218 for the 2021 tax year, if the asset being sold qualifies.

Bill C-208 only extends to certain types of businesses: family farms, fishing corporations and “small business corporations”, which don’t necessarily need to be small, but they do need to be private and Canadian in order to receive the new tax treatment.

They also need to be active. A corporation that owns an investment portfolio or a collection of apartment buildings, for example, doesn’t qualify.

“For purposes of a sale just getting capital gains [treatment], you'd want to make sure that the corporation that is buying your shares is buying small business corporation shares, not publicly-traded entities, not U.S.-owned businesses,” Leve says.

For more information, give us a call or send us an email. We would be happy to answer any questions, and help you with this process. 

www.CahillCPA.ca

604-985-0123

 

Crystal Cahill

Crystal Cahill is responsible for the social media and marketing at Cahill CPA. Crystal completed her Bachelor of Arts Degree at Simon Fraser University in English, and has an Education Degree and teaching certification. She enjoys keeping clients updated on new accounting practices, upcoming tax deadlines, and news & events within the Cahill CPA office & staff. She is married to Cahill CPA partner Jordan Cahill, and together they have two young children.

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