RESOURCES

Income Tax Planning Opportunities

If you are considering a change to the structure of your business or investment holdings or wish to investigate other significant income tax planning opportunities, you should meet with your Chartered Accountant to discuss the process. These discussions are meant to examine your goals, identify issues and possible solutions and to determine if a preliminary engagement should be undertaken.
 
Preliminary consultation engagement
The complexities involved with the integration of business, family and income tax matters necessitate a certain level of rigor in the planning process. This engagement provides a reasonable “first look” at your situation and will provide you with information that will help you determine if you would like to continue with the reorganization process. If you decide against reorganization, this engagement provides a logical termination point in the process.

The preliminary consultation engagement involves consulting services led by one of our tax specialists.  We will assist in identifying your objectives, determining the relevant facts, discussing reasonable options available, identifying certain planning opportunities, offering a recommended approach and providing an estimate of the requirements and accounting costs involved.

We will provide the results of this engagement through verbal or written communication.  An engagement letter will be prepared which outlines the responsibilities of the parties involved.
The estimated fees for this engagement will typically range from $3,000 to $4,700, before applicable taxes, and are dependent on matters such as the existing business structure, the nature and complexity of business assets, and the complexity of the desired corporate structure.
 
The planning opportunities and recommended approach, once agreed upon, would have to be fully researched to ensure there would be no adverse or unintended income tax consequences.  This additional research, planning, and assistance with implementation of an agreed upon plan will be a separate engagement.
 
Planning and implementation engagement
This phase of the planning process may involve your legal advisor, our income tax specialists and one of our accredited valuators. The parties involved need to understand and agree with the overall plan and approach.

The purpose of this engagement is to provide further assistance and consulting services regarding a plan recommended at the conclusion of the preliminary consultation engagement. We will provide advice including determining the amounts, sequence and timing of the required transactions, providing legal counsel with written instructions as to the documentation required, reviewing such documentation to determine if it is consistent with our instructions, planning for tax minimization in the year of transition, obtaining the required Canada Revenue Agency business numbers, providing assistance with the required income tax elections, determining the general ledger journal entries required to reflect the transactions within the corporation(s), preparing the opening balance sheet for the corporation(s), and ensuring the relevant transactions are reflected in the personal and corporate income tax returns.
 
We will provide the results of this engagement through verbal or written communication.  An engagement letter will be prepared which outlines the responsibilities of the parties involved.
The estimated fees for this engagement, including a valuation engagement if required, will be addressed at the conclusion of our preliminary consultation engagement.
 
Valuation Engagement
The valuation engagement involves services led by one of our accredited valuators.  The Income Tax Act requires certain transactions to be concluded at fair market value to avoid possible negative income tax consequences.  To ensure the transaction values withstand the scrutiny of the Canada Revenue Agency, a significant amount of effort and expertise is required to determine the share value of privately held corporations.  The fair market value of a corporation’s shares is derived from the value of the underlying assets including intangible assets such as goodwill and other factors such as the inherent tax liabilities in respect of the assets.  Minority and marketability discounts must be considered as well.  In our experience, valuations are more defensible where an accredited valuator has assisted with the calculation of value.
 

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