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The “Big Five” Top Business Succession and Exit Tax Strategies

  1. $750,000 $800,000 Capital Gains Exemption (CGE) available to business owners, spouses and children. 90% active assets at time of sale and 50% over previous two years. Family trust may sell shares and allocate exemption to multiple beneficiaries. Can be used during life or upon death. Holding companies cannot claim a CGE for shares it sells unless Opco and Holdco together met 90% and 50% test.
  2. Spousal Rollovers. Transfer title of assets or shares to a spouse on a tax deferred basis. Elect to transfer assets to a spouse at any value between cost and fair market value in order to utilize CGE, bumps cost base. Roll over to spousal trust in will to create separate taxpayer.
  3. Estate Freezes. Value of parents shares is “frozen” on a chosen date. The basic mechanism of a freeze is that the principal shareholder would exchange his/her common shares for “preferred” shares of the corporation that have a fixed value. This fizzed the value of the preference shares that will be taxed in parents estate. Future growth in value of shares goes to spouse or children delaying tax for a generation.
  4. Holding Corporations. Another way to “freeze” the value of the business. Creditor proof with tax free dividends. Careful about CGE.
  5. Life Insurance. Only tax free asset, used to equalize estate on a fair basis, pay tax and eliminate debt. Corporation can own and pay for policy using retained earnings. Any amount over ACB pays out through Capital Dividend Account to spouses, children, etc. on a tax-free basis.
  6. Yours truly,

    MILL Professional Corporation

    John Mill

    per: John Mill LL.M.

    A network of independent professionals dedicated to simplified Succession & Exit planning

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