The bulk of businesses requiring succession/sale tax advice from CGAs are small businesses, most often with one or only a few owner-managers/shareholders.  This course is written from that perspective and, unless otherwise noted, concentrates on Canadian-controlled private corporations and resident Canadian individuals.  The materials are believed to be representative of common problems encountered by a CGA in practice whether advising proprietors, partners, or a corporation and/or its shareholders.

Throughout the course there are frequent references to the Income Tax Act (ITA), and Canada Revenue Agency (CRA) Interpretation Bulletins and Information Circulars, and occasionally a particular tax case is referenced.  Each of these is specifically identified and provided to assist you in further researching the discussion.  It is expected that you have a current copy of the ITA and either have an up-to-date tax subscription service or can access these bulletins/circulars/cases via the Internet.

This course is based on the ITA as it stood at February 4, 2011. Any pending legislative amendments, pronouncements, and proposals announced up to then are incorporated into these materials. Also included are the measures affecting partnerships announced in the March 22, 2011 federal budget and reintroduced in the June 6, 2011 budget. You are expected to have a current ITA, as some of the ITA references included in these materials are paraphrased or merely cited, and you will want to refer to the actual provisions to build your comprehension.

This course is contained within five modules. Additionally, there is an online quiz following Module 5 that tests your understanding of the concepts canvassed in the course.

Module 1  Estate planning and orderly succession
The consequences of no business succession plan
Crystallization of the capital gains deduction
Crystallization, paid-up capital, and deemed dividend
Redemption of crystallized shares
Basic planning — Insurance
Modification for the lifetime capital gains deduction
The subsection 40(3.6) estate exception
1998 Amendments

Module 2  Estate planning and orderly succession — Estate freeze
Estate freeze
Considering an estate freeze
How to choose suitable provisions for the preferred shares issued on the freeze

Module 3  Income splitting and the attribution rules
Income splitting: A non-business succession reason for freezing
The attribution rules

Module 4  The use of trusts in tax planning
What is a trust?
Discretionary trusts for holding shares
Taxation of trusts
Taxation of beneficiaries
The reversionary trust attribution rule
Establishing the structure
Miscellaneous advantages
Miscellaneous problems

Module 5  Selected topics on business succession
Reversing estate freezes
Miscellaneous matters

Quiz

Abbreviations

J. Thomas McCallum, FCGA, CBV, has practiced in the tax discipline since 1967. He is currently based in Ontario and restricts his practice to business valuation and income tax consulting. He has conducted over 1200 seminars throughout Canada, Barbados, and the United States. Tom has been the coordinator of CGA Magazine’s monthly “Tax Strategy” column since its inception in 1989, and has authored several online courses and articles which can be found on the CGA PD Net. Active in the Certified General Accountants Association, Tom is a past president of CGA Ontario.

We also thank Bruce Reed, CGA, for his review of, and invaluable contribution to, this course. Bruce obtained his CGA designation in 1984.  Bruce has obtained extensive tax experience over his 34 years with the Canada Revenue Agency and is now in public accounting as a senior tax manager.