We recently held our Update for Professional Breakfast Seminar and wanted to share some key topics that came out of the morning’s session. We hope you can join us at our next seminar!
“Whole life as an Investment” with Brenda McEachern from Canada Life
Brenda McEachern provided us with case studies that focused on insurance as an alternative investment strategy for business owners. She discussed these cases as they relate to CDA and differing corporate tax rates. Below are some highlights from the presentation:
- Life insurance for business owners, basic tax rules: Typically, premiums are not tax deductible. Growth in cash values is tax-advantaged. Death benefit is received tax-free. Death benefit received by a private corporation credits the corporation’s capital dividend account (CDA) to the extent it exceeds the policy’s adjusted cost basis (ACB) at the time of death.
- Why life insurance with high cash values are attractive to business owners: Asset on the corporate balance sheet. Source of immediate liquidity for business needs, personal needs, or both. Additional source of income in retirement. Conservative method of building wealth. Tax-efficient method of building wealth.
“Budget Update – What it Means for Private Companies” with Kevin Wong from MNP
Kevin Wong talked about the 2017 Federal Budget and private corporations. He specifically talked about income splitting, incorporated passive investments and conversion of regular income into capital gains. Here are some key points that came out of the session:
- Predictions regarding income splitting: Potentially see the end of classic income splitting techniques (ie. Discretionary dividends and Multiplication of capital gains exemption (through the use of trust)). He also talked about the possibility of an increase in the Capital Gains Inclusion Rate.
- Verification activity has increased especially in a real estate sector review: There has been a redeployment of 50 income tax auditors + 20 GST auditors. Areas of focus: Property “flipping” (capital versus income, principal residence exemption). Source of funds (residence in high-value areas and household income, world-wide income reporting). Unreported assignment sales (unreported GST/HST on sale of new or substantially renovated homes).