Advanced Curriculum Chapter 2_Financial Planning for Business Owners

Question 1

CAPITAL GAINS REINVESTMENT - How can business owners defer capital gains tax?

Answer 1

By reinvesting proceeds into another active business within 120 days after year-end.

Question 2

CAPITAL GAINS RESERVE - How long can a seller defer capital gains on a sale?

Answer 2

Up to 5 years (10 years for QSBC shares, farms, and fishing businesses).

Question 3

FARMING & FISHING ROLLOVERS - How do they help with succession planning?

Answer 3

Allow tax-free intergenerational transfers of qualified farms or fishing operations.

Question 4

TAX ON SPLIT INCOME (TOSI) - What does it restrict?

Answer 4

It prevents dividend income splitting with family members unless they meet work or ownership conditions.

Question 5

INCOME SPLITTING - How can business owners split income legally?

Answer 5

Paying a reasonable salary to family members, pension splitting at age 65, or meeting TOSI exemptions.

Question 6

LIFETIME CAPITAL GAINS EXEMPTION (LCGE) - What is it, and how much is available?

Answer 6

Allows business owners to shelter capital gains on QSBC shares up to $971,190 (2023 limit) from taxation.

Question 7

ASSET SALE VS SHARE SALE - What are the tax benefits of each?

Answer 7

Asset sale: More deductions for buyers, but sellers may face tax on recaptured depreciation. Share sale: Sellers can use LCGE, but business needs to be ‘purified.’

Question 8

CREDITOR PROTECTION - How can business owners reduce personal liability?

Answer 8

Using holding companies, limiting personal guarantees, and separating personal & business assets.