Tax Planning

Question 1

Why do buyers prefer asset sales?

Answer 1

• don’t take on tax liabilities

- no legal liabilities (corp can be sued)

Question 2

Why do sellers prefer share sales?

Answer 2

• get rid of everything and it’s now the buyers problem

- they can use LCGE

Question 3

What happens when you sell for less than UCC?

Answer 3

Declare terminal loss
-fully deductible from income in that year
Lump together with all assets in that class (only terminal loss if all assets in that class are disposed)

Question 4

What happens when you sell an asset for more than UCC, but less than ACB?

Answer 4

Recapture of depreciation

-taxed as ordinary income

Question 5

What happens when you sell an asset for more than the ACB? (Regarding UCC)

Answer 5

1) Proceeds up to ACB is treated as recapture, and 2) capital gain on proceeds above ACB

Question 6

How do you calculate the standby charge for a purchased vehicle?

Answer 6

Purchase price x 2% x months car is used in year

Question 7

How do you calculate the standby charge for a leased vehicle?

Answer 7

2/3 of monthly lease payment x months used by employee in year

Question 8

When do spousal loans have to be paid by?

Answer 8

30 days after year end

Question 9

What limitations do charitable donations have on net income?

Answer 9

Up to 75% while alive and 100% at death

Question 10

What are some benefits of a holdco?

Answer 10

Creditor proof assets
Can purchase other investments
Can set up spouse as a shareholder if over 65 and income split