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ADVANCED TAX PLANNING STRATEGIES. TRUSTS AND CORPORATE STRUCTURE. CORPORATE SITUATIONS. STRUCTURE. 1% 99% 100%. OPCO. FAMILY TRUST WITH ALL FAMILY MEMBERS AS BENEFICIARIES. HOLD CO. ADVANTAGES. *INCOME SPLITTING - SPOUSE/CHILDREN OVER 18/PARENTS/CHILDREN UNDER 18?

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ADVANCED TAX PLANNING STRATEGIES


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    1. ADVANCED TAX PLANNING STRATEGIES

    2. TRUSTS AND CORPORATE STRUCTURE CORPORATE SITUATIONS

    3. STRUCTURE 1% 99% 100% OPCO FAMILY TRUST WITH ALL FAMILY MEMBERS AS BENEFICIARIES HOLD CO

    4. ADVANTAGES *INCOME SPLITTING - SPOUSE/CHILDREN OVER 18/PARENTS/CHILDREN UNDER 18? *MULTIPLICATION OF CGE - SALE OR DEATH *ASSET PROTECTION - HARD/OP ASSETS - CASH: IMMEDIATE AND ONGOING - LIFE INSURANCE PROCEEDS - REDUCTION IN PROBATE AND PROFESSIONAL FEES WITHOUT LOSS OF CONTROL *BUSINESS OWNERS RETIREMENT PLAN - UL OVERFUNDED/LEVERAGE *CONTROL OF DISPOSITION OF SHARES FOR TAX PURPOSES ON DEATH *SUCCESSION PLANNING - TAX/CONTROL/PROTECTION

    5. - OPCO (0) FAMILY TRUST DIVIDEND INCOME SPLIT $35,000.00/YR CGE MULITPLIED ($750,000.00 X ?) HOLD CO $$$ UL

    6. SALE OF BUSINESS DAVE • FAMILY – Wife, two kids (ages 19 & 14) • CCPC - $2,500,001.00

    7. EXAMPLE – INCOME SPLITTING DAVE – FAMILY – Wife, two kids (ages 19 & 14) - CCPC – annual income (personal) $200,000.00 Dave Dave/Wife/19 year old

    8. SITUATION IDENTIFICATION/CLIENT PROFILE • CLIENT - HAS A CORPORATION - A FAMILY - WIDE VARIATION IN TAX BRACKETS/LIABILITIES WITHIN FAMILY - CLIENT OR CLIENT CORPORATION HAS A SIGNIFICANT ANNUAL INCOME - CLIENT HAS A LARGE ANNUAL TAX LIABILITY (INCOME/CAPITAL GAINS) - WANTS TO BRING CHILD INTO BUSINESS – POSSIBLE SUCCESSION OR TAKEOVER - IS TALKING ABOUT SELLING BUSINESS - IS INVESTING THROUGH CORPORATION - IS RETIRING, OR TALKING ABOUT IT

    9. INTER VIVOS TRUSTS ADVANCED TAX PLANNING

    10. TRUST BASICS SETTLOR TRUSTEE TRUSTEE Legal TRUSTEE Ownership BENEFICIARIES (benefits and use)

    11. TRUST PRINCIPLES • CONTROL • PROTECTION • TAX PLANNING/TAX REDUCTION • FLEXIBILITY – separate benefit & control - tax deferred roll in/roll out in some cases • UNIQUE PROPERTY HOLDING/OWNERSHIP SITUATIONS • LIMITATIONS

    12. ADVANTAGES/LIMITATIONS *ADVANTAGES*LIMITATIONS • CONTROL -TRANSFER TO TRUST MAY BE - TRUSTEES (OFTEN PARENTS) A DISPOSITION • ASSET PROTECTION - 21 YEAR TRUST RULE - CREDITORS/SPOUSES • TAX REDUCTION - INCOME SPLITTING - CGE MULITPLICATIONS - TAX DEFERRAL • ADVANCE ESTATE PLANNING - SUPPLEMENTS WILL/EPA - AVOIDS PROBATE TAXES - REDUCES PROFESSIONAL FEES

    13. KIDDIE TAX - S.120.4 ITA • PERSON UNDER 18 YEARS RECEIVING A DIVIDEND FROM CCPC • SOLUTIONS: - NOT APPLICABLE TO - SALARIES TO CHILDREN - MONEY LENT AT PRESCRIBED RATE - INVEST IN SHARES WITH DIVIDEND PAYMENTS - INVENT IN INTEREST BEARING TERM DEPOSIT MATURING WHEN CHILD IS 18 - FIXED INCOME TRUST FOR MINORS - DEBT/INTEREST PAYMENTS FROM FAMILY - SECONDARY INCOME

    14. TRANSFER OF PROPERTY TO AN INTER VIVOS TRUST EXISTING: X Investment Portfolio (FMV $500.000) REORGANIZATION: X FMV Child 1 and 2 Disposition (1) Y (1) Consideration $500,000 promissory note at 4% TRUST

    15. FIXED INCOME TRUST FOR MINORS * S.104(18) FACTORS - RESIDENT - BENEFICIARY YOUNGER THAN 21 YEARS - INCOME RIGHT VESTS (NON-DISCRETIONARY) - ENTITLEMENT OF BENEFICIARY BY 40 ONLY CONDITION * PLANNING - INTEREST FREE LOAN TO CAPITAL BENEFICIARIES - TRUST INTEREST BY SEPARATE DISCRETIONARY TRUSTS

    16. Secondary Income

    17. OWNERSHIP OF FAMILY ASSETS BY AN INTER VIVOS TRUST * COMMON FAMILY ASSET IS COTTAGE - USED BY VARIOUS FAMILY MEMBERS Parents * CONSIDER ACQUIRE COTTAGE BY TRUST - FUNDED BY OPCO DIVIDENDS - PARENTS SHOULD NOT BE BENEFICIARIES OF TRUST - SPECIFIED BENEFICIARY - PRINCIPAL RESIDENCE - S.107(2.01) TRUST TO BENEFICIARY - PRINCIPAL RESIDENCE PLANNING TRUST (1) OPCO

    18. TRUST PLANNING FOR NON-SBC SCENARIOS * CONSIDERATION ACQUISITION OF NON-ACTIVE BUSINESS ASSET BY A CORPORATION - NOT A “SBC” * S.74.4(4) TRUST - NO DIVIDEND ENTITLEMENT WHILE A “DESIGNATED PERSON” EXAMPLE: Designated Persons Real Property Financed by mortgage guaranteed by X TRUST OPCO

    19. PERSONAL SERVICES TRUST EXISTING: X Employer/Employee REORGANIZATION: SERVICE AGREEMENT X Y Child 1 and 2 1. Employment Agreement with the Trust PUBCO PUBCO TRUST

    20. SITUATION INDENTIFICATION/CLIENT PROFILE • SITUATION IDENTIFICATION - FAMILY SITUATION/FAMILY CONCERN OR ISSUE (BLACK SHEEP/DISABLED CHILD/UNDESIRABLE SPOUSE) - CLIENT HAS SIGNIFICANT ANNUAL INCOME - CLIENT HAS LARGE ANNUAL TAX LIABILITY (INCOME/CAPITAL GAINS) - CLIENT HAS FAMILY BUSINESS - CLIENT HAS BUSINESS WITH NON ACTIVE BUSINESS ASSET (EG: REAL ESTATE) - WIDE VARIATION IN TAX BRACKETS/LIABILITIES - CLIENT HAS UNIQUE PROPERTY HOLDING/OWNERSHIP SITUATION - CLIENT HAS SPOUSE AND CHILDREN BUT IN NOT ENGAGED IN INCOME SPLITTING - CLIENT HAS AN ESTATE TAX ISSUE PENDING

    21. 21-YEAR RULE GENERAL * PREVENTS INDEFINITE DEFERRAL OF TAX PROPERTY HELD WITHIN A TRUST - GENERALLY APPLIES TO CAPITAL PROPERTY AND LAND INVENTORY * BE WARY OF IT - S.107(2) PLANNING TOOL * GENERALLY ARISES IN ONE OF TWO SITUATIONS - TESTAMENTARY SPOUSE TRUST - ESTATE FREEZE * IMPORTANT EXCEPTIONS - SPOUSE TRUST - ALTER EGO TRUST - JOINT SPOUSAL/COMMON-LAW PARTNER TRUST - TESTAMENTARY SPOUSE TRUST

    22. PLANNING CONSIDERATIONS * PERSONAL TRUST S.107(2) ROLL-OUT - ELIMINATES 21-YEAR RULE ISSUE - BUT NOW THE ASSETS ARE IN THE HANDS OF A BENEFICIARY * ALTERNATIVES TO S.107(2) - S.107(2.001) - S.107(2.002) * ABOVE CAUSE S.107(2.1) TO APPLY - DISTRIBUTION GREATER OF FMV AND COST - CONSIDER IF TRUST HAS TAX SHIELD

    23. TRUST SETTLEMENT CONSIDERATIONS * BE VERY CAREFUL - S.75(2) IS ONEROUS - PROPERTY NEVER REVERT TO SETTLOR - WATCH OTHER ATTRIBUTION ALSO * SETTLOR LINEAR RELATIVE TO BENEFICIARIES * KEY MATTERS TO NOTE - SETTLOR CAN BE TRUSTEE - SETTLOR SHOULD NOT BE BENEFICIARY - TRUST SHOULD BE IRREVOCABLE AND NO VARIATION - SETTLOR PAY COSTS TO ESTABLISH TRUST