Committed to providing solutions for your future needs.

Book a meeting
(877) 422-6346 x 550
CANFIN
Joshua Bacchus, CPA, CFP®, CLU®
Joshua Bacchus, CPA, CFP®, CLU®
Financial Advisor

Show all articles

Posts

Personal Wealth and Finance


Tactical Capital Gains Tax Planning

June 1, 2020

Capital gains from business, cottage, second residence, rental property, or non-registered investments are subject to taxation when the property is disposed of. How and when the property is disposed of requires serious consideration, as the tax implications can be enormous.

shutterstock_69171412 MEDIUM SIZE

Reviewing budget tax changes Consider setting an appointment to review strategies if you have previously used life insurance inside a corporation to plan to pay your estate’s capital gains tax. Legislative tax changes may necessitate that an optional strategy is implemented.

Let’s look at some common tax problems that may be brewing if left unattended:

  • If you own a family business Many family businesses have accrued large capital gains over time, due of course to the success of the businesses. When sold, the business will incur a taxable disposition that could be subject to high taxable capital gains.
  • If you own non-registered investments outside of a TFSA Any capital asset that is held outside of an RRSP, or a TFSA whether a stock, GIC, or mutual fund to name only a few, will be taxed on the difference between its fair market value at the time of sale, and the cost of the asset. The difference between the purchase price and the sale price will be either a taxable gain or loss.
  • If you own a cottage or second residence When you sell your cottage (or a second residence), or you and your spouse die, capital gains tax will be triggered on the difference between the cost and the fair market value at the time of sale. One major consideration is how to keep the cottage (or second residence) in the family. Assuming the kids want the secondary real estate, how can the tax problem be handled? If there are not enough assets or cash in the estate to pay the tax bill, it may be that the property has to be sold. This will apply to rental properties as well.
  • If you own  RRSPs at death RRSPs will be fully taxed as income upon the death of the individual or the death of a surviving spouse. Depending on the situation, large RRSP/RRIF holdings can present significant taxation.

It is advisable to discuss this with your advisor early on, to get more direction on your best tax strategy for both capital gains tax and large income taxation at death. Life insurance can offer a valid method of making up for more than your taxation costs.

Source: Licensed by Adviceon Media

 

Publisher's Copyright & Legal Use Disclaimer

All articles are a legal copyright of Adviceon®Media.

The particulars contained herein were obtained from sources which we believe are reliable, but are not guaranteed by us and may be incomplete. This website is not deemed to be used as a solicitation in a jurisdiction where this representative is not registered. This content is not intended to provide specific personalized advice, including, without limitation, investment, insurance, financial, legal, accounting or tax advice; and any reference to facts and data provided are from various sources believed to be reliable, but we cannot guarantee they are complete or accurate; and it is intended primarily for Canadian residents only, and the information contained herein is subject to change without notice. References in this Web site to third party goods or services should not be regarded as an endorsement, offer or solicitation of these or any goods or services. Always consult an appropriate professional regarding your particular circumstances before making any financial decision.

Mutual Funds and/or Segregated Funds Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investment funds, including segregated fund investments. Please read the fund summary information folder prospectus before investing. Mutual Funds and/or Segregated Funds may not be guaranteed, their market value changes daily and past performance is not indicative of future results. The publisher does not guarantee the accuracy and will not be held liable in any way for any error, or omission, or any financial decision. Talk to your advisor before making any financial decision. A description of the key features of the applicable individual variable annuity contract or segregated fund is contained in the Information Folder. Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. Product features are subject to change.