If you carry on a business as a corporation you may want to consider using a holding company to own your operating company. The holding company structure offers tax deferral opportunities and can help insulate your accumulated wealth from creditors or be used to avoid the U.S. estate tax. The Basics of A HoldCo In its basic format, a holding…
Income splitting can produce some pretty dramatic results. Consider the case of a married, self-employed individual whose taxable income is in excess of $250,000. Assuming the spouse does not work, the tax bill would be $94,700 (in Ontario). If this couple were to split their income equally, their combined tax bill would drop to $77,700, a savings of $17,000. Now if…
The income tax you pay is based on a set of progressive tax rates. This means that the amount of income tax you pay increases as your taxable income increases. For example, in 2012 you would pay federal income tax of: 15% on the first $42,707 of income you earn, 22% on the next $42,707, 26% on the next $46,992,…
Accountants often call the income splitting rules attribution rules. The term attribution simply means to attribute income back to the original person and effectively stop any attempt to income split. Who Do The Income Splitting Rules Apply To? The rules that are designed to prevent income splitting apply when you attempt to shift income to any one of the following…
If you own your private corporation and borrow money you should consider the income tax consequences. The Income Tax Act contains a series of rules that may have income tax consequences for the person receiving the loan from the company. In the context of this article, the term loan means any form of debt the shareholder or family member has to…
There are two different types of personal trusts referred to in the Income Tax Act: Testamentary trusts and inter vivos trusts (Inter vivos literally means "among the living"). Testamentary trusts arise out of or on the consequence of the death of an individual and an inter vivos trust is any other personal trusts that are not testamentary trusts. Note however…
