As you know, we make a point of keeping you up-to-date on all things planning for your family business. Until recently, Section 84.1 of the Canadian Income Tax Act deemed it more expensive to sell a family business or farm to a family member than to a stranger. This is due to the difference in sale price and original purchase price being considered a dividend upon sale between family members, while the sale to a non-family member is considered a lower-taxed capital gain.
Recent changes to legislation will now amend this rule. On June 22nd, the Senate approved Bill C-208, which creates a limited exemption to the sale of qualified business corporation shares. What this means to small business owners, farming families, and family corporations is that the same tax rate when selling their corporation will apply regardless of selling between family members or to a third party. This will allow for sustainable family business and farm succession, secured retirement savings, and will result in fewer unfair taxes overall.
Click Here to read an article from Tim Cestnick of the Globe & Mail which highlights the exciting news. As always, if you have any questions, let us know. It would be great to hear from you.