Anti-Avoidance Rules
This section prevents individuals from converting dividends into capital gains in non-arm’s-length share sales
What is Section 84.1?
What is the main purpose of an estate freeze?
To freeze value at a certain date so future growth accumulates for other parties.
Section 86 requires that the taxpayer dispose what portion of shares of a given class in order to qualify.
All shares of a given class must be exchanged
Section 85 allows taxpayers to transfer property to this type of corporation for tax-deferred treatment.
What is a taxable Canadian corporation?
This type of dividend arises when a corporation redeems, acquires, or cancels its shares for more than their PUC.
What is a deemed dividend?
These individuals are considered affiliated persons for tax purposes.
Who are spouses or common-law partners?
This section is used for an internal freeze that is automatic and does not involve creating a new company.
What is Section 86?
Under Section 86, the ACB of the new shares is calculated as ACB of old shares minus this.
What is the FMV of boot?
This amount determines the POD to the seller, the ACB to the buyer, and the cost of consideration received.
What is the elected amount?
When shares are redeemed, this attribute determines whether a capital gain arises on the disposition.
What is the adjusted cost base (ACB)?
Losses generally cause no issues when used within this type of corporate group.
What is an affiliated group?
This section allows for the crystallization of CGE?
What is section 85?
Section 86 is often preferred over Section 85 for this practical reason.
What is that it requires no election form (automatic)?
Boot cannot exceed this amount without creating a shareholder benefit under 15(1).
What is the FMV of the property transferred?
The proceeds of disposition are reduced by the deemed dividend to avoid what?
What is double taxation?
The stop-loss rules exist primarily to prevent taxpayers from triggering this result.
The transfer of losses between affiliates parties
This transaction has immediate tax implications?
What is the redemption of shares?
One major drawback of Section 86 is that it does not allow this valuable tax planning opportunity.
What is crystallizing the LCGE?
Under a Section 85 rollover, the elected amount must be allocated in a specific order to determine the cost of consideration received by the transferor. What is the order?
After allocating the elected amount to boot (up to its FMV) and to preferred shares (up to their FMV), common share receives the remaining balance.
A share redemption can be a tax-effective way to extract money from a corporation when this is high.
What is the paid-up capital (PUC)?
In 2020, this company became the first private firm to send astronauts to the International Space Station under a contract with NASA, marking a major milestone in commercial human spaceflight. Which company achieved this historic launch?
SpaceX
This tennis player won their 24th Grand Slam title in 2023, breaking the record for the most major singles titles in the Open Era. Who is this athlete?
Novak Djokovic
Released in 2023, this movie became the highest-grossing film of the year and sparked a global pink-themed cultural moment. What was the film?
Barbie
This animal can “hold its breath” longer than a dolphin—not underwater, but by slowing its metabolism and sleeping for up to 22 hours a day. Which animal is known for this?
A koala
This global snack, originally invented in Japan, became a worldwide hit because of its unique seasonal flavors—like Sakura, Cheesecake, and Wasabi—and even has museum exhibits dedicated to it.
KitKat (Japanese KitKat varieties)