Easy-ish
What does IBT stand for?
True or false:
Prior to the changes made to section 84.1 of the Income Tax Act, individuals were taxed less if they transferred their business to family instead of an arms length third party.
False - they were (effectively) taxed more when selling to family because they could not gain the capital gains deduction they would have if they sold to a 3rd party.
True or False
Where the transferor and transferee's of IBT's and/or EOT's fail to comply with the requirements for these transfers, each party will be jointly and severally liable for potential additional taxes owing.
True
What does EOT stand for
Employee Owned Trust
True or False
Employees must pay for their shares in the EOT immediately
False - They can pay for these shares over time, using dividends received from the EOT.
Can an EOT benefit an employee who has not yet completed a 12 month probationary period?
Yes
What is the name of the Bill introducing the changes discussed in today's lunch and learn?
Bill C-208
When did these changes to the Income Tax Act come into force?
January 1, 2024
How many years is the limitation period extended for the CRA to reassess the transferring parent's taxes in a gradual IBT?
10 years
True or False
Under IBT's, transferees can include (all adult) children, grandchildren, nieces and nephews.
True
The beneficiaries of an EOT must elect trustees at least once every ____________
5 years
Describe a situation that would be covered by the Relieving Provisions of an IBT
•Where a child can no longer be actively involved in the business due to their death or an impairment in their mental/physical functions
•Where a child must sell shares or assets of the business to an arms length party to pay the debts of the business
How long do you have to complete an immediate IBT?
3 years
What percentage of active employee beneficiaries are required to approve a wind up?