The 2024 Canadian Budget introduced several changes related to capital gains that are important to be aware of. Here are the key points:
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How Does a RRIF Work?
This article is timely, with the end of the year in sight.
A Registered Retirement Income Fund (RRIF) is a retirement income vehicle in Canada, designed to provide a steady income stream to retirees by converting savings from a Registered Retirement Savings Plan (RRSP) into taxable income. Here's how it works:
Section 85 of the Income Tax Act - Continued
As explained in our previous entry, Section 85 of the Income Tax Act provides a mechanism for taxpayers to transfer certain types of property to a corporation on a tax-deferred basis. It is commonly used for business reorganizations, incorporating sole proprietorships or partnerships, and transferring assets between related corporations while deferring tax on accrued gains.
Income Tax and Section 85 Rollovers
The Section 85 rollover of capital property in Canada is a provision in the Income Tax Act that allows a taxpayer to transfer certain capital property to a corporation on a tax deferred basis. This means that the transferor (an individual, partnership, or corporation) can defer recognition of any capital gains that would otherwise be triggered by transferring the property. Section 85 rollovers are commonly used in situations like estate freezes, corporate reorganizations, or incorporating a sole proprietorship.
Integration of the Corporate Income Tax System
Integration of the corporate income tax system aims to prevent double taxation of corporate earnings. In Canada, this system allows income earned at the corporate level, which is then distributed as dividends to shareholders, to be taxed once at a combined corporate and personal level similar to how personal income would be taxed directly.
Death of a TFSA Holder - What Happens?
When a Tax-Free Savings Account (TFSA) holder passes away, the handling of the account depends on whether the account has a named successor holder or a designated beneficiary. Here’s a breakdown of the main scenarios:
Tracking Loans to or From Shareholders
When advances or loans are made to shareholders this should be recorded in a general ledger account set up for this purpose. If a loan is made for which the interest would be tax deductible for the shareholder, it is important to track this loan separately from other advances or loans.