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SUCCESSion: Tax & Estate Matters

Dec 21, 2017

An Ode to Income Splitting by Robins Appleby LLP

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'Twas the middle of July, with days so hot and hazy

When the Feds announced new tax rules, which some said were so crazy

With complicated language and broad applications

They targeted the shareholders of private corporations

And whilst giving all small business owners an undeserved scare

It was all done in the name of having them pay their "fair share"

The pundits all weighed in, with criticism abound

They wrote articles and letters, decrying the measures as unsound

And as Summer turned to Fall and pressure grew and grew

The number of proposed changes shrunk from many to just a few

But with still so much uncertainty and so much left unclear

Finance promised us an update before the end of the year

 

And on December 13th, as the days drew short and cold

We received an early Holiday gift – amended proposals to behold!

The aim was to simplify "TOSI", the rules on "income splitting"

An "advantage" from which Finance said the wealthy were benefitting

To address this serious issue that they sought to mitigate

They expanded the scope of "split income", taxed at the top marginal rate

 

The aspect of the July proposals which caused the most confusion

Was how one should interpret the "reasonableness" exclusion

So within its December bundle of revised legislation

Finance sought to simplify the rules on "split income" taxation

And while the rules remain broad, and many will still be caught

Numerous exclusions now specify some persons who will not

 

Like the business owner who has turned age 65-plus

And can split income with her spouse without causing a fuss

Or the child who has now reached 18 years of age

And works in his father's business but has been "actively engaged"

Before December's updates this definition was not precise

But now we know that 20 hours per week will suffice

 

If you're 25 and own 10% of a business which provides no service

Your dividends are not "split income" – there's no reason to be nervous

With respect to qualified shares of a small business corporation

Sales will not be caught by "TOSI" – a cause for celebration!

The proposals also explain that if you die while owning shares

Your past labour, contributions, and business risks will accrue to your heirs

 

Now if none of these exclusions apply, please do not be stressed

The new rules still contain the good 'ole "reasonableness" test

Just account for the business contributions of all the proper actors

And assess labour, capital, risk and, of course, "other relevant factors"

 

So if your head is spinning now and you feel like you can't see

Be thankful for the Tax Group at Robins Appleby

With experience and expertise we will guide you through this maze

So that you and your family can enjoy some Happy Holidays!

more SUCCESSion: Tax & Estate Matters posts

Keywords

65-plus  |  revised legislation  |  income splitting  |  small business  |  private corporations  |  Feds announced new tax rules

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