TAXATION - OTHER LIFE EVENTS

Separation or divorce can create a difficult and complicated financial situation, but with proper tax planning, creative yet practical solutions can be achieved.

As your advisor we will ensure all the options available to you are explained in a clear concise way to ensure you can make an informed decision. There are many income tax rules that need to be considered to achieve a fair result and to ensure the CRA takes the smallest portion of family assets.

Some of the tax issues to consider are:

1) Child support is not deductible to the payer and non taxable to the recipient. This sounds good for the recipient but remember, if the payer has a higher income than the recipient, more funds are going to the CRA which may reduce your award. Consider a compromise to increase alimony (which is deductible) and share the tax benefit.

2) Company owned assets. It may be possible to structure the settlement whereby company owned assets are split into two companies, one for each spouse, thereby avoiding prepayments of tax. In a recent case, we were able to assist in settlement negotiations by structuring company owned rental properties to be portioned into separate companies for each spouse without income tax being paid.

For common law relationships, a planning opportunity may be available to utilize the $500,000 capital gains exemption to reduce tax so that both parties win.

If you need advice or would like a second opinion contact Larry Hanson, C.A. or Ron Batty, C.A.anytime for a free initial consultation.