Reorganizations : Tax tips

The merger of an existing operating corporation with a shell corporation

The merger of an existing operating corporation with a shell corporation is sometimes undertaken solely for the purpose of triggering a new year end. CRA (the Canadian income tax department) views this type of transaction to be a misuse of the Act and the general anti-avoidance rule (GAAR) would apply.

Are you incorporating your existing business? Then carry out a tax free rollover of the assets

If you’re incorporating your existing business you will have to carry out a tax free rollover of the assets into the corporation and elect to defer income tax under section 85 of the Canadian Income Tax Act to avoid an immediate tax liability.

Disclaimer:
"This article provides information of a general nature only. It may no longer be current. It does not provide legal advice nor should it be relied upon. If you have specific legal questions you should consult a lawyer."