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Highlights
CORPORATIONS
Dividend Taxation and Integration
D. Bernard Morris
The disparity between the level of
taxation related to dividends and the taxation on income earned through a
flow-through vehicle such as an income trust has been the source of concern and
attention over the past number of years on the part of both investors and the
Department of Finance. On June 29, 2006, the Minister of Finance released draft
legislation that sets forth the proposed rules to better align the after-tax
result of income earned through a corporation as compared to income earned
through a flow-through vehicle. Bernard Morris reviews the history leading to
the introduction of the proposed regime, describes the numerical consequences,
and then examines in detail the new rules, which are of particular interest to
any tax practitioner that advises corporations and/or shareholders. Key
intricacies of the proposed legislation are described including those related to
wind-ups and amalgamations. The workings of proposed Part III.1 are explained.
As the author notes, the full impact of the Proposals will not be known until
all of the provinces have announced the manner in which they will tax eligible
dividends. However, they are nonetheless a significant improvement in the
integration of income subject to tax at the general corporate rates. In any
event, the changes introduced have created a range of new issues to be
considered every time a dividend is to be declared or a reorganization or
acquisition is contemplated.
CORPORATIONS
Professional Fees for Amendments to Unanimous Shareholder
Agreements
Donald Cherniawsky
Donald Cherniawsky examines the
recent jurisprudence related to the deductibility of professional fees. Over the
past several years the treatment of professional fees has been scrutinized by
the Canada Revenue Agency (the "CRA"). In many cases, the CRA has assessed upon
the basis that most professional fees are not deductible and constitute a
shareholder benefit (effectively leading to double tax). As the author notes,
while the CRA may attempt to limit the
effect of Truckbase and Grabowski, due to the precedential value
of Informal Procedure appeals, it is clear that the Tax Court is willing to adopt a practical
approach where the expenditures relate to "a bona fide business
reorganization" that facilitates "effective management, good governance and
protection." The article will be of particular interest to tax practitioners who bill for their
services and who wish to best position
their clients for future developments related to the deductibility of
professional fees.
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Board
Gordon S. Funt
Editor-in-Chief
Fraser Milner Casgrain LLP
Vancouver
Christopher L.T. Falk
McCarthy Tétrault LLP
Vancouver
Judith E. Harris
Osler, Hoskin & Harcourt LLP
Toronto
F. Patrick Kirby, QC
Felesky Flynn LLP
Edmonton
D. Bernard Morris
Goodman and Carr LLP
Toronto
Martin J. Rochwerg
Miller Thomson LLP
Toronto
Paul K. Tamaki
Blake, Cassels & Graydon LLP
Toronto |