Capital Gains Stripping Redux – COVID implications

Get ready to pay for it

The latest parliamentary budget report [i] estimates a $252.1 Billion deficit in 2020-2021 while direct COVID support so far exceeds $150 Billion.

We have touched upon this in past articles, and now it’s fairly acknowledged that taxes will likely be increasing to pay for the COVID-related spending. A recent Opinion piece by former finance minister Joe Oliver buttresses this idea: Another recent piece in MacLean’s Magazine supports this idea as well.

Sloan Partners does not endorse or promote any individual’s opinion, nor do we have a crystal ball, it’s safe to assume that one way or another, a tax hike is on the way.

Plan for possible tax increases

The cheapest tax rate you can get, and the easiest target for any tax increase is capital gains. It is an easy tax hike because the tax rate is not increased – just the “inclusion rate” i.e. the percentage of the gain that is taxable. Currently, only 50% of capital gains is taxable.

There are numerous other tax-planning opportunities that can just as easily be eliminated without increasing the actual tax rate but is an effective tax increase.

Solutions for business owners

“Capital Gains Stripping” is a method to access corporate surplus at Capital gains rates and save 20%, or $20,000 on each $100,000 of surplus removed from a business.

To find out more about capital gains stripping refer to my article from last November. As the 2020 budget has not yet been tabled, this tax plan is still available.

There are other significant opportunities still available, including multiplying the capital gains exemption and certain income splitting opportunities available with family members, especially in light of the CRA Prescribed rate falling to 1% in July 2020.

At Sloan Partners, we are experts at tax advisory and corporate reorganization. We work directly with business owners as well as small and medium accounting Firms to implement strategies and achieve the most favorable tax results for small business owners and their families.

Roman Belenky CPA, CGA is a Tax Specialist at Sloan Partners LLP specializing in tax planning and advisory for business owners and their families. You can reach Roman at or reach out to me at 416-665-7735 ex.227

Disclaimer: This article is intended for educational and informational purposes only. It is not intended in any way whatsoever to provide tax advice. The reader should be aware that legislation and administrative policy are subject to change at any time. None of the persons involved in the preparation of this article accepts any responsibility for its contents or the consequences that arise from its use.



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