Holding companies

What is the best way to transfer assets or profits to a holding company. I understand that this can be accomplished under section 85 of the income tax act. Any comments are welcome
Cheers

Patrick

It can be a fairly involved process, depending on the type of assets, any associated debt, and doing detailed planning to make sure the plan works with the owner’s current and future plans. Section 85 is normally used to transfer net assets on a tax-deferred basis but I hesitate to get into more details because the actual mechanics depend on so many things that you couldn’t (or shouldn’t) disclose in a public forum.

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I was thinking the same thing as Kevin.

In order to achieve the desired result some of these asset transfers can be quite complex and expensive.

Transferring profits to a holding company can be achieved via the inter-corporate dividend process. When distributing non-taxable dividends to a connected corporation you also need to be very careful not to run afoul of subsection 55(2).

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As snoplowguy has pointed out, these transfers can be complicated and it’s easy to miss something. Going wrong can lead to expensive penalties so it is not a DIY project for most people.

Thanks Kevin for pointing this out. The inter-corporate dividend process seems the way to go. What pitfalls have you encountered in the past? Can the same thing be done using a trust?

Since this is all corporate, it does not seem to me something that I would remotely give a seconds thought to in individual tax deadline week…
Perhaps tell the clients you will discuss it with them in May and june, or perhaps July…

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