A client with a corporation sold off all the assets and dissolved the corp. After all outstanding debts were paid, the shareholder received a small profit. Does she claim this as a capital gain on her T1?
I assume that you mean the company was wound-up through the proper jurisdiction. If that’s the case, after all payables and share capital have been paid/reversed, the net assets left over would be a wind-up dividend. A T5 should be prepared and the shareholder reports that dividend on their personal tax return.
I am somewhat confused by this description?
If the CORPORATION made a profit after selling the assets that IT owned, then the CORPORATION has a Capital Gain, and needs to pay tax, on ITs T2 tax return, in which case all debts would not yet have been paid, and the dissolution should not have been filed before all such debts had been paid?
The SHAREHOLDER would not have had any debts to pay?
What did the CORPORATION’s Balance Sheet look like when Dissolution was applied for? What did the CORPORATION’s final T2 show - Assets?
Otherwise, it could be the situation as Kevin stated above?
Far too many underlying issues here which should, at very least, be reviewed by someone with experience in corporate dissolutions. Unfortunately, there is no easy answer to this as not enough information is being provided to simply make a comment about it here.
Yes, it could be something as simple as a T5 dividend. It could also be a capital gain on the sale of assets and/or final disposition/redemption of the company shares.
Was there recapture of CCA reported on the sale of assets?
Were these assets sold to a arms-length third party or, were they sold to a party related to the company?
If sold to a related party, was it at fair market value and, is there documentation to support this?
All of this information (right down to the individual transactions) needs to be examined in detail to properly report the final financial statements and tax returns (GST/HST as well as income tax).