Blog + News

Further to our Blog of October 27, 2009, Bill 53 – Professional Corporations Statutes Amendment Act – has received Royal Assent today and is expected to be proclaimed (pursuant to an Order-in-Council) soon. As previously discussed, these long awaited changes allow for common law partners / spouses and children of a professional and/or a special purpose trust (of which minor children of the professional can be the only beneficiaries) to own non-voting shares of a professional corporation.

As mentioned in our blog of September 29, 2009, one of the most common errors that we identify during our review of private corporations is the corporate ownership of personal use assets.  The shareholders of the corporation will often believe that it is tax efficient to purchase assets inside the corporation that would otherwise involve the withdrawal of funds from the corporation to purchase such assets (which would be a taxable withdrawal).  Unfortunately, the tax consequence of the acquisition of personal use property by a corporation is not pretty.  We often see vacation homes, automobiles, boats, art collections, etc. owned by the corporation.  Certainly the most common examples we see are vacation property and in some unusual cases the primary residence of the shareholder(s).

By Nicolas F. Baass  LL.B., LL.M. (Tax) and Kim G C Moody  CA, TEP

Good news for Alberta professionals who are regulated by the Health Professionls Act (doctors/dentists/chiropractors/optometrists), Legal Profession Act (lawyers), Medical Profession Act and Regulated Accounting Profession Act (accountants).  On October 26, 2009 Bill 53 – Professional Corporations Statutes Amendment Act, 2009 passed first reading in the Alberta Legislative Assembly.  This Bill, if enacted, will have some significant repercussions on how professionals set up their business affairs in order to minimize income taxes. 

Tomorrow marks the second anniversary of the establishment of Moodys LLP Tax Advisors!  While the last year has certainly provided economic challenges for our clients, we are extremely pleased with the services, clients and growth that our firm has had.  A special thank you to the Moodys’ teammates and Shea Nerland Calnan LLP (our fantastic legal partner).  A special thank you also to all of our great service providers.  Moodys has some exciting new plans and service offerings that we will share with you soon!

For those of you who enjoy reading our blogs, we are pleased to announce our new blogsite at www.taxandestateplanning.com which hosts all of our blogs and has a link to a whole host of other interesting blogs.  We encourage you to visit this website.

As a tax specialist firm, we work with many private corporations and their accounting and legal advisors. We see a lot of opportunities for planning and take great pleasure in working with the fabulous advisors that serve our clients. 

Unfortunately, however, we often come across plans that could perhaps have been better thought out. One of the common strategies that we trip across is the use of “management fees” to reduce income of one corporation and increase the income of another corporation. Often times the payor corporation and the recipient corporation have different taxation year ends and therefore the plan is a loose attempt to try and get an income tax deferral.  In some cases, advisors will recommend the use of a disassociated “Management Co” (owned by a related person) to receive management fees in an attempt to multiply access to the small business deduction (with the result being lower income tax rates on retained profits).  There are a host of income tax issues that need to be considered with the use of management fees between related corporations. For example, are the management fees legitimate, are they reasonable, were they incurred for the purpose of earning from a business or property, are the management fees earned over the course of the year (and, if so, is the resulting deferral eliminated or reduced) and are GST issues  properly considered?