Disposition Tax Planning

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Disposition Tax Planning
Update 2005Emerging Trends for Decision
Makers Michael Templeton November 30th, 2005
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Abacus Structure

• Sale of assets (including real estate assets)
  shares or partnership interest with low basis,
  high value
• Transaction structure reduces taxable gain by 50
  or more
• Non-share assets must be held in a corporation,
  or transferred to a corporation prior to sale
• Transaction structured as a two-part share sale -
  Buyer first acquires control of corporation then
  the balance of the shares
• Transaction available if Purchaser for assets
  already located, or buyer not yet selected

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Sale by Long-Term Lease

• Instead of selling assets, Owner enters into
  long-term lease with Lessee/Buyer with purchase
  option
• Lessee prepays all rent due under lease, together
  with deposit for purchase option price
• Lessor/Seller includes rent prepayment in income,
  but claims a reserve for rent attributable to
  future period
• Effectively amortizes gain from sale of the asset
  over the term of the lease

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Inter-Provincial Tax Planning

• Use of Alberta Resident Trust
• Combined Federal and Provincial Individual Tax
  Rates

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Inter-Provincial Tax Planning

• Transfer of shares to a spousal trust resident in
  Alberta
• Payment of dividend by RDTOH rich corporation
• 1,000,000 dividend triggers RDTOH of 333,333
  tax refund to corporation
• Alberta resident trust pays tax on dividend of
  240,080
• Net tax recovered of 93,253

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EquiGenesis Investment LP and Charitable
Donation Program

• Investors purchase LP units with borrowed funds
• Partnership invests in promissory notes with
  hedge fund, equity and bond-linked returns
• Investors get current interest deductions and
  deferred income recognition
• Investors can make charitable donation with
  borrowed money
• Charity invests in linked notes
• Independent valuation supports full donation
  receipt

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www.mcmbm.com
Toronto
Montréal