Navigating the 2024 Tax Changes: Strategies to Fortify Your Portfolio
Adrian C. Spitters FCSI?, CFP?, CEA? President, Author, Private Wealth Advisor
I Execute Tax-Efficient Investment Portfolio Solutions So That Your Business, Family, And Estate Assets Are De-Risked And Protected Against Financial Risk, Economic Threats, Inflation And Higher Taxes.
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Source Article: Crystallizing capital gains before June 25: What about the GAAR?
Minimizing the Impact of Higher Capital Gains Taxes
The federal government's 2024 budget threw a curveball at investors with the proposed increase in the capital gains inclusion rate from 50% to two-thirds, effective June 25, 2024. This change means many taxpayers will face a higher tax bill on realized capital gains after that date, prompting a rush to crystallize gains before the deadline.
One strategy that may help mitigate the immediate tax hit involves transferring appreciated capital properties to a Canadian-controlled private corporation (CCPC) before June 25th. While this move doesn't eliminate the tax entirely, it can potentially reduce the effective tax rate compared to realizing the gain personally.
Here's how it works: An individual transfers their capital property (e.g., shares) to a CCPC under subsection 85(1) of the Income Tax Act, deferring the capital gain. The CCPC then crystallizes the gain before June 25th, taking advantage of the lower corporate tax rates. Down the road, the CCPC can pay out the after-tax proceeds as dividends to the individual shareholder.
The potential savings? Significant in some cases. For example, a top-bracket individual in British Columbia could see their effective tax rate drop from 32.1% (if they realized the gain personally) to 29.56% using this corporate strategy – a difference of 2.54 percentage points.
You might wonder if this strategy raises any red flags under the General Anti-Avoidance Rule (GAAR). However, legal experts argue that it aligns with the purpose of subsection 85(1) and the principle of tax integration, where investment income should be taxed similarly, whether earned personally or through a corporation.
It's important to note that this strategy isn't a one-size-fits-all solution. Each situation is unique, and professional advice is crucial to navigate the complexities and ensure compliance.
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A Partnership for Holistic Wealth Management
To navigate this complex financial landscape, I have partnered with one of Canada's leading private wealth management firms serving high-net-worth clients nationwide. This firm offers professional investment management and comprehensive wealth planning from a client-first perspective, providing affluent Canadians access to sophisticated strategies and solutions usually reserved for the ultra-affluent.
Driven by a "capital preservation first" philosophy, the firm generates consistent, tax-efficient returns uncorrelated to public markets. Through my relationship with this firm and other key industry professionals and firms, my clients gain exclusive access to alternative investments such as private equity, private real estate, precious metals, commodities, government-sanctioned flow-through tax structures, and tax-efficient corporate insurance solutions – all designed to fortify and de-risk a client's personal, family, business and estate assets against economic threats, inflation and higher taxes.
Complimentary Portfolio Evaluation
As a valued reader, we are offering a complimentary portfolio evaluation to discuss how to fortify and de-risk your portfolio against economic threats, inflation, and higher taxes. To schedule your complimentary portfolio evaluation, email us at [email protected] or use my Calendly Link .
During this no-obligation consultation, we can provide insights into how we can help you navigate the 2024 budget changes to ensure your portfolio is resilient to the tax changes and aligned with your long-term financial goals.
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