The Department of Finance announced 3 changes to the Canadian Income Tax Act on Tue July 18. The first one related to income sprinkling and is designed to reduce income splitting with a spouse and children through the use of dividends and through the lifetime capital gains exemption. Detailed proposed legislation has been released. A second proposal, without any details, wants to prevent private corporations from accumulating funds and using them to make passive investments. The third proposal relates to tightening the rules designed to prevent the conversion of regular income or dividends into capital gains that are taxed at half rates.
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