With global economies significantly constrained and markets everywhere in turmoil, it may be prudent to consider whether tax planning is a way in which you can use depressed fair market values to your advantage.
In Canadian tax planning the most important assumptions typically relate to the fair market value of taxpayers' assets. Whether those assets are shares in a private company, a portfolio of marketable securities, real estate held to produce rental income, or otherwise, depressed fair market values of those assets due to current economic conditions may present opportunities to implement tax planning strategies.
Some strategies to consider include:
- Freeze – this strategy is often used to reduce taxes payable on death of a principal shareholder and shift future growth (e.g. in a family business) to future generations.
- Re-Freeze – for taxpayers who have already implemented a freeze, there may now be an opportunity to reduce the frozen value, thereby potentially reducing taxes payable by an estate.
- Crystalizing Losses – triggering losses to offset past or future capital gains and thereby lower tax payable.
- Purifications and Reorganizations – strategies to add efficiencies to a corporate structure and set a taxpayer up for a future event, such as the sale of the taxpayer's business.
Every taxpayer's situation is different. We suggest that you consult with your accountant or contact a member of our tax team to discuss whether we can help you seize any tax planning opportunities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.