Tax Planning

3623 Words May 4th, 2016 15 Pages
Tax Planning Report

Prepared Especially for:
Billie Ghote

March 2016

Prepared by:
XiangYu (Lucy) Fan 250702646
Xiaohan (Elliot) Yu 250674565
Yiping Hu 250685725
Ensen Xie 250673945

Hai Val Yu
Chartered Public Accountant Firm

Table of Contents
Contents
Executive Summary .................................................................................................................... 3
Assets Not Transferred To the Corporation ................................................................................. 4
Assets Not Transferred Under ITA85(1) ...................................................................................... 4
Goodwill
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The marketable securities are not required for the operation of the new corporation.
Land, Ontario held for Speculation
The land in Stratford is being actively traded, rather than being held for income producing purpose, so it is not eligible to be transferred under ITA 85(1.1). If this land is either disposed at
FMV to the corporation or to a non-affiliated party, the TCG of $89,200 will be triggered. Since the land is not required for the operation of the business, it is not recommended to transfer the asset to the newly incorporated business.

Assets Not Transferred Under ITA85(1) (Exhibit 1)
Cash and Prepaid Insurance
Cash and prepaid are not among eligible assets listed in ITA 85(1.1). As their fair market values are equal to their tax values, this is no tax consequence of the disposition.
If the marketable securities are simply sold to a non-affiliated party, then you would be able to claim the ACL of $5,400, which can be utilized against any future capital gains.
Account Receivable
The fair market value of the Accounts Receivable is $18,500 less than their face value, reflecting
Ms. Billie's estimate of accounts that will not be collected. Accounts Receivable could be transferred under ITA 85 (1). However, the $18,500 loss would have to be treated as a capital loss, which would be disallowed as a superficial loss by ITA40(2)(g). Further any additional bad debts incurred by
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