Did You Know
That on May 17, 2005 there were some fundamental changes to the Alberta Business Corporations Act?
Among the changes are now the ability for increased tax planning opportunities involving Stock Dividend Freezes (SDF). Previously, only British Columbia allowed for SDF's. Without getting too complicated, Tax Planners use various types of "Freezes" to lock the value of a company so that new shareholders, including family members, can join in the ownership of the company by buying shares with nominal value. Often this is to facilitate income splitting and multiplying the capital gains exemption on the eventual sale of the company. Previously however, these "Freezes" created a tax trap call Corporate Attribution. The use of SDF's may however allow a Freeze to occur without the negative consequences of Corporate Attribution.
A second major change is now the ability to incorporate Unlimited Liability Corporations (ULC's) in Alberta. ULC's are typical corporations and are taxes as such in Canada. The major difference is the fact that shareholders now subject to unlimited liability. the positive side to such a structure however, is that for U.S. tax purposes, a ULC can be treated as a partnership. This allows for U.S. companies to incorporate a ULC, operate in Canada, and in the start-up years flow the corporate losses to the U.S. parent company.
Careful planning with a Chartered Professional Accountant is warranted. Contact Keith Anderson, BCom, CPA, CA-IT, CITP at (780) 447-5830 if you need advice.