ABOUT THE COURSE

Corporate structures often evolve without deliberate planning — a Holdco is added for creditor proofing, a second operating company is acquired under it, a spouse ends up owning Realty Co. Years later, each of those decisions has accumulated tax consequences that nobody modeled at the time. The course opens by testing five commonly encountered structures against current rules, and in most cases something is wrong. These are not exotic planning failures — they are structures that CPAs encounter every week.

The five problem structures covered:

• Structure 1 — A & B / Holdco / Opco: a holding company receives dividends from the operating company and accumulates an investment portfolio; the passive income in Holdco now grinds down the small business deduction of Opco (associated corporations); and Holdco shares cannot qualify for the capital gains exemption because of the passive assets. The fix depends on whether A and B are related: if unrelated, separate holdcos per shareholder can hold passive assets outside the associated group entirely
• Structure 2 — Holdco / Opco 1 + Opco 2: an individual's access to the capital gains exemption is blocked because shares of Opco 1 and Opco 2 are held by Holdco, not directly; Holdco realizes the capital gain on a sale, not the individual; and splitting Holdco into two corporations to fix this cannot be done tax-free where the purpose is to facilitate a sale to an arm's length person — a common and costly mistake
• Structure 3 — Opco (H) and Realty Co (W): an operating company pays rent to a related corporation owned by the spouse; the two corporations are related but not associated; rental income in Realty Co is therefore passive, taxed at approximately 50%, while Opco deducts the rent at 12%; the fix is to make them associated, converting the rental income in Realty Co to active business income taxed at a lower rate
• Structure 4 — Trust / Partnership with losses: a trust owns interests in a partnership that is generating losses; the losses flow to the trust but are trapped there and cannot be allocated to individual beneficiaries; had the beneficiaries owned the partnership directly, the losses would have been deductible against their other income
• Structure 5 — Holdco (10%) / Opco: a holding company owns exactly 10% of Opco by votes and value; because the threshold for "connected" corporation status requires ownership of more than 10%, dividends paid from Opco to Holdco are subject to Part IV tax at 38½%; increasing ownership to just over 10% — an almost inconsequential change to the structure — would eliminate this tax entirely

The course then covers the five objectives every corporate structure must now serve and why they are often in conflict: creditor proofing, tax deferral, income splitting under TOSI, access to the capital gains exemption and the Canadian Entrepreneurs Incentive, and estate planning. No single structure achieves all five without tradeoffs. TOSI is typically the breaking point.

The Trust Sandwich is covered in full: how common shares of Opco are issued to a family trust; how a corporate beneficiary (Holdco) receives dividends tax‑free from the trust provided Opco and Holdco have common related party control (so they are connected for Part IV tax purposes); and how this allows surplus funds to flow out of Opco to Holdco without personal tax, keeping Opco pure as a small business corporation for the capital gains exemption. The key limitation: holding Opco shares via a trust blocks the excluded shares exception, because the shares are not held directly by a natural individual. The trust sandwich therefore creates a structural choice between purification flexibility and TOSI‑free dividends to family members — it is very difficult to achieve both simultaneously from the same structure.

The section 74.4 clause — often inserted in trust agreements to prevent the s.74.4 interest imputation from running on the preferred shares held by the settlor — is also covered. Inserting a s.74.4 clause precludes designated persons (spouse, minor children, grandchildren) from benefiting under the trust, which solves the interest imputation problem but also prevents them from receiving capital gains allocations and using their capital gains exemption. Practitioners must understand this tradeoff before recommending a s.74.4 clause.

The course concludes with the hybrid structure that achieves the most objectives simultaneously: individual shareholders hold Opco shares structured to qualify as excluded shares (enabling TOSI‑free dividends and direct CGE access for those individuals); a family trust holds additional Opco shares with a corporate Holdco as a beneficiary (enabling purification and CGE multiplication among trust beneficiaries including children); and both purposes are served within the same corporate group. The one remaining tradeoff: Holdco is associated with Opco, so passive income in Holdco still affects the SBD grind. The structure requires careful management but comes closer than any other to achieving all objectives at once.