Succession of the Family Business
Estate Freeze, Section 84.1, and the New Intergenerational Transfer Rules
A case-study-driven session covering the full succession landscape: from splitting the business and structuring the freeze to paying the parent and navigating the rules that determine whether a sale to a child works at all.
Passing the Business to the Kids Is Not Simple. Getting the Tax Right Makes It Possible.
Transitioning a family business involves management, valuation, family dynamics, legal structure, and tax, all at once. The tax issues alone include capital gains, the capital gains exemption, estate freeze mechanics, the section 84.1 trap, and the new intergenerational transfer rules that replaced Bill C-208. Get any one of them wrong and the consequences can be immediate and severe. This session works through a realistic case study from start to finish, covering every major decision point a CPA advisor will face.
Methods to transition a family business vary greatly based on value, type of business, family dynamics, and overall facts. Tax is an important aspect, but not the only one. This is a very valuable service to clients.
- check_circle The family dynamics that determine whether the plan can work. Before any structure is considered, the session addresses the questions every CPA advisor should ask: who is capable and interested, who is being treated fairly, whether the business can support multiple families, and who you actually represent when multiple parties are involved.
- check_circle The estate freeze and redemption program. How to freeze the value for the parent, transfer future growth to children through trusts, and structure a share redemption program that pays the parent over time while gradually reducing the accrued capital gain, including the trust pros, cons, and the TOSI interaction.
- check_circle Section 84.1: the rule that turns a capital gain into a dividend. When a parent sells shares to a corporation controlled by a child and the child pays with corporate funds, section 84.1 can convert the parent's capital gain into an ineligible dividend taxed at 47%, with no capital gains exemption. The session covers how it works, why it exists, the failed attempts to plan around it, and what the new intergenerational transfer rules actually require.
- check_circle A full case study: Peter, Paul, and Mary. An operating business and an investment real estate company, two children with different roles, a parent who needs income for retirement, and a set of structures to evaluate: freeze, butterfly split, sale plan, redemption program, and reversible freeze. Each approach is worked through with its tax cost, trade-offs, and practical constraints.
What You'll Learn
The session combines a conceptual framework with a detailed case study, covering the full succession landscape: family and business considerations, restructuring options, the estate freeze, paying the parent, the section 84.1 rules, and the new intergenerational transfer regime.
expand_more The Succession Decision: Business, Family, and Advisor Considerations
- Why families pass businesses to children, and the questions that need honest answers before any tax structure is considered
- The three roles every family member plays (owner, employee, and family member), and why the overlap creates problems that tax planning cannot fix on its own
- The range of purchase price approaches from gift to full arm's length terms, and why each has a different tax cost and risk profile
- Who you represent as advisor, and when conflict of interest becomes a real issue
- How to assess whether the business is more like a lifestyle business, a profitable operating company, or an operating company with embedded real estate, and why it matters for every decision that follows
expand_more Restructuring the Business Before the Freeze
- When and why to separate the operating business from the investment real estate before any freeze or transfer
- How a butterfly reorganization accomplishes the split on a tax-free basis, and the land transfer tax considerations in Ontario
- The valuation paradox that arises when real estate moves into a separate corporation and fair market rent must now be charged
- How splitting the business affects what each family member is entitled to, and how to use that to treat children fairly without treating them equally
expand_more The Estate Freeze and Paying the Parent
- How an estate freeze locks in the parent's value as preferred shares while transferring future growth to the next generation
- The use of trusts: control, income splitting, multiplying the capital gains exemption, family law protection, the 21-year rule, and the TOSI interaction with excluded shares
- Comparing the two ways to pay the parent over time: ongoing dividends on preferred shares vs. a share redemption program, and why redemptions are the superior approach for reducing the capital gain on hand
- How a capital gains reserve spreads the gain on a sale to a child over 10 years, and the additional annual benefit from the $250,000 allowance
- The reversible freeze: how making the parent a beneficiary of the trust removes the risk of freezing too early, and what the trust can still provide even if circumstances change
- The redemption program for a real estate holding company: the rate of return, the timeline to full redemption, the impact of rent increases, the ability to continue in the estate, and what happens if shares are not fully redeemed before death
expand_more Section 84.1 and the Intergenerational Transfer Rules
- Why the capital gains exemption creates a problem when a parent sells to a corporation controlled by a child: what section 84.1 does to the transaction, and the magnitude of the tax cost if the plan fails
- The history of the rule, the cases where attempts to plan around it were struck down by GAAR, and why the rule treated family transfers differently from arm's length sales to the same result
- Bill C-208: what it permitted, why it was replaced at the end of 2023, and what safeguards it lacked
- The new intergenerational transfer rules: what conditions must be met for a transfer to be treated as arm's length, the immediate vs. gradual transfer distinction, and the consequences of failing any one of the conditions
- When the new rules work well for the Peter and Mary scenario, and the planning required to make them work
Learn Directly from Tax Experts
Michael Cadesky is the managing partner at Cadesky Tax and a committed contributor to the tax and accounting professions since 1980, earning the title of Fellow from CPA Ontario. He is a past governor of the Canadian Tax Foundation, past chair of STEP Canada and STEP Worldwide, and past chair of the CPA Canada Tax Committee for Small and Medium-Sized Enterprises. Michael is also the co-author of 11 books on tax subjects and the author or co-author of numerous papers and articles on Canadian and international taxation.
Hugh Woolley is an independent tax consultant who has taught income tax for over 30 years for many professional organizations. Hugh has written courses for CPA Canada and over 10 papers for the Canadian Tax Foundation and STEP Canada. From 1990 to 1992 he worked at the CRA's Rulings Directorate in Ottawa writing "butterfly" tax rulings. Hugh is a past Governor of the Canadian Tax Foundation.
Frequently Asked Questions
Quick answers about registering for this course.
Can I start right away? expand_more
Yes. Family Business Succession is available on demand. Register and begin immediately at your own pace.
Does this course provide CPD? expand_more
Yes. You will receive a verifiable CPD certificate for 2.0 hours of instructional learning upon completion.
What is included with registration? expand_more
Registration includes the seminar recording, slides, detailed notes, Technical Corner legislation review, and resource materials. You have one year of access to the program and all materials from your date of registration.
Is there a cost to register? expand_more
Yes. Registration is $150 CAD, a one-time payment with no subscription required.