Year-End Tax Planning Seminar
2024 EditionRecorded December 2, 2024, with the capital gains inclusion rate change still unlegislated. Two hours on planning when the law is not settled: pre-transition and post-transition capital gains strategies, the $250,000 allowance, the new AMT rules, flipped property and short-term rental exposure, and the bare trust filing relief. No charge, no subscription.
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Year-End Planning 2024: Advising Clients While the Law Is Still Unsettled
The move from a one-half to a two-thirds capital gains inclusion rate is not law. It may never become law if there is an early election. The increase in the capital gains exemption to $1,250,000 and the Canadian Entrepreneur's Incentive sit in the same draft package, and the Incentive does not start until 2025 in any case. Meanwhile the new AMT rules for 2024 are in force, the short-term rental expense denial is in force, and clients still need year-end advice in December.
Much of the planning this year is about preserving hindsight. A spousal election is made by April 2025 on a property-by-property basis. A rollover election form can be held back until the legislation is resolved. Where a decision can be deferred without cost, deferring it is the plan.
- check_circle What is law and what is not, as of December 2024. New AMT, new GAAR and the 25% penalty, the new reporting rules and the short-term rental denial are passed. The capital gains changes, the AMT investment counsel fee amendment and the three-year estate loss carryback are not.
- check_circle Pre-transition planning, on or before June 24. Actual sales, sale or gift to spouse with the FMV election available until April 2025, section 85 rollovers, the capital gains strip, and trust distributions. Plus the CRA technical interpretation on GAAR and where the risk actually sits.
- check_circle Post-transition consequences at a two-thirds rate. An 8 to 9 point increase for individuals and 10 points for corporations, the capital gains strip no longer worth doing, the exemption now worth roughly $450,000, the safe income strip becoming the preferred route, CDA additions falling to one third, and the stock option deduction moving to one third.
- check_circle The 2024 AMT rules and who they now catch. Federal rate at 20.5%, exemption at $173,000, capital gains included at 100% while net capital losses and interest are allowed at 50%, the donation credit at 80%, and trusts with no exemption at all.
- check_circle The compliance items with December 31 deadlines. Non-compliant short-term rentals losing all expense deductions, the flipped property rule and the rollovers that restart the 365-day clock, and the CRA announcements on bare trust and T3 filing relief.
What You'll Learn
Seven sections across two hours, in the order the seminar builds them. The legislative position first, then pre-transition and post-transition capital gains planning, then AMT, then the compliance items that had to be settled by December 31.
expand_more Uncertainty Reigns: What Is Passed and What Is Not
Establishing the legislative position before any planning is done, because most of the year's decisions turn on it.
- The capital gains inclusion rate change is not law The move from one half to two thirds, and the possibility that it never becomes law if there is an early election.
- What travels with it The increase in the capital gains exemption to $1,250,000, and the Canadian Entrepreneur's Incentive, which reduces the inclusion rate from two thirds to one third by special deduction but does not begin until 2025.
- The possibility of a tax decrease in 2025 And what that alone should do to 2024 income recognition.
- What is passed The new AMT rules for 2024, the new GAAR and its 25% penalty, the notifiable, reportable and uncertain tax treatment reporting rules, and the expense disallowance on non-compliant short-term rentals.
- What is not passed The three-year period for the estate capital loss carryback, the AMT amendment on investment counsel fees, and the capital gains changes themselves.
expand_more Pre-Transition Planning: Gains Realized On or Before June 24
Five methods of deliberately realizing gains at the one-half rate, and how much hindsight each one preserves.
- Actual sales Generally what is done is done, with tax loss selling by year end as the remaining lever. AMT issues for individuals and trusts follow.
- Sale or gift to spouse Rollover by default with an election at fair market value available property by property. The decision can be made in April 2025, so it is made with hindsight: elect at FMV if the two-thirds rate passes, otherwise take the rollover.
- Rollover with election to a corporation or partnership Investment assets, private company shares and real estate, and the question of what amount to elect. AMT applies to individuals and trusts, not corporations.
- The capital gains strip A deliberate share reorganization, usually in Holdco, with rollover by default and a gain where a section 85 election is filed at a selected amount. Funds come out at capital gains rates.
- Worked example Barry, B Holdco and B Opco. A share exchange with an election for gain, then a capital dividend and probably an ineligible dividend to obtain the dividend refund. Roughly 29% overall in Ontario at the one-half rate against 39% at two thirds. Provincial rates are in the materials.
- Last-chance framing and the GAAR risk Why this may be the final opportunity for most capital gains strips, why it is worth doing only for a large amount if at all, and the CRA technical interpretation stating GAAR would not apply.
- Defer the election form Holding back the rollover election, at $100 per month in penalty, until the fate of the legislation is known.
- Trust distributions Paid or payable by the trust year end of December 31 unless a GRE, otherwise taxed in the trust at the top rate. Pre-transition dispositions give beneficiaries the one-half rate, no attribution of capital gain applies for persons under 18, and kiddie tax must be watched on a non-arm's length gain paid to a minor. Distributions of investment assets or real estate in specie with an FMV election on a property-by-property basis are determined by March 31, 2025.
expand_more Post-Transition: Nine Consequences of a Two-Thirds Inclusion Rate
What changes on June 25 and afterward, assuming the rate becomes law.
- Tax rates An increase of 8 to 9 points for individuals and 10 points for corporations. Rate charts are provided.
- Capital gains strip At a 39% Ontario rate it is comparable to an eligible dividend and only 8 or 9 points better than an ineligible dividend. No longer worth doing.
- Capital gains exemption $1,250,000 at 36% is worth roughly $450,000, far more valuable than before. Keeping the corporation pure on the 90% test, reviewing whether the structure suits a share sale by an individual, and multiplying the exemption across family members.
- Safe income strip Reducing share value on a sale and moving retained earnings to a holding company. The historic disadvantage narrows once capital gains are taxed at 33% or 39%, and deferral becomes the preferred approach.
- Capital dividend account One third of the gain added rather than one half, with a full worked comparison showing total tax moving from 29% to 39%.
- Donations of public company shares A 50% donation value plus 36% for the nil capital gain, roughly 86% in total, and whether this is the year to donate given the uncertainty and the AMT exposure.
- Post-mortem planning The capital loss carryback approach becomes more attractive, swapping the deceased's capital gain for a dividend in the estate, particularly where there is CDA or RDTOH, and using three taxation years in the GRE.
- Life insurance Reviewing coverage for higher tax at death, and the 50% solution becoming a one-third solution.
- Stock options The deduction moving from one half to one third, subject to the $250,000 allowance.
expand_more The $250,000 Allowance, Capital Losses, Reserves, and the Filing Dilemma
Where the remaining planning room is, and what to do about returns that come due before the law is settled.
- The $250,000 allowance Available to each individual annually in the form of a deduction, giving an effective one-half inclusion rate below the threshold.
- Maximizing it Planning the amount of gain realized, realizing losses to trim gains that run over, using reserves on real estate and private company shares to spread a gain over five years, and spreading gains among trust beneficiaries.
- A new dimension to income splitting Each individual beneficiary receiving an allowance on a trust distribution, subject to TOSI.
- Capital losses Realizing in the year to net against gains, the superficial loss rule where the same or identical property is held at the end of 30 days by the taxpayer or an affiliated person, and the trap of selling at a loss to an RRSP, RRIF or TFSA.
- Applying loss carryforwards For individuals, whether to apply against all gains or preserve $250,000 at the one-half rate, decided in April when the return is prepared. For corporations, applying only against gains taxed at two thirds and trimming the amount applied in the transition year.
- The 2024 net capital loss Carryback or carryforward, and why the carryforward may be worth more.
- A 2023 capital loss already carried back Whether it can be amended, and the Notice of Objection deadline that leaves room to change the claim.
- Reserves Draft legislation confirming the reserve comes into income on the first day of the taxation year, so a 2024 reserve is pre-transition at one half, and whether to claim a reserve at all or report the entire gain in 2024.
- The filing dilemma A June 30 corporate year end with tax due August 31, and whether to file at one half or two thirds when legislation has no status until passed. The CRA relief announced November 14 covering corporations and trusts with filings due on or before March 3, 2025, relief from both interest and penalties expiring that day, and updated forms expected by January 31, 2025.
expand_more Alternative Minimum Tax Under the New 2024 Rules
Why AMT now reaches ordinary high-income profiles, and what can be done about it before year end.
- The mechanics Many more adjustments, almost all unfavourable. The federal rate rising from 15% to 20.5%, roughly 31.5% in Ontario with provincial tax, against an exemption rising from $40,000 to $173,000.
- Winners and losers Lower-income AMT profiles benefit from the larger exemption, while high-income individuals with an otherwise ordinary profile can now be caught.
- The major changes Interest expense and non-capital and net capital losses allowed at 50%, capital gains net of losses included at 100%, and the donation credit allowed at 80%.
- Capital gains at the one-half rate A worked comparison showing roughly 3 points of extra federal AMT, moving the Ontario rate from 26.5% to about 31.3%. At two thirds the regular tax exceeds AMT and the problem disappears, by paying more regular tax.
- The new profiles Large donations, particularly of public company shares with large gains, and large personal investment interest expense. Capital gains exemption claims produce less AMT in 2024 because of the higher exemption limit.
- Diagnosing the exposure Using 2023 data and a 2024 planner to determine whether AMT is a one-time event that will be recovered or a recurring profile that has to be changed.
- Planning responses Paying down loans, matching gains and losses in the same year to avoid carryovers, switching private company remuneration from dividend to salary, making smaller and more gradual donations, and transferring investments and the related loan to a corporation.
- Trusts No exemption amount at all and much greater exposure, reduced by allocation to beneficiaries but still arising where deductions are taken in the trust, particularly interest on an investment loan or a prescribed rate loan. Recovery within a trust is especially difficult.
- The exemptions Year of death, capital gains realized on death in an alter ego, spousal or joint spousal trust, and the new 36-month GRE exemption, with the donation timing that follows from them.
- Worked example Evan, with a 2024 net capital loss over $1,200,000 offset against a 2025 gain, showing nil regular taxable income and substantial federal AMT.
expand_more Flipped Property and Non-Compliant Short-Term Rentals
Two rules that convert an expected result into a much worse one, one of them with a hard December 31, 2024 deadline.
- The flipped property rule Canadian residential property held under 365 days produces business income, not a capital gain, with no principal residence exemption.
- The sale-circumstance exceptions Death, insolvency, threat to safety, a qualified move and joining a related household. Reasonably available to an individual with personal use property, harder for an investment property, particularly one held in a corporation.
- Worked example Debbie rolls a long-held rental property into D Co to use its capital losses. The property is flipped property to D Co, the gain is business income, and the capital losses cannot be used.
- The reset trap Rollovers and amalgamations restarting the 365-day holding period, and the period from offer to closing not counting toward ownership.
- Short-term rentals New for 2024, no expenses allowed on non-compliant short-term rental of Canadian residential property while the income remains taxable. Rented or offered for rent for under 90 days.
- What non-compliant means Use not permitted by the province or municipality, or permitted but requiring a registration, licence or permit that has not been issued. Compliance was required by December 31, 2024.
- Where it bites Cottage and ski chalet rentals, a basement rented to a student for under 90 days, Airbnb and bed and breakfast operations, with the Toronto registration and municipal tax position and the HST threshold as a worked illustration.
expand_more Planning for a Possible 2025 Tax Decrease, and the T3 Filing Updates
Deferral strategies where rates may fall, and the two CRA announcements that changed trust filing obligations.
- If rates fall or the capital gains change dies Reducing 2024 income by taking less salary or dividend, accruing a bonus for payment within 180 days of the corporate year end, deferring capital gains and stock option exercises, maximizing deductions such as RRSP contributions where room exists, and increasing 2024 donations with care for AMT.
- The August 12, 2024 announcement Proposed amendments reducing the number of trusts, including bare trusts, required to file a T3 return and Schedule 15 beneficial ownership information, applying from 2024.
- Bare trusts Not required to file for the 2024 taxation year, required from 2025 onward. In substance a further one-year postponement.
- The new bare trust exclusions Legal owner who is also the beneficiary, related legal owners where the property is a principal residence, a spouse or common-law partner beneficiary of a principal residence, property held for a partnership that files a T5013, property held under a court order, Canadian resource property held for a public company, and property held for a charity or NPO on conditions.
- The October 29, 2024 announcement CRA confirming it will not require bare trusts to file for 2024 unless it makes a direct request, extending the 2023 administrative relief, with a minor change to the definition of settlor for Schedule 15.
- The expanded small trust exception No Schedule 15 where assets stay under $50,000 throughout the year, or under $250,000 where every trustee and beneficiary is a related individual and the assets are limited to cash, GICs, mutual funds, segregated funds, publicly traded securities or personal use property.
- No T3 obligation For a trust established to comply with a federal or provincial statute for a specific purpose, and for a lawyer's separate trust account not exceeding $250,000 in the year.
- Servicing the December review Why capital gains and losses, AMT, pre-transition rollover guidance and trusts make this a time-sensitive but valuable client service, and why time has to be set aside for it.
What Practitioners Say
Feedback from CPAs attending the Cadesky Tax Seminars series.
Greatly enjoy your tax courses. Very informative, practical and relevant. Complex subject matter is presented in a logical and understandable manner. The illustrations have been very useful and used as a template to work through client scenarios. I find the live Q&A equally informative, as many of the questions I have are addressed.
I am very appreciative of your courses. They are always informative with an easy to follow presentation. The accompanying notes are a terrific reference backup for future consultations. I wish I had known about your webinars sooner.
I really enjoy your seminar series. Your presentations are extremely thorough and you explain complex tax issues very clearly.
The presentations are relevant. The material is easy to follow. Worked examples are excellent. It is a great value.
Michael and Hugh created a positive learning environment and encouraged meaningful participation throughout the sessions.
I very much love the courses and only wished I knew about them 10 years ago.
Thanks for providing all the great courses. They are very practical, useful and interesting.
Learn Directly from Tax Experts
Managing partner at Cadesky Tax, practising since 1980 and a Fellow of CPA Ontario. 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. Co-author of 11 books on tax subjects.
Independent tax consultant who has taught income tax for over 30 years. 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, and is a past Governor of the Canadian Tax Foundation.
Frequently Asked Questions
Is this seminar really free? expand_more
Yes. There is no charge, no payment details are collected, and there is no subscription. You create an account, register, and the seminar opens immediately.
Does a free seminar still count as verifiable CPD? expand_more
Yes. You receive a verifiable CPD certificate for 2.0 hours of instructional learning on completion, issued the same way as on our paid programs. Verifiable CPD requires evidence that the learning took place, and the certificate provides it.
Which provinces recognize these hours? expand_more
The seminar is eligible for CPAs across Canada. Each provincial body sets its own annual requirement, and a certificate of completion is the documentation they ask for. Retain the certificate with your CPD log.
Can I start right away? expand_more
Yes. The seminar is available on demand. Register and begin immediately, at your own pace, and return to any section as often as you need.
What is included with registration? expand_more
The full two-hour seminar recording, the complete slide deck with detailed notes, and a verifiable CPD certificate on completion.
Who is this seminar for? expand_more
CPAs and tax professionals running December year-end reviews for individual, owner-manager and trust clients. It suits practitioners handling a mixed personal and corporate book, and anyone who advised on a pre-transition rollover, spousal election or capital gains strip in 2024 and has decisions still open in the spring.
Does the content reflect the law as it stands now? expand_more
The seminar was recorded on December 2, 2024 and states the law and the CRA administrative positions as at that date, including the capital gains proposals that had not been enacted. It remains the record of what practitioners had to work with through the 2024 year end and the following filing season. Check the current status of any measure still in draft at that time.
Can I share this with colleagues? expand_more
Please do. Every colleague registers on their own account and receives their own certificate. There is no seat limit.