Welch 2016 Private Enterprise Accounting Updates
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On October 6th 2016 Welch LLP presented their annual Private enterprise Accounting Updates. For more great content, pklease visit www.welchllp.com. To opt-in to receive future event invites and publications, please email marketing@welchllp.com.
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Welch 2016 Private Enterprise Accounting Updates
- 1. O C TO B E R 6 , 2 0 1 6 Private Enterprise Welch LLP Presents: Accounting Updates Audit Tax Accounting Consulting
- 2. AGENDA 2:30 3:00 3:15 3:30 3:55 4:05 4:154:15 4:25 4:40 4:50 NETW ORKING & SNACKS HST/ INPUTTAX CREDITS IN HOLDING COMPANIES GARTH STEELE IFRS/ASPE SHAW N KELSO INCOMETAX UPDATE:W HATYOU NEED TO KNOW DON SCOTT CRA TIPS:W HATTHEY’RE LOOKING FOR GARY DONELL AUDIENCE Q&A BUSINESS INCENTIVES UPDATE JOSHUA SMITH AUDIENCE Q&A BREAK TRANSACTION INDUSTRY UPDATES STEPHAN MAY
- 3. SPEAKER BIOS GARTH STEELE,CPA,CA AUDIT& INDIRECTTAXPARTNER WithWithover20yearsofexperienceasaPartneratWelch,Garth hasanexhaus velistofNot-for-Profitauditexperience.In addiontoaudingNPOs,Garth’sforteisCommodityTaxes (GST,HST,PST)andPayrollTaxes(CPP,EI,EHT,WCB).Forthe past20years,Garthhasbeenatutorialleaderandlecturerfor theCPACanadaIn-DepthGSTCourse,aswellasaninstructor forCPAOntario’sannualProfessionalDevelopmentprogram. DON SCOTT,FCPA,FCA DIRECTOROFTAXSERVICES& TAXPARTNER DonisnDonisna onallyrecognizedforhisextensiveknowledgein theareaofPersonalandCorporateTaxPlanning.Heregularly contributescontenttokeepWelchLLP’sclientsuptodateon thelatesttaxissues.DonauthorstheannualIncomeTax Updatecourse,whichistaughtna onallythroughtheCPA professionaldevelopmentprogram andteachesvarious specializedtaxcoursesfortheCPACanadaandCPAOntario. HeisalsoameHeisalsoamentortostudentswithinthefirm thatare workingtowardstheirCPAdesigna on. SHAWN KELSO,CPA,CA DIRECTOROFPROFESSIONALSTANDARDS& PARTNER ShShawnbeganworkingwithWelchLLPin1993,servingclients intheprivateandnot-for-profitsector.In2005,Shawnwas appointedDirectorofProfessionalStandardsandisresponsi- bleforthecompliancewithQualityAssurancepolicyinall12 ofWelch’soffices.Heisalsoresponsibleforensuringall QualityControldirec ves,assetbytheCanadianIns tuteof CharteredAccountants(CICA),areupheldonauditfilesas wwellasrecommendingandenforcingWelch’sinternalquality assurancepoliciesandprocedures. welchllp.com
- 4. SPEAKER BIOS GARYDONELL INDEPENDENTCONTRACTOR& TAXCONSULTANT STEPHAN MAY,MBA|MANAGING DIRECTOR WELCHGROUPCONSULTING SStephanistheManagingDirectorofWelchGroupConsulng.He bringsyearsofexperienceinM&A,debtcapital,privateequity, advisoryandrestructuringservices.Stephanworkswithcompa- niestomaximizetheirvalueandensureasmoothtransion process,whetherthroughbuyingorsellingyourcompany,financ- ingorrestructuring.StephanisaregularguestspeakeratTelfer SchoolofBusiness.Inaddion,heiscurrentlytheChairofan iinterna onalCorporateFinanceGroup.In2015,Stephanwasa recipientoftheTop40under40award. JOSHUASMITH,CPA,CA|BUSINESSINCENTIVESLEADER JoshuagJoshuagraduatedwithaBachelorofCommercefrom theUniver- sityofO awain2002andbeganworkingwithWelchLLPin2006. HeobtainedhisCAdesigna onin2008.Joshuahasworkedona numberofgovernmentcomplianceaudits,aswellasauditsfor privatesectorandnot-for-profitclients.Since2007,Joshuahas focusedontaxcomplianceandplanningforpersonal,business andestateclients.JoshuaisalsoresponsibleforSR&EDandother businessincebusinessincen veplanning. GarybeganwithCRAin1985a erworkingintheprivatesector forelevenyearsandhasstayedinvariousrolesfornearlythirty years.HeregularlyconsultswithnumerousCRAauditorsona varietyofdomes candinterna onalissues.Inhisroleswith CRA,Garyhaspar cipatedasaguestspeakerinCRAsponsored taxeventsforsomeofCanada'slargestcompanies,provideda specialtaxeventtotheDepartmentofJus ceandtheDepart- mementofFinancepolicysec on,andhasbeentheCRAguest speakerforthelastdecadeintheadvancedtaxprogram.Finally, hehasactedasaconsultantandadvisorto2authorsontheir taxbasedtextbooks,andcurrentlyheadstheTax2program at AthabascaUniversity. welchllp.com
- 6. 2 HST/Input Tax Credits in Holding Companies Garth Steele, CPA, CA Partner gsteele@welchllp.com
- 7. 3 Registration for HST required if carrying on a “Commercial Activity” The holding of shares or debt in a subsidiary is not a CA Voluntary registration may be permitted HST + Holding Companies
- 8. 4 S 186(3) Excise Tax Act All or substantially all of the property of the subsidiary is used exclusively in CAs Subsidiary is related to parent The shares held by the parent and the debt held by the parent in the subsidiary is deemed to have been acquired by the parent for use exclusively in the course of its CAs Deeming Rule
- 9. 5 If parent company is registered for GST/HST ITC’s are available in respect of expenditures incurred in relation to the shares or debt of the related company Impact
- 10. 6 Subsidiaries engaged exclusively in commercial activities No ITC - Expense relates to annual meeting of parent company - Expense relates to issuing shares or debt in parent company ITC - Expense is a legal fee related to acquiring shares in subsidiary Examples
- 11. 7 Shawn Kelso, CPA, CA Partner skelso@welchllp.com IRFS/ASPE
- 12. 8 Purpose • To clarify application of cost method to strategic investments Key features • Measure at FV of consideration transferred at acquisition date (includes contingent consideration) • Bargain purchase gain would not be recognized • Previously held investment would not be re-measured • Acquisition costs would be expensed Amendments to ASPE 1591 (Subsidiaries) + 3051 (Investments) Transition • Effective for Jan 1,2018 • Prospective (to new acquisitions)
- 13. 9 Placement of significant accounting policy note Change in accounting policy for current period no longer required under 1506 Amended 1521 (Balance Sheet) re: required disclosure of assets under capital lease. Consistent with section 3065 LEASES. Removal of disclosure requirement re: impaired operating leases receivable (replaced by disclosure of allowance…similar to trade receivables) 2017 Annual Improvements
- 14. 10 Purpose • Original purpose was to eliminate exception for redeemable preferred shares Developments • Significant concerns expressed from practitioners/preparers • Implementation postponed (effective date no earlier than Jan 1, 2018) • Discussions ongoing (viability of classification exemption) Project – Redeemable Preferred Shares
- 15. 11 More guidance in certain areas Confusion around application of standard to RPTs Questioned the value of certain disclosures Post Implementation Review: ASPE S. 3856 Financial Instruments
- 16. 12 Assets in Scope • Unharvested crops • Agriculture produce • Animals held for sale • Bearer plants/animals ASPE – Discussion Paper on Agriculture
- 17. 13 Measurement Alternatives • Cost • Current value • Current value when conditions met • Insured value ASPE – Discussion Paper on Agriculture
- 18. 14 ASPE – Discussion Paper on Agriculture Asset Preliminary View Unharvested crops Cost Agriculture produce Current value when conditions met (cost if not met) Animals held for sale Current value when conditions met (cost if not met) Bearer plants/animals Cost
- 19. 15 Purpose • Address concerns re: off balance sheet financing Implications • Lessees will be required to recognize most leases on balance sheets • Right of use assets • Obligations to make lease payments • While have impact on numerous financial metrics for entities with material leases • Essentially no change to lessor accounting New IFRS Standard for Leases (IFRS 16) Effective Date • Effective from Jan 1, 2019 • Early adoption requires IFRS 15 to be adopted as well*
- 20. 16 Definition of a Lease • Identified asset • Control over asset Separating lease and non-lease components (e.g. service components) Important Elements of IFRS 16 Transition Options • Full retrospective option (FY Dec 31, 2018 and Dec 31, 2019) • Modified retrospective approach (FY 2019) • Cumulative effective = adjust opening R/E at Jan 1, 2019) Exceptions to general application • Short term leases (< 1year) • Low value leases (< $5K)
- 21. 17 Purpose • Provide more guidance on application or revenue recognition principles IFRS 15 Transition • Effective from Jan 1, 2018 New 5 Step Process • ID Contract • Id separate performance obligations • Determine transaction price • Recognize revenue when performance obligations met
- 22. 18 Purpose • Enhance the representational faithfulness of standard and improve the execution of the standard Financial Instruments Transition • Effective date is Jan 1, 2018 • Transition relief Key Elements • New financial instruments classification/measurement model • New impairment criteria • New hedging criteria
- 23. 19 Amortized Cost FVOCI FVTPL IFRS 9 Principle Measurement Categories
- 24. 20 IFRS 9 Asset Classification FVOCI (equity instruments) FVTPL (equity instruments) Amortized cost FVOCI (debt instruments) Not held for trading OCI election made by MGMT Held for trading Principal & interest only Intent to hold & collect Principal & interest only Mix of selling assets and collecting on contracts Dividend income in P&L Change in FV through OCI Dividend income in P&L Change in fair value the P&L All items (interest revenue, FX, impairments, gain on sale etc. through P&L) - Interest (P&L) - F/X (P&L) - Credit impairments (P&L) - Other gains/losses (OCI) - Reclass cumulative OCI adjustments on derecognition
- 25. 21 Other IFRS Projects IFRS SECTION DESCRIPTION OF THE CHANGE EFFECTIVE DATE IFRS 10 and 12, IAS 28 Clarifies the application of non-consolidation exemption for investment entities Jan 1, 2016 IFRS 11 Requires entity acquiring an interest in a joint operation to follow the provisions of IFRS 3 (so long as they don’t conflict with IFRS 11) Jan 1, 2016 IFRS 14 Applies to entities subject to rate regulation permitting qualifying entities to defer certain expenditures which, in the absence of this section, would otherwise be expensed. Jan 1, 2016 IAS 1 Clarifies application of disclosure certain disclosure requirements reflected (e.g. materiality, order of notes, disaggregation etc.) Jan 1, 2016 IAS 16 and 38 Establishes that revenue based amortization models are not appropriate for PP&E and Intangible assets Jan 1, 2016 IAS 16 and 41 Bearer plants now fall under the provisions of IAS 16 not IFRS 41. Government grants related to bearer plans will fall under the provisions of OAS 20 Government Grants. Jan 1, 2016 IAS 27 IAS 27 now enables entities to account for investment in subsidiaries using the equity method when preparing non-consolidated financial statements to satisfy a regulatory requirement Jan 1, 2016
- 26. 22 Income Tax Update What You Need To Know Don Scott FCPA, FCA Director of Tax Services, Tax Partner dscott@welchllp.com
- 27. Incentives Tax Update – What You Need to Know 23 The Small Business Deduction • Changes to partnership-based structures • Changes to corporation-based structures
- 28. Partnership Example 24 LLP CLIENTS K Co $400, 000 Contract for services Kerry 50% C Co Chris $400, 000 Contract for services Leslie 50%
- 29. Corporation Example 25 K Co T/I $450K Kerry C Co Chris C Co T/I $250K $100K Fees
- 30. 26 Eligible Capital Property • Move to CCA System • Class 14.1 – Declining Balance at 5% • Post 2016 Additions Directly to Class • Pre-2017 Transitional Rules • The Tax Effect • Incentive to Sell Assets (Goodwill) Before 2017 Incentives Tax Update – What You Need to Know
- 31. 27 Life Insurance • Transfer of life insurance policies • Changes for 2017 policies Incentives Tax Update – What You Need to Know
- 32. 28 Amendments to S.55 • Prior legislation and proposed amendments • Purpose of S.55 • The importance of safe income • Part IV exception narrowed • Revised purpose test • Stock dividends Incentives Tax Update – What You Need to Know
- 33. 29 Incentives Tax Update – What You Need to Know Amendments to S.55 • Redemption of shares/new S.55(2) • Normal course dividends/loss consolidation transactions • Safe income/discretionary dividend shares/ “skinny” shares • Purpose test/creditor proofing • Using S.55(2) as an advantage
- 34. 30 OPCO Hold Co Mr. X Invest Co Mr. Y OPCODividends Dividends Examples
- 35. Q&A 31
- 36. Break 32
- 37. 33 The State of M&A In North America Stephan May Managing Director, WelchGroup Consulting s-may@w-group.com
- 38. North American M&A Trends North American M&A Trends
- 39. v i a P i t c h B o o k SCARY
- 40. v i a P i t c h B o o k M&A Activity is Slowing as Market Transitions North American M&A Deal Flow by Quarter $176 $220 $226 $341 $329 $291 $324 $353 $351 $379 $304 2713 2640 2626 2568 2914 2756 2812 2724 2505 2155 1556 0 500 1000 1500 2000 2500 3000 3500 $0.00 $50.00 $100.00 $150.00 $200.00 $250.00 $300.00 $350.00 $400.00 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2014 2015 2016 Deal Value ($B) Deal Count
- 41. v i a P i t c h B o o k There's Too Much Capital Chasing Too Few Deals
- 42. v i a P i t c h B o o k Multiples Remain at the Top End North American M&A EBITDA Multiples by Quarter 6.5x 5.9x 5.4x 5.8x 5.2x 6.8x 3.7x 5.8x 4.2x 5.6x 6.0x 6.5x 5.5x 4.8x 5.2x 4.0x 3.0x 4.2x 4.3x 4.1x 3.0x 4.2x 4.1x 4.9x 4.3x 4.7x 3.5x 5.8x 4.8x 5.9x 10.5x 9.0x 9.6x 10.1x 9.3x 9.8x 7.9x 9.9x 9.1x 9.9x 10.8x 10.0x 11.3x 9.6x 11.1x 0x 2x 4x 6x 8x 10x 12x 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 Debt/EBITDA Equity/EBITDA Valuation/EBITDA
- 43. v i a P i t c h B o o k Middle-Market Deals Remain Bulk of M&A North American M&A Deals (#) by Size 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 $5B+ $1B-$5B $500M-$1B $250M-$500M $100M-$250M Under $100M
- 44. v i a P i t c h B o o k Mega Deals Taking Larger Share of M&A $ North American M&A Deals ($) by Size 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 $5B+ $1B-$5B $500M-$1B $250M-$500M $100M-$250M Under $100M
- 45. v i a P i t c h B o o k High Multiples and Competition Have Pushed PE Activity Down North American PE % of M&A 0% 5% 10% 15% 20% 25% 30% 35% 0 500 1000 1500 2000 2500 3000 3500 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 Sponsor Backed Corporate M&A Sponsor Backed %
- 46. v i a P i t c h B o o k “Bankers are scared”
- 47. v i a P i t c h B o o k Company Quality and Large Bank Lending Limits are Driving More Equity into Deals North American M&A Debt % by Quarter 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 Debt % Equity %
- 48. PE Firms Keep Adding On at A Record Pace PE Add-On % 337 347 416 410 508 433 494 515 519 523 509 496 479 452 328 251 230 275 336 306 309 347 333 330 326 311 340 253 278 202 57% 60% 60% 55% 62% 58% 59% 61% 61% 62% 62% 59% 65% 62% 62% 0% 10% 20% 30% 40% 50% 60% 70% 0 100 200 300 400 500 600 700 800 900 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 Add-On Non Add-On Add-On %
- 49. North American M&A Trends M&A in Canada
- 50. Volume of Completed Transactions Saw A Steep Downward Plunge Canadian M&A Deal Flow by Quarter $16 $11 $9 $15 $31 $15 $12 $26 $12 $19 $11 $12 $14 $14 $9 0 50 100 150 200 250 300 350 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 Capital Invested ($B) Deal Count
- 51. U.S. M&A Activity Continues to be Robust U.S. M&A Deal Flow by Quarter$106 $140 $150 $244 $145 $205 $214 $315 $317 $272 $313 $342 $337 $365 $295 0 500 1000 1500 2000 2500 3000 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 Capital Invested ($B) Deal Count
- 52. North American M&A Trends B2C Sector
- 53. v i a P i t c h B o o k B2C Deal Value Hit a New High in 2Q 2016 North American M&A B2C Deal Flow by Quarter$30 $39 $32 $63 $36 $57 $44 $56 $47 $54 $92 $33 $64 $121 $55 0 100 200 300 400 500 600 700 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 Deal Value ($B) Deal Count
- 54. v i a P i t c h B o o k Median B2C Deal Size Swings Higher Median Deal Size for North American M&A B2C Deals $21.7 $37.7 $21.3 $51.7 $26.0 $69.7 $38.0 $35.0 $26.3 $18.0 $28.1 $170.0 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016
- 55. North American M&A Trends B2B Sector
- 56. B2B M&A Activity Saw A First Sizable Slump in Some Time North American M&A B2B Deal Flow by Quarter $31 $14 $35 $36 $38 $38 $43 $52 $34 $49 $70 $50 $65 $75 $23 0 200 400 600 800 1000 1200 1400 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 Deal Value ($B) Deal Count
- 57. v i a P i t c h B o o k B2B Deal Sizes Seeing a Big Trend Upwards Median Deal Size ($M) for North American B2B M&A Deals $12.2 $11.8 $30.0 $17.0 $22.8 $35.0 $25.0 $19.3 $70.0 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016
- 58. North American M&A Trends Energy Sector
- 59. Energy Deal Flow Falls Again North American M&A B2B Deal Flow by Quarter$15 $23 $23 $36 $18 $19 $38 $102 $29 $51 $21 $41 $22 $13 $39 0 20 40 60 80 100 120 140 160 180 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 Deal Value ($B) Deal Count
- 60. v i a P i t c h B o o k 3Q 2016 Median Deal Size was the Highest Median Deal Size ($M) for North American Energy M&A Deals $27.8 $86.2 $73.3 $40.0 $68.6 $133.1 $52.8 $108.1 $22.0 $26.0 $119.0 $67.4 $24.1 $190.2 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 $200.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016
- 61. North American M&A Trends Healthcare Sector
- 62. v i a P i t c h B o o k M&A Value and Volume for 3Q 2016 Tends Toward the Downward End North American M&A B2B Deal Flow by Quarter $11 $18 $8 $27 $54 $21 $68 $32 $137 $90 $83 $41 $47 $68 $44 0 50 100 150 200 250 300 350 400 450 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 Deal Value ($B) Deal Count
- 63. Valuations and Appetites are Increasing in the Healthcare Industry Median Deal Size ($M) for North American B2B M&A Deals $45.0 $29.0 $59.9 $39.0 $65.6 $29.2 $30.0 $75.9 $45.0 $59.1 $65.7 $68.8 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016
- 64. v i a P i t c h B o o k There is a lot of uncertainty in the market
- 65. North American M&A Trends Changing Business Model
- 66. What’s Next?!?
- 67. v i a P i t c h B o o k Autonomous Cars will change your business model
- 68. “Uber, Lyft drivers know they will be replaced by self-driving cars”
- 69. 260M* Average utilization rate of a car is “One out of ten cars sold in 2030 potentially being a shared vehicle”, and up to 15 percent of new cars sold in 2030 could be fully autonomous** Number of Cars in the U.S. *Statista 2016 ** Mckinsey 95%
- 70. v i a P i t c h B o o k It will be sooner than later…
- 71. Companies That Will Be Obsolete or Reduced to Nothing • Car insurance • Taxi • Parking garages • Auto parts dealer • Delivery trucks • Gas stations • Car rental • Banks • Road construction • Car dealership • Real estate • Oil changers • Mechanics • Etc.…
- 72. 68 CRA Tips: What They Are Looking For Gary Donell Independent Contractor, Tax Consulting gdonell@welchllp.com
- 73. Basic Premise Qualification 69 The audit is not a restricted audit and the auditor is well experienced with a good level of technical expertise. The nature of the enquiry by a CRA auditor will depend on the outcome of a fact finding mission. Most audits require insight into the nature of the corporate business, whether there are other entities connected to the shareholders (other corporations, partnerships, trusts, etc), the reliability of the accounting system and interactions with the shareholder(s) and family members.
- 74. 70 Full organization chart including entities and nature of ownership interests over time Structure
- 75. 71 Determining necessary connections between those either interacting with the company or having a connection to shareholders of the company Control, Related (non-arm’s length), Associated + Affiliated Updated share registry and minute book – verification of ownership history
- 76. 72 Private Shareholder Agreements Unanimous Shareholder Agreements Buy/Sell Agreements Insurance Policies Any other relevant contractual agreements or arrangements including PACs Legal Formal valuation reports by qualified valuators
- 77. 73 Valuation on property transfers between the company, shareholders and their family members (ITA 15(1)) Personal Amounts Expensed Shareholder loan accounts – payments, source of funds, timing, offsetting salary, bonuses and dividends, any withholding requirements (ITA 15(2)) Shareholder Transactions Specifically
- 78. 74 Whether improperly deducted (capital versus income) Details to lead to tax planning transactions Transaction Costs
- 79. 75 The stop loss rules (affiliated persons and ITA 251.1) Abils Loss refreshing The dividend stop loss rule (ITA 112(3)) Acquisition of Control Losses & Loss Transactions
- 80. 76 Shifting to other shareholders Duplication PUC Preservation
- 81. 77 Non-arm’s length sale of shares (ITA 84.1) Capital gains deduction by individual shareholders (ITA 110.6) – includes Abil history, Cnil & Amt Hard ACB (ITA 84.1)) Small groups of shareholders and control (ITA 84.1) Surplus Stripping Any corporate transaction where either retained earnings have been removed without tax or the appropriate level of tax (dividend tax) or where buyers have financed a corporate acquisition with retained earnings. (Gaar)
- 82. 78 Inter-corporate dividends History of shareholders & shares for rough safe income determination Subsequent transactions for series Whether purification transactions included Capital Gain Strips T2057 (ITA 85(1)) Stock Dividends (ITA 15(1.1) and 55(2))
- 83. 79 Continuity (depreciable property, CDA, R&D etc) Acquisition of control (ITA 256(7)(b)) Transaction Costs Gifting for family members (ITA 87(4)) Amalgamations PUC determination (ITA 87(3)) Accounts created on amalgamation (goodwill etc) Amalgamated interest expenses
- 84. 80 The application of ITA 88(2)/69(5) (voluntary and involuntary dissolutions failing to file annual provincial corporate returns) ITA 88(1) wind-up – continuity, bump (high priority) Transfers of property one year or more in advance Wind-ups + Dissolutions
- 85. 81 Accuracy of attributes of shares Valuation issues leading to gifting or shareholder benefits Eligible property Gifting for family members (ITA 87(4)) Rollovers Under ITA 85(1) Timing on filing (if filed close to three year limit – tax avoidance?)
- 86. 82 Their role, use, and whether properly established Establishing settlor and trustee for trusts (attribution rules ITA 75(2)) Family partnerships Family Trusts + Partnerships
- 87. 83 Business Incentives Update Josh Smith, CPA, CA Business Incentives Leader jsmith@welchllp.com
- 88. 84 Increased CRA Reviews SR&ED Update Five Questions Approach Continues Documentation • Time sheets • The picture it paints New CRA Programs • Pre-claim consultation (technology only) • Pre-claim review
- 89. 85 Recent Cases Documentation • “In respect of” has a broad meaning • New draft legislation introduced Oldcastle Building Products • Wages based on sales
- 90. Q&A 86