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ARTICLE · 17 DECEMBER 2024

Asset Drop-Down Transactions: What Happens When A Third-party Sale Falls Through?

Miller Thomson
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The 2024 Federal Budget, introduced on April 16, 2024, brought significant changes to Canada's tax landscape, particularly for business owners and investors. Among the most impactful was the proposed increase.

CanadaTax
Brendon Ho
Brendon Ho
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The 2024 Federal Budget, introduced on April 16, 2024, brought significant changes to Canada's tax landscape, particularly for business owners and investors. Among the most impactful was the proposed increase in the capital gains inclusion rate, effective June 25, 2024. For corporations, the inclusion rate rose from 50% to 66.67%, and for individuals, capital gains exceeding $250,000 now face the same increase.

This change created a rush of tax planning activity, with the Asset Drop-Down transaction emerging as a preferred strategy. However, not all plans proceeded smoothly, leaving many taxpayers asking: What should we do if the anticipated sale doesn't go through?

This article explores the practical implications of an Asset Drop-Down transaction, the reasons some taxpayers used it ahead of the capital gains changes, and the key steps to take if your third-party sale is delayed or abandoned.

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