ARTICLE · 27 OCTOBER 2017

Finance Abandons The Surplus Stripping Rules For Now

Collins Barrow National Incorporated

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On October 19, 2017, the Department of Finance ("Finance") announced that it will abandon the proposed tax measures aimed at restricting the conversion of income into capital gains...

CanadaTax

Sankalp Jaggi

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On October 19, 2017, the Department of Finance ("Finance") announced that it will abandon the proposed tax measures aimed at restricting the conversion of income into capital gains ("anti-surplus stripping rules").

The controversial anti-surplus stripping rules were introduced on July 18, 2017 (see CBT's summary here) with immediate effect. The proposed measures created uncertainty and may have caused unintended tax consequences on the intergenerational passage of family businesses and distributions by private companies to their shareholders.

With today's announcement, it appears that the tax planning strategy to avoid double tax on death (commonly referred to as "pipeline planning") may resume with the pre-July 18, 2017 cautions.

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