Further to our earlier
article regarding the Federal Government's proposals to
amend the Income Tax Act, on October 19, 2017, the
Department of Finance announced that it would not be proceeding with
the last of its proposed changes, namely measures dealing with the
conversion of income into capital gains ("anti
surplus-stripping proposals"). "Surplus stripping"
refers to the concept of the extraction of corporate surplus in a
manner that would convert income taxable at higher tax rates (such
as dividends) to income taxable at lower tax rates (such as capital
gains).
As part of its explanation for abandoning these proposals,
Finance stated that "the measures could result in several
unintended consequences, such as in respect of taxation upon death
and potential challenges with intergenerational transfers of
businesses". Although the abandonment of the anti
surplus-stripping proposals should allay the concerns expressed by
the tax community and business owners
