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Business Reorganization for Tax Savings

Case Study | Mar 13, 2015

The Problem

A successful business was being operated through a corporation that owned both the operating business assets and the real estate housing the business. The shareholders wished to separate ownership of the real estate from the operating business, so that future creditors of the operating business would not have recourse to the real estate. The shareholders were concerned, however, that creating a new corporation and transferring the real estate to it would trigger significant income tax and land transfer tax, since the real estate was now of significant value and had been acquired for a very modest price many years earlier.

Our Approach

We developed and implemented a reorganization plan that enabled the real estate to be transferred to another corporation owned by the same shareholders, using provisions of the Income Tax Act that enable assets to be transferred on a tax-deferred basis and the Land Transfer Tax Act that provide for the deferral and ultimate cancellation of land transfer tax in certain prescribed circumstances.

The Result

This enabled the separation of the real estate from the operating business without incurring income tax or land transfer tax.

© 2015 Lawrence, Lawrence, Stevenson LLP

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