In Grade 5 I was invited to sit occasionally at a special desk at the back of the classroom, which served as solitary confinement.
One day, after a piece of mischief got me in a bind, I was there, frozen as instructed, hands clasped in front of me, the model of obedience.
Just at that moment, a bumblebee buzzed through the classroom toward me. A couple of kids in the class squealed, and the teacher demanded silence as we all watch it fumble through the stuffy classroom air. The bee made its way toward my desk and began to buzz around my head.
The angry teacher's voice boomed - always the drill sergeant: "Be absolutely still and no harm will come to you!"
I was a model of icy stillness.
The honey-sucker landed on my right cheek and began to crawl across my face toward my mouth and nose.
With all eyes on me, the bee crawled across my upper lip and climbed all the way inside my right nostril. The teacher's eyes got really big as she barked her next instruction: "DO. NOT. MOVE!"
The bee fiddled, scratched, tickled and eventually came to the upper part of my nostril.
Blessedly, just then the bee decided to go into reverse - realizing, I suppose, that it was caving for the wrong sort of nectar.
I thought it was over, but the bee promptly walked across my lip and slid right up my left nostril.Busy as a... well, you know, it scoured a little more, but disappointed, the golden stinger finally - thankfully - backed out and flew away.
And I breathed.
Numbing the sting of it all
In the final of nearly a dozen installments studying the art of selling the family business efficiently, we take a last look at a few more ways to take the sting out of the tax bite we all eventually pay.
Triggering capital losses
If you have publicly traded securities that are in a capital loss position, you could consider selling these loss securities prior to year-end to trigger the capital loss. If your current year capital losses exceed your current year capital gain, then the net capital loss can be carried back to offset capital gains in the prior three years. So if you sold your business in 2012, then net capital losses in 2013, 2014 or 2015 can be carried back to 2012 to reduce the capital gain on the sale of your business and you would get a refund of some of the tax you paid in 2012 on the sale. This decision should be made based on investment merits and you should also bear in mind the 30-day superficial loss rules if you want to repurchase the security that was sold at a loss.
Incorporate to provide continuing service to the business after the year of sale
If you are going to work for the purchaser after the sale of your business to assist with the transition, speak to your qualified tax advisor to determine the best structure in which you should receive your compensation going forward - either as an employee or a consultant. If you are considered a consultant, you may be able to incorporate yourself so that the income you earn from the business is taxed at lower active business rates. If you are considered an employee then it may not be advisable to incorporate yourself since new rules make this option not as attractive.
Financial and wealth planning
Work with a professional to manage your sale proceeds, creating adequate retirement income to meet your lifestyle needs.
Consider getting a financial plan completed to determine all your sources of retirement income and to determine whether you have an excess or shortfall. Your advisor will take into account your income needs now and in the future and the effect of those needs, your risk tolerance and investment knowledge on asset allocation. This analysis along with your objectives will assist them in determining the types of investments appropriate for your needs.
There are a host of different investments available that satisfy different needs. For example:
Individuals with very low risk tolerance can buy GIC's for income but will forego any meaningful growth.
Individuals who want regular interest income with a little risk can look to investment grade bonds but again will give up some growth opportunities, especially in a low-rising interest rate environment.
Individuals seeking certainty, and willing to give up some or all flexibility, may consider annuities to get a guaranteed income.
Individuals with longer investment time horizons and that are more risk tolerant may consider equities.
Of course there are many other types of investment solutions available that meet various needs.
As always, this article is not meant as tax or legal advice. Readers should consult their own professionals before proceeding with a strategy.
Mark Ryan is an advisor with RBC Wealth Management, Dominion Securities (member CIPF) and can be reached at [email protected] or 250-960-4927.
In Grade 5 I was invited to sit occasionally at a special desk at the back of the classroom, which served as solitary confinement.
One day, after a piece of mischief got me in a bind, I was there, frozen as instructed, hands clasped in front of me, the model of obedience.
Just at that moment, a bumblebee buzzed through the classroom toward me. A couple of kids in the class squealed, and the teacher demanded silence as we all watch it fumble through the stuffy classroom air. The bee made its way toward my desk and began to buzz around my head.
The angry teacher's voice boomed - always the drill sergeant: "Be absolutely still and no harm will come to you!"
I was a model of icy stillness.
The honey-sucker landed on my right cheek and began to crawl across my face toward my mouth and nose.
With all eyes on me, the bee crawled across my upper lip and climbed all the way inside my right nostril. The teacher's eyes got really big as she barked her next instruction: "DO. NOT. MOVE!"
The bee fiddled, scratched, tickled and eventually came to the upper part of my nostril.
Blessedly, just then the bee decided to go into reverse - realizing, I suppose, that it was caving for the wrong sort of nectar.
I thought it was over, but the bee promptly walked across my lip and slid right up my left nostril.Busy as a... well, you know, it scoured a little more, but disappointed, the golden stinger finally - thankfully - backed out and flew away.
And I breathed.
Numbing the sting of it all
In the final of nearly a dozen installments studying the art of selling the family business efficiently, we take a last look at a few more ways to take the sting out of the tax bite we all eventually pay.
Triggering capital losses
If you have publicly traded securities that are in a capital loss position, you could consider selling these loss securities prior to year-end to trigger the capital loss. If your current year capital losses exceed your current year capital gain, then the net capital loss can be carried back to offset capital gains in the prior three years. So if you sold your business in 2012, then net capital losses in 2013, 2014 or 2015 can be carried back to 2012 to reduce the capital gain on the sale of your business and you would get a refund of some of the tax you paid in 2012 on the sale. This decision should be made based on investment merits and you should also bear in mind the 30-day superficial loss rules if you want to repurchase the security that was sold at a loss.
Incorporate to provide continuing service to the business after the year of sale
If you are going to work for the purchaser after the sale of your business to assist with the transition, speak to your qualified tax advisor to determine the best structure in which you should receive your compensation going forward - either as an employee or a consultant. If you are considered a consultant, you may be able to incorporate yourself so that the income you earn from the business is taxed at lower active business rates. If you are considered an employee then it may not be advisable to incorporate yourself since new rules make this option not as attractive.
Financial and wealth planning
Work with a professional to manage your sale proceeds, creating adequate retirement income to meet your lifestyle needs.
Consider getting a financial plan completed to determine all your sources of retirement income and to determine whether you have an excess or shortfall. Your advisor will take into account your income needs now and in the future and the effect of those needs, your risk tolerance and investment knowledge on asset allocation. This analysis along with your objectives will assist them in determining the types of investments appropriate for your needs.
There are a host of different investments available that satisfy different needs. For example:
Individuals with very low risk tolerance can buy GIC's for income but will forego any meaningful growth.
Individuals who want regular interest income with a little risk can look to investment grade bonds but again will give up some growth opportunities, especially in a low-rising interest rate environment.
Individuals seeking certainty, and willing to give up some or all flexibility, may consider annuities to get a guaranteed income.
Individuals with longer investment time horizons and that are more risk tolerant may consider equities.
Of course there are many other types of investment solutions available that meet various needs.
As always, this article is not meant as tax or legal advice. Readers should consult their own professionals before proceeding with a strategy.
Mark Ryan is an advisor with RBC Wealth Management, Dominion Securities (member CIPF) and can be reached at [email protected] or 250-960-4927.
