We anticipated an amazing adventure, and got one, but without the fish.
A friend had raved about a mountain lake, teaming with thousands of hungry, wriggly trout. After an hour long canoe paddle and a difficult hike which separated the millions of Lower Mainland residents from its pristine waters, we arrived at the lake at around 5 p.m. Both of us were exhausted, dripping with sweat from our heavy packs.
The beautiful lake was its own reward, but the fish must have been at some sort of a staff meeting.
Disappointed, and only partially rested, we trampled down the mountain toward our canoe, arriving there at around dusk.
The canoe section of the journey was a maze of marshy inlets, each of them very much like the other, but only one of them providing access to the voluminous Pitt River, which separated us from where my wife was to rendezvous with the car.
It was dark. We were tired. I was tired. We tried what seemed like a dozen different waterways through the dimming marsh.
The grass was tall, blocking our scant view, and the wind was cold.
The dread that sinks in with the darkness began to rub on my mood.
The dank smell of lowland marsh, the thickening nightfall, the splash of unknown beasts, the wobbly canoe and the threat of the serious currents of the nearby larger river seeped in.
And I began to whine. It wasn't a manly complaint.
"I miss my wife."
We had only been married three months. The prospect of curling up somewhere on the damp shore was real enough at this point, and not that big of a deal, but what worried me the most was that we had no way of telling her we were okay. This was BC - Before Cellphones.
"What will she do if we have to stay the night? She'll probably call search and rescue, and they will make a big huge fuss, and we will be embarrassed, and fine, and on the news, and look stupid, and..."
"Shut up!" My friend had had enough. "Just paddle. I think I know how to get us out of here."
Around this time, the lights of her car became visible across the waters, and it gave us a flicker of hope, and a sense of direction. We persevered and eventually found our way out to the welcoming waterway and on to home.
A down market feels a bit like a lost and dreary darkness.
We all know that market cycles come and go. They are not as predictably as the night and come with a wall of worry that maybe this time it won't bounce back.
There are no guarantees that it will, but there is a long history of it doing so. And so we paddle on.
Now, on with our continuing series regarding selling the family business, this time we touch on some tax strategies to look at.
Tax strategies
to consider
When selling your business, the purchase price you get is less important than the after-tax funds left in your pocket. Here's where it is critical for buyers and sellers to get professional tax advice early in the transaction process so that the deal can be structured properly.
Incorporate your business before sale
If the business is currently not incorporated but there is a prospective purchaser, then think about incorporating the business and selling the shares of the corporation in order to utilize any remaining capital gain exemption (CGE).
In this case, the shares do not have to be held for at least two years to qualify for the CGE.
Sale of assets
Determine if the purchaser is interested in purchasing the assets or shares of your. If they are interested in purchasing the assets, then you will generally not be eligible to claim the CGE.
As a result, you might be able to negotiate a higher sale price so the after-tax proceeds of an asset sale are similar to a share sale.
Asset sales can be very attractive if the majority of the assets being sold are considered "goodwill."
In this case, only 50 per cent of the gain on the sale of goodwill is taxable in the corporation at active business tax rates and the other 50 per cent gets added to your corporation's capital dividend account (CDA at the end of the corporation's taxation year, and can be paid out to you tax-free as a capital dividend if the CDA is positive after the taxation year in which the disposition occurred.
Sale of shares
If the purchaser is willing to purchase the shares of the business, then ensure that the shares qualify for the CGE. If there are passive assets in the corporation, such that less than 90 per cent of assets are being used in an active business at the time of sale, your qualified tax advisor may have to restructure or "purify" your business assets prior to sale to ensure that the business qualifies for the CGE, but this should ideally be done well before the sale.
This article is not meant to be used as individualized tax or legal advice. Readers should consult their own tax or legal professionals before implementing a strategy.
Mark Ryan is an investment advisor with RBC Wealth Management, Dominion Securities (member CIPF) and can be reached at [email protected] or 250-960-4927.
