Corporate Tax - Purchase and Sale of a Business

Overview:

Merger and acquisition activity in Canada continues to thrive, notwithstanding profound environmental changes. The process of buying or selling a business in Canada, or transitioning it to one’s children or other successors, can constitute one of the most exciting yet stressful times in the lives of entrepreneurs, their key executives, members of their families, and their professional advisors. The purpose of this course is to alleviate some of the stress by providing an understanding and update of Canadian income tax issues for purchasers and vendors of businesses in Canada and their professional tax advisors.

This course offers practitioners, business owners, and other tax professionals relevant technical and practical knowledge of important income tax considerations for when it is time to buy, sell, or undertake an intergenerational transfer of a private Canadian business. 

This course will focus on transactions between Canadian private business owners and/or their privately-held corporations and issues arising from their dealing with family members, public corporations, and non-residents. Following introductory comments on commercial and tax due diligence issues, a discussion of technical and practical content on relevant rules, anti-avoidance measures, planning opportunities, and updates from the government and the courts will be offered in the context of commonly used transaction structures and business vehicles. In particular, the course will explore separate and comparative material on “share deals” vs. “asset deals,” along with a presentation of issues common to both kinds of deals. Several hypothetical case studies will be reviewed to illustrate major concepts.

Course Content:

In this course, you will gain knowledge about the following topics:

• Commercial factors
  • Motivations to sell/acquire
  • Identifying interested/relevant parties
  • Valuation
  • Financing
  • Role of Tax Professionals
  • Buying/selling assets vs. shares
  • Impact of pandemic-related government assistance and other consequences
  • Personal and corporate income tax rates and integration
• Share Deals
  • Purchaser – determination and tax treatment of purchase price, the tax impact on acquired corporation, acquisition of control, asset basis bump, and dealing with non-residents and public corporations
  • Vendor – determination and tax treatment of gain / loss on sale, capital gains deduction and deferrals / rollovers, pre-sale planning including s. 55, and dealing with non-residents and public corporations
• Asset Deals
  • Accounts receivables
  • Inventory
  • Capital assets including depreciable property, goodwill / intangibles, and real estate
  • Dealing with Non-residents
  • Allocation of the sale/purchase price among assets
  • Tax status of vendors and purchasers
  • Contingent liabilities
  • Hybrid transaction example
• Intra-family and intergenerational transfers
  • Related and affiliated persons
  • Not dealing at arm’s length
  • Price adjustment clauses
  • The capital gains exemption and application of s. 84.1
  • Application of S. 55
• Other Issues
  • Restrictive covenants - S. 68
  • Interest expense
  • "Excessive Interest and Financing Expense" Limitations (EIFEL)
  • Mandatory Disclosure Rules and the GAAR
  • Vendor take-back financing
  • Earnouts
  • Retiring allowances and IPP’s
  • Employee share options
  • Employee ownership trusts
  • Post-transaction Tax-On-Split-Income ("TOSI") considerations
  • GST / PST

Learning Objectives:

Upon completing this course, you should be able to:

• Identify and act on opportunities to be of service to their clients / employers as potential private purchasers and vendors of businesses in Canada, in a manner that is consistent with codes of ethical business culture and professional independence/conflict of interest
• Comprehend, explain, and act on key income tax concepts that are most relevant to purchasers and vendors of businesses in Canada prior to a proposed transaction, at the time of the transaction, and at times subsequent to the transaction
• Participate meaningfully in negotiations on behalf of buyers or sellers in negotiating tax-consideration-driven transaction structure and assessing the impact on taxes to both sides
• Identify and assist with related tax compliance obligations
• Identify, assess, and address both pitfalls and situations that offer opportunities for tax savings
• Apply the most important recent legislative and interpretive changes to the rules in delivering planning and other advice and related compliance services

Who Will Benefit: 

Practitioners, industry members, and owners / key executives in privately owned Canadian businesses, who are tax professionals and who want technical and practical knowledge and updates in taxation issues relevant to the purchase and sale of a business in Canada.