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, employees 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.

The focus of this course will be on transactions between Canadian private business owners and/or their privately-held corporations, as well as issues arising from their purchasing from or selling to family members, public corporations, and non-residents. Following introductory comments on commercial and tax due diligence issues, the course offers a discussion of technical and practical content on relevant rules, anti-avoidance measures, planning opportunities, and updates from the government and the courts in the context of commonly used transaction structures and business vehicles. In particular, the course will explore separate and comparative material on “share transactions” vs. “asset transactions,” along with a presentation of issues common to both. 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 government assistance and other consequences
  • Personal & corporate income tax rates and integration
• Share Transactions
  • Purchaser – determination and tax treatment of purchase price, 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 (including the “Canadian Entrepreneur’s Incentive”) and deferrals/rollovers (including the “eligible small business corporation” share exchange), pre-sale planning including s. 55, and dealing with non-residents and public corporations
• Asset Transactions
  • 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
  • Application of and recent exceptions to the anti-avoidance rule of s. 84.1 
  • Application of exceptions to the anti-avoidance rules of S. 55 
• Other Issues
  • Restrictive covenants - S. 68
  • Interest expense
  • “Excessive Interest & 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 (“EOT’s”)
  • 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
• Participate meaningfully in negotiations on behalf of buyers or sellers in negotiating tax-consideration-driven transaction structuring and assessing the impact on income 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 wanting technical and practical knowledge and updates in taxation issues relevant to the purchase and sale of a business in Canada, and opportunities to discuss this with an experienced practitioner.