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 In leveraging over 26 years of public accounting experience, Ralph H Green & Associates are able to offer a diversified range of professional services.
Our firm's primary concentration is taxation advisory services. This section highlights a few diverse tax assignments we have encountered and the solutions provided to meet our client's needs.
Mergers and Acquisitions:
A provincial body was in the process of acquiring a publicly traded company on the Toronto Stock Exchange. The transaction involved a transition from a public to provincially owned entity. There was numerous tax issues involved in this transaction. In particular, the deemed disposition rules and other matters would have significantly increased the acquisition costs.
The transaction was highly confidential and an advance tax ruling had to be obtained in order to proceed with the transaction.
Solution offered:
We were able to develop a unique solution that significantly reduced the cost of the acquisition, however it required an advance tax ruling. Through key contacts with CCRA, we were able to fast track the advance tax ruling. Our contacts assisted in obtaining the information we needed from the Rulings Director in Ottawa.
They provided the initial comfort which allowed the transaction to go forward in the planning stages. [BACK TO TOP]
Shareholders Dispute:
A shareholder dispute between three arms length parties regarding a joint venture operation. The parties could not agree how the operation should be run. As a result of the dispute, it was evident that the company had to be dissolved. The shareholders did not have a tax minimization strategy. The transaction involved a license which had a very short duration. A butterfly reorganization transaction was not possible.
Solution offered:
The solution involved incorporating a new company and transferring the license to the new company at fair market value. The cost of the license could be written off over the term of the license. The license had a very low cost base and the sale was treated as a capital gain. Because of the arms length nature of the contract, the license was written off in the new company at full tax basis. The departing shareholders in the original company had their shares redeemed and a dividend refund was triggered in the company.
The structure of the transaction resulted in a higher after tax return to the departing shareholders and the ability of the continuing shareholders to write off the full cost of the license over a short period of time.
This was a win-win situation for all parties resulting in tax savings in excess of $600,000. [BACK TO TOP]
Estate and Succession Planning:
A family with significant multiple businesses required an estate plan. The shareholders did not know exactly what they wanted. They had sufficient cash and other investment resources and no longer required their business interest for funds to live on.
The shareholders were very concerned about the continuity of the business. Although a successor had not been chosen the shareholders desired a plan with the flexibility to make the decision when the time was appropriate and minimize the associated tax cost.
The investment assets in the company were subject to operating risk. In addition, the multiple businesses had varying degrees of liability issues.
The clients had not used their enhanced capital gains exemption.
Solution offered:
The first step in designing the estate plan was to develop a relationship with the clients and gain an understanding of what they wanted. Experience has reiterated that a trusting relationship is essential in order for clients to share critical information needed for the estate plan. The clients also must divulge their assessments of the abilities of family members for succession planning purposes. This part of the assignment took a significant amount of time and in the end analysis was time well spent.
The businesses had to be restructured in order to be eligible for the enhanced capital gains exemption. The businesses were segregated into various operating units and essentially split off into different companies. The investment assets were moved out of the operating companies into a new holding company. The various companies were frozen with the parents exchanging their common shares for preferred shares. New voting preferred shares were also issued to give the parents voting control in case the preferred shares were redeemed.
A Family Trust was set up which included the father, mother and children as capital and income beneficiaries. The father, mother and an advisor were trustees of the Family Trust. The trust included the provision for replacement trustees such that there would always be three trustees. The Family Trust subscribed to the new common shares in all the various new companies.
The structure allowed the future growth to accrue to the Family Trust. It froze the value of the company at its present value and allowed the parents to crystallize their capital gains exemption. The structure provided flexibility in allocating the future growth of the companies at the discretion of the trustees.
A creditor protection strategy was also needed for the estate plan. Surplus investment assets were moved from the operating companies to an investment holding company. In addition, a portion of the retained earnings of each company was transferred to the holding company via stock dividend in order to move future excess cash flow into the investment holding company. The plan involved having the holding company lend money to the various operating companies on a secured basis.
The estate plan provided a structure to minimize the estate tax, allowed for effective succession planning, the ability for the children to utilize their capital gains exemptions and offered a mechanism to pass the growth on to any family member(s). In conjunction with this assignment the parents wills were also tax planned to include multiple trusts and spousal and tainted spousal trusts.[BACK TO TOP] |
