I don’t really believe in good or bad luck. I like the words of the late business management expert Eliyahu Goldratt when he said: “Good luck is when opportunity meets preparation, while bad luck is when lack of preparation meets reality.”
Today, I want talk about a problem that the majority of Canadians who own holding companies, and their executors, will face. If you understand the problem, you can take steps to fix it.Thousands of Canadians own holding companies with assets of meaningful value. These companies might hold cash, marketable securities, real estate, or just about anything else. If you’re one of these folks, you might have ended up with your holding company because you own – or used to own – an active business.
But the taxes aren’t done. Not only will you pay tax on any capital gain on your holding company shares when you die, but there will be tax to pay by the corporation itself when it sells those assets that have been appreciating in value. That’s two levels of tax on the same growth. Further, if the assets in the corporation are sold and the funds are then distributed out to the shareholders, there’s a third level of tax paid on the taxable dividend in this situation.