BUSINESS TRUST

PLANNING OPPORTUNITY

For example, suppose that the taxpayer is a geologist who is an independent consultant working for one major oil company. That individual and his family own less than 10 percent of the issued and outstanding shares of that company and he is therefore not a specified shareholder.

In the past the taxpayer's tax advisor would have been concerned that his consulting company could be construed as a personal services business. If so, then that company does not have the ability to access the small business tax rate and deductions are very limited.

In such a situation, we would recommend that the taxpayer consider reorganizing his affairs so that a new family trust, known as a business trust, is set up to conduct the services with the major oil company. This will allow the family to split income under the strength of the Ferrel decision and the rules under section 120.4. One must remember that any income allocated from the trust to the beneficiaries is income from property and would not be earned income for pension purposes. In addition, liability issues have to be consider because the trustees of the business trust could be responsible for negligent activities of the trust. Professional liability insurance is a must.

For more information on our corporation and our products, please contact:
R. Paul Jacobson, Q.C. Director
The Fiscal Planning Corporation
Suite 2600, 144 - 4th Avenue S.W., Calgary, Alberta, Canada T2P 3N4
Telephone: (403) 210-0278
email: jake@fiscalplanning.com