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Insights into the Proposed Capital Gains Tax Increase and its Implications for Estate and Succession Planning

Apr 16, 2024

Arguably the single measure within the federal government’s 2024 budget introduced to the House of Commons on April 16th was that which was related to the proposed changes to the taxation of capital gains.  Presently one-half of capital gains are subject to taxation, irrespective of whether the entity reporting the gain is a corporation, trust or an individual.  The budget proposes to increase that rate of income inclusion to two-thirds[1].  While this proposed change may have caught many by surprise, the reality is that for many years the tax community has been warning of an increase and indeed those warnings led to significant end-of-year tax planning activities to mitigate the risk which, until now, failed to come to pass.

Changes in tax laws can be an opportunity to review your  tax planning strategies. However, income taxes are just one input to broader estate and succession planning.  Such planning should be viewed as an activity that occurs with a consistent cadence and  is viewed as a living process, that needs attention and intention. 

Just as a change in personal circumstances such as the birth or death in the family or transition of shares to the next generation will precipitate a reconsideration of an existing plan, a change in prevailing tax legislation should similarly be viewed as an opportunity to reach out to your professional advisors to determine whether your planning needs to be revisited. 

Change is inevitable, and estate and succession planning is a long game strategy.

For more insights from the Trella team, click here.

[1] Putting this into an historical context, the inclusion rate for capital gains was increased from one-half to two-thirds in 1988, further increased to three-quarters in 1990, then reduced to one-half once again in 2000.  So the current rule change is arguably an example of what’s old is new again.

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