As every reader will surely recall, the federal government issued a number of tax proposals for private corporations last summer. The government ultimately abandoned or replaced all of them, except for new rules that address so-called “income splitting.” Those rules, now in force, are extraordinarily complex and will impose a heavy compliance burden on small business. The rules should be set aside.
Income splitting involves diverting dividend income (and certain other types of income) from one family member to another member in a lower tax bracket. The planning is disarmingly simple.
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