COMMERCE 4SC3 Lecture Notes - Lecture 9: Tax Bracket, Financial Statement
14 Mar 2019
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Cannot sell corporation shares, want to retire. If bob could sell shares of his company, need to determine if they"re qsbs (holding test, 50% test, 90% test) and you qualify for capital gain deduction. Flip side is that you cannot sell shares you start liquidating corporation assets because i want to retire. Will sell receivables, liquidate inventory, sell pp&e, sell customer lists/goodwill. Part of money will pay mortgage, pay off a/p, trigger tax liability because of capital gains, recapture, etc. After all this, end up with company that looks like this: 1,999,999: one option is take all money out of company. One issue with this is that part of the r/e could constitute a non-taxable dividend (i. e. dividend paid out of capital dividend account). A big chunk of it could be taxable dividend which will push you into high-tax bracket and you end up paying higher tax today.
