Why should I reconsider reorganizing my corporate structure? (Part 2)
Q: Why should I consider reorganizing my corporate structure? Part II of II
A: Corporations that accumulate excess cash or investments not needed for working capital requirements may not entitle common shareholders to utilize their capital gains exemption if 90% of the fair market value of the company’s assets (including unrealized goodwill) are not used in an active business.
Owners should consider transferring non-business assets on a timely, tax-deferred basis to another corporation. This type of transaction may insulate these assets from the active business operations.
Often, clients are in receipt of an offer from an unrelated party to sell their shares when the shares are not qualifying for the capital gains exemption. The tax-deferred transaction will generally not be effective if it is implemented within two years prior to the sale.
Each beneficiary of a family trust may be entitled to their capital gains exemption. By utilizing a family trust, their available capital gains exemption (maximum $750K) is multiplied by the number of beneficiaries. If structured properly, the trust may not have to own the shares for 24 months for a beneficiary to be eligible for the capital gains exemption.
You should consult with your professional advisor on all related matters