Reference no: EM131934013

Sale of SL shares

Yesterday, Mike offered to purchase the 4,000 shares of SL owned by David, the triplets and Yona for $1 million. $1 million is the FMV of the 4,000 shares at the current time because the value of the company has recently increased to $2.5 million. Mike may purchase the shares personally or have his 100% owned holding company, Mike Ltd. (ML) purchase the shares (because the holding company has quite a lot of cash). Alternatively, he is willing to have SL redeem the shares. Mike wants to own 100% of the SL shares because a public company is interested in buying the shares in the near future and he thinks it will be simpler to have fewer sellers sell all the SL shares to the public company. The FMV of SL is not expected to change between now and the date of sale to the public company.

David, the triplets and Yona are happy to sell for the FMV price that Mike has offered (or even less) either to Mike, ML, SL (ie., have SL redeem the shares) or to the public company. David understands the legal differences between each of the alternative transactions but wonders what the best way of structuring the sale is for tax purposes because he doesn't understand the tax implications. He would like to see calculations of the taxable income for each of his family members in the year of sale for each alternative. This sale will probably happen sometime later in 2018 or 2019.

Complicating matters is the fact that Mike is seriously thinking about leaving Canada and moving to Florida for at least 10 years. Last week, he bought a condo in Miami for $1 M because he would like to spend the remainder of the winter there in 2018, come back to Canada for the summer and fall and then move to Florida permanently sometime in 2018 or 2019.

Mike wants to save tax when he sells SL to the public company and wants to know whether he should sell the SL shares before or after he moves to Florida.

He also wants to know whether he has to (or should) sell everything to cease to be a Canadian resident for tax purposes. He knows the withholding tax rules for his RRIF, RPP, CPP and OAS but is not too clear on the other rules. Mike was born in Canada and has always been a Canadian resident.

Need good explanations for this because other clients will be asking me similar questions.

Just do Issue - Sale of SL shares

Attachment:- Assignment.rar