1. CORPORATE CLIENTS – THE POWER OF 5
Michelle Connolly
Vice President, Wealth Planning, CI Investments

2. CORPORATE CLIENTS/PROSPECTS – THE POWER OF 5
5 minutes – capture attention regarding your value 5 key tax concepts – understand 5 questions – value of wealth planning

3. CORPORATE CLIENTS/PROSPECTS – THE POWER OF 5
5 minutes – capture attention regarding your value

4. CAPTURE ATTENTION IN 5 MINUTES
Can you claim the Lifetime Capital Gains Exemption when you sell your shares?
Does your current corporate structure maximize income splitting opportunities?
Has your tax advisor discussed creative tax strategies available to your corporation?
Have you implemented flexibility and maximized control over retirement income flows?
When do you think you will be financially and emotionally ready to retire?
What is your overall, average tax rate?
Are you a tax-efficient investor?
When was the last time you were asked about your wills or succession plan?
Today’s Wealth Planners have to ask a lot more questions, and be comfortable in dealing with individual, trust and corporate planning situations 4 4

5. CAPTURE ATTENTION IN 5 MINUTES
High-net-worth investor concerns
89% concerned about losing their wealth
85% concerned about tax mitigation
79.2% taking care of heirs
71.5% having enough money in retirement
Financial analysis
Risk
mgmt
Tax planning
Wealth
transfer
Wealth planning
Source: Building a World Class Experience for Affluent Clients, CEG Worldwide, Morgan Stanley Smith Barney Institute, 2009 5 5

6. CAPTURE ATTENTION IN 5 MINUTES
90% of business owners state proceeds from sale will be very important for the financing of retirement
52% of business owners do not have any succession plan
40% of business owners do not have an estate plan in place
Financial analysis
Risk
mgmt
Tax planning
Wealth
transfer
Wealth planning
Source: RBC Wealth Management, HNW Inc, CIFP 6 6

7. CORPORATE CLIENTS/PROSPECTS – THE POWER OF 5
5 key tax concepts - understand

8. 5 KEY TAX CONCEPTS 1
Selling a small business or an incorporated practice does not guarantee $750,000 in tax-free capital gains 8 8

9. 5 KEY TAX CONCEPTS – CAPITAL GAINS EXEMPTION
$2M offer for hotel building, equipment and furniture 9

10. 5 KEY TAX CONCEPTS – CAPITAL GAINS EXEMPTION
Is it an asset or share sale?
$2M offer for hotel building, equipment and furniture X
CGE is only available on certain qualified property, namely:
Canadian controlled small business corporation shares
Qualified farm property
Qualified fishing property 10

11. 5 KEY TAX CONCEPTS – CAPITAL GAINS EXEMPTION
Mr. A
Mrs. A
50%
50%
Holdco
FMV $1.5M passive investment assets
$2M offer for Opco
100%
Opco
FMV $2M active business operation assets 11

12. 5 KEY TAX CONCEPTS – CAPITAL GAINS EXEMPTION
Only individual taxpayers, or individual beneficiaries of a trust, can claim the CGE
Mr. A
Mrs. A X
50%
50%
Holdco
FMV $1.5M passive investment assets
$2M offer for Opco
100%
Opco
FMV $2M active business 12

13. 5 KEY TAX CONCEPTS – CAPITAL GAINS EXEMPTION
Shares must be QSBC shares and the following tests are applied:
Length of ownership test: shares owned by taxpayer for 24 months;
24 month asset test: 50%+ assets used in active business; AND
Moment of disposition test: 90%+ assets used in active business
Consider:
Corporation may need to be purified and/or structure modified
Good rule of thumb is 24 month lead time in planning for sale
Keep in mind:
Feb 22, 1994 elimination of $100,000 general capital gains exemption – many individuals elected to use
Timing: ensure current year capital losses don’t grind down capital gain eligible for CGE treatment
2013 Federal Budget: 2014 $800K, indexed thereafter
Client CNIL balance and ABIL claimed in prior years? 13

14. Incorporate a holdco for investments?
5 KEY TAX CONCEPTS 2
Should your client:
Incorporate?
Incorporate a holdco for investments?
Set up a separate corporation for each business interest or investment account? 14 14

15. 5 KEY TAX CONCEPTS – PSB, SIB AND ASSOCIATION
Personal Services Business
Business providing services where the incorporated “employee” would reasonably be regarded as an officer or employee of the entity to which services are provided. But does not include a business … where more than five full-time employees
Consider employee versus self-employed/independent contractor tests
Specified Investment Business
The principal purpose of which is to derive income from property – including interest, dividends, rents or royalties, but does not include a business … where more than five full-time employees
Association
In order to employ multiple Small Business Deductions, two or more CCPCs must not be associated
The associated corporation rules are complex, but generally two or more corporations are “associated” if one corporation controls the other, or if they are directly or indirectly controlled by the same person, group of persons, or related groups of persons 15

16. Corporate Tax Accounts –
5 KEY TAX CONCEPTS 3
Corporate Tax Accounts –
What do you need to know? 16 16

17. 5 KEY TAX CONCEPTS – RDTOH ACCOUNT
RDTOH – Refundable Dividend Tax on Hand Account
Refundable Portion of Part I tax assessed on investment income (26.67% Cdn/15.25% Foreign)
Part IV tax on Canadian Dividends received (33.33%)
Dividend Refund
$1 from RDTOH for every $3 of taxable dividends paid.
All taxable dividends paid by a CCPC generate a dividend refund to the extent RDTOH exists 17

18. 5 KEY TAX CONCEPTS – CDA ACCOUNT
The CDA of a CCPC tracks certain non-taxable amounts received by a corporation that can be distributed on a tax-free basis to Canadian resident shareholders of the CCPC. From a time perspective – calculated on a cumulative basis.
Capital
Dividend
Account
“CDA”
Non-taxable
portion of net
capital gains
PLUS:
Capital
Dividends
received
PLUS:
Non-taxable
portion of gains
on eligible
capital property
PLUS:
Proceeds of a
life insurance policy
(less ACB)
LESS:
Capital
Dividends
paid 18

19. What is your clients overall,
5 KEY TAX CONCEPTS 4
What is your clients overall,
average tax rate? 19 19

20. 5 KEY TAX CONCEPTS – OVERALL TAX RATE
Corporation – T2
Individual shareholders – T1
Salary, dividends,
capital gains
How can funds be extracted from the corporation?
What is tax impact to corporation?
Shareholder needs $X after-tax from corporation to support lifestyle needs now and in retirement
Plan - to maximize tax efficiencies, flexibility and planning opportunities. Tax and financial analysis will naturally tie together and highlight investment considerations. How do you minimize total taxes paid given shareholder lifestyle needs? 20

21. 5 KEY TAX CONCEPTS – OVERALL TAX RATE
How would $250,000 in earnings be taxed?
Personally $ 95,800 (38.3%)
Opco/Profcorp $ 38,750 (13.0%)
However, keep in mind have to get money from corporation out to the shareholder to support lifestyle needs – how achieve?
Assume client requires $100,000 for lifestyle needs:
How much taxes are paid?
How much excess funds are left to invest?

22. 5 KEY TAX CONCEPTS – OVERALL TAX RATE

23. 5 KEY TAX CONCEPTS 5
How can a corporation be used to generate a flexible, tax-efficient, self-directed retirement? 23 23

24. 5 KEY TAX CONCEPTS – FUNDING RETIREMENT
15-20 years ago – RRSPs/RRIFs, IPPs, and RCAs
10-15 years – provincial professional regulatory bodies allow incorporation
Finance in the last three years addressed - IPPs (2011 budget), EPSPs and RCAs (2012 budget), RCAs (50% refundable tax)
Today – maybe RRSPs/RRIFs, TFSAs, opco sale proceeds, holdco dividends and share redemptions
Plan - to maximize tax efficiencies, flexibility, provide control and planning opportunities. Tax and financial analysis naturally tie together and highlight structure and investment considerations

25. CORPORATE CLIENTS/PROSPECTS – THE POWER OF 5
5 questions – value of wealth planning

26. 5 QUESTIONS – VALUE OF WEALTH PLANNING1
When was the last time your tax, legal or financial advisor asked about your business, succession or estate plans? 26 26

27. 5 QUESTIONS – VALUE OF WEALTH PLANNING
Business plan
At what stage in the corporate life cycle?
Organization chart – does voting control lie with management?
Contingency Planning
Succession/estate plan
Who? How? When?
Shareholders Agreement? If yes, when was the last time it was reviewed and compared against the wills of the shareholders?
When was the last time provisions in will were reviewed and distributions mapped out to beneficiaries? Would actual distributions match intentions?

28. What purpose does the corporation or structure serve?
5 QUESTIONS – VALUE OF WEALTH PLANNING 2
What purpose does the corporation or structure serve? 28 28

29. 5 QUESTIONS – PURPOSE OF…
Opco
Liability or creditor protection
Tax savings and deferral opportunities
Means to maximize/monetize the value of the business operations
Income splitting opportunities/flexibility for compensation
Means to facilitate wealth transfer plans
Holdco
Further means of protection
Implement an estate freeze
Means to purify opco
Trust
Implement flexibility over cash/income flows
Set up direct vs. indirect ownership of shares
Maintain an element of control over opco
Multiply access to CGE
Liability protection
Corporate structure extends a measure of protection to other personal assets of shareholders in the circumstance of a lawsuit
Only the assets of the corporation are at risk
For an incorporated professional – have to look to provincial regulatory guidelines regarding malpractice and the protection provided by the professional corporation
Creditor protection
Corporate structure provides protection against trade creditors in situation of insolvency/bankruptcy
Often over-rated as most times owner has to co-sign or provide personal guarantees for non-trade creditors

30. 5 QUESTIONS – TAX MINIMIZATION
Average top marginal personal tax rate (July 1, 2013) – 44.87%
Average active business corporate tax rate (July 1, 2013) – 14.6%
Tax savings – reduced tax rate, pay less tax
With Small Business Deduction – first $500K is taxed at lower, flat rate
$500K personal versus $500K corporate and dividends paid out – depends upon the province
Non-deductible expenses (life insurance, automobile, meals and entertainment, capital costs) funded with cheaper dollars
Tax deferral – pay tax later, perhaps at reduced tax rate
Surplus, after-tax dollars should remain in corporation to be invested – more investment capital
Why generate income, unless needed to support lifestyle?

31. 5 QUESTIONS – INCOME SPLITTING
Corporations and/or trusts provide flexibility for compensation and income splitting opportunities that does not exist for a sole proprietor
Does shareholder support family members with after-tax funds? Find out “how, what and who” shareholder is spending funds on
Potential to access $750K+ Lifetime Capital Gains Exemption, and multiplication of access to
Individual
Trust
Dividends/CGE
Dividends/CGE
Dividends/CGE
Corporation
Corporation
Beneficiaries 31

32. 5 QUESTIONS – FACILITATE WEALTH TRANSFER
Succession planning
Funding retirement, as opposed to RRSP
Valuation of business
Monetization of goodwill
Implement control
Estate planning
Family members – who, age, in/dependent, residence, marital status
Easier to implement at various stages with corporation or trust than a simple will concerning a proprietorship
Multiple will strategy – depends upon the province 32

33. 5 QUESTIONS – VALUE OF WEALTH PLANNING3
What if? 33 33

34. 5 QUESTIONS – WHAT IF?
If business owner or professional is injured and/or cannot manage the business or practice? Is there:
Sufficient funds to keep the company running smoothly or provide for their, and their family’s, continued financial well being?
A POA (or similar instrument) in place? Does the designated attorney have the business acumen to maintain ongoing operations and protect corporate value? Is key management or appropriate staff in place?
A Shareholders’ Agreement in existence outlining steps to be taken?
What happens upon the death of the business owner or practitioner?
How will the tax liability be financed? Is there liquidity in the estate to pay terminal tax liability or adequate insurance?
Does the current will reflect intentions? Does the designated executor (or similar) have the business acumen to maintain ongoing operations and protect corporate value?
Is there a Shareholders’ Agreement in existence with a buy-out provision? Adequate financing to execute buy-out?
Does current will concur with the Shareholders’ Agreement?

35. 5 QUESTIONS – VALUE OF WEALTH PLANNING4
Have you heard of tax-efficient investing? 35 35

36. 5 QUESTIONS – TAX-EFFICIENT INVESTING
Cash flow – generating flexible cash flow streams while mitigating associated tax liability. Income – is investment income needed to support lifestyle needs? Flexibility over when reported and type, and tax rate on income. Growth – minimizing distributions/income to facilitate compound growth on account of capital. What is the most tax efficient source of income? Maintenance of portfolio allocation – making strategic or tactical shifts in portfolio – does tax impact client’s decision? Aim is to maximize after-tax rate of return and consider any value-add components 36 36

37. 5 QUESTIONS – VALUE OF WEALTH PLANNING
Do you have philanthropic intentions? 37 37

38. 5 QUESTIONS – PHILANTHROPIC INTENTIONS
Philanthropy by design, as opposed to philanthropy by default
Planning is key…
Maximize benefit of $X, or $X donation for minimum dollars
Corporate deduction versus personal tax credit
Cash versus donation in kind
Now versus later

39. 5 QUESTIONS – PHILANTHROPIC INTENTIONS

40. 5 QUESTIONS – PHILANTHROPIC INTENTIONS

41. IN FINAL… THE POWER OF 5
Working with business owners and incorporated professionals, you should:
Inquire, pique their interest and relate possible planning opportunities or touch on potential deficiencies you have encountered in similar situations.
Ask what their overall, average tax rate is for their corporation and personally over the last two years.
Talk to strategies available to business owners and incorporated professionals in relation to investment capital, funding retirement and wealth transfer.
Combine forces and promote collaborative approach amongst business owner, wealth advisor, tax advisor and legal advisor.
KNOW YOUR VALUE – DO NOT NECESSARILY HAVE TO BE AN EXPERT, OR HAVE THE SOLUTION, BUT CAN FACILITATE AND MOTIVATE ACTION 5

42. Thank You FOR ADVISOR USE ONLY
This information is provided solely for informational and educational purposes and is not intended to provide, and should not be construed as providing individual financial, investment, tax, legal or accounting advice. Professional advisors should be consulted prior to acting on the basis of the information contained in this publication.
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