We have updated our section on surplus income in bankruptcy with the new, 2011 Superintendent’s Standards here:
Tag Archive: surplus income
A Corporate Divorce Alternative When the Butterfly Won’t Fly
By Pierre Alary of Gowling Lafleur Henderson LLP
I. Introduction
Sometimes, two is better than one. A company in dire straits can potentially attain success by dividing itself into two separate entities. Whether the issues plaguing the company are financial or philosophical in nature, a separation of the business should be considered by corporations and practitioners alike. In addition to making good business sense, a divisive reorganization, or “corporate divorce”, can be structured to benefit both parties from a tax perspective. In other words, a corporate divorce does not need to be a painful experience. This article will conduct a brief overview of the well-known butterfly transactions, but will primarily focus on an alternative method, the “McMullen Method”, which was approved by the Tax Court of Canada in recent years.
ITA Section 84.1 still a trap for the unwary: Emory v the Queen, 2010 TCC 71
By Jennifer Smith, Ernst & Young LLP, Ottawa
In a clear and concise judgment, the Tax Court of Canada applied section 84.1 of the Income Tax Act (ITA) to a disposition of shares by the taxpayer, resulting in a taxable dividend of $400,000 instead of a capital gain eligible for the capital gains exemption. Although Justice Judith Woods agreed with the taxpayer’s counsel that section 84.1 is a “trap for the unwary” and appeared to have some sympathy for the taxpayer’s position, she nevertheless felt bound to apply the clear wording of the provision.
The 2010 Superintendent’s Standards for Surplus Income are here!
I have now posted the newly released Superintendent’s Standards for surplus income for 2010. I have also updated the Sample Surplus Income Calculation.
The Superintendent’s standards are derived from the Low Income Cutoffs (LICO) released by Statistics Canada. The Superintendent of Bankruptcy uses the before-tax LICO for urban areas with 500 000 people or more.The 2010 standards are updated by adding to the 2008 LICO the 2009 Consumer Price Index (CPI) of 0.26 percent, plus a 1.7 percent adjustment reflecting the 2010 CPI expectation. Because the actual and expected changes in CPI are currently so low, there has been very little change in this year’s standards.
New Sample Calculation of Surplus Income
The most frequent question asked on this site is, “How much is my surplus income requirement?” (Surplus income is the amount of monthly income that a bankrupt must share with his creditors during the period of bankruptcy.) I have now provided a sample calculation of surplus income, with a downloadable spreadsheet that can be modified for specific cases. See Surplus Income under the Bankruptcy Rules menu item above for more information.
Your firm’s guide to dealing with consumer debt
We have published our version of the booklet, Dealing with Debt – A Consumer’s Guide, originally published by the Office of the Superintendent of Bankrupty, Industry Canada. We have also made available a Word version of the booklet that is suitable for customization by your firm for use with clients who face insolvency. If you need help with customizing the booklet or with producing a .pdf version, please contact us.
How Canadian bankruptcy laws recently changed
I’ve noticed that some practitioners hold outdated beliefs about bankrutpcy and insolvency. My first step in trying to change this is to provide details of new rules that came into force September 18, 2009.
