South West Terminal Ltd. Becoming Public
Sep 28, 2018

If you are an individual owning South West Terminal Ltd. (SWT) shares personally, and not through a corporation or RRSP, there is an opportunity this fall to make use of the capital gain deduction (CGD) before the shares are no longer eligible for the CGD. The CGD allows a taxable capital gain on certain shares to be offset so that the gain is no longer taxable.

The SWT has posted a notice to shareholders, that effective on or after December 31, 2018, they will file an election to be a public corporation. This will then end the eligibility of the shares for the CGD.

SWT shareholders should determine if it would be in their interest to use the CGD before the eligibility period is over. Following are some ways that may work depending on your circumstances:

  1. Selling the shares to outside parties. This however gets rid of the investment and may not be desirable.
  2. Selling the shares to a related person; this could be to a spouse, adult child, or a private corporation you or family members may own. This keeps the investment within the family but allows the CGD to increase the tax cost of the shares which will allow the new owner to use that bumped up tax cost when they sell the shares later.
  3. Gift of the shares to a spouse, the original owner spouse should then elect out of the spousal rollover which triggers the gain and use of the CGD. The spouse getting the shares will then have a bumped-up tax cost, but any future appreciation and any dividends will attribute back to the original owner spouse.
  4. Gift of the shares to other adult family members.

There may be some of the following tax implications of disposing of the shares, whether it be to outside or related parties, especially if you have considerable share value;

  • Alternative Minimum Tax issues;
  • Old Age Security pension clawback issues,
  • Loss of income tested benefits for one year, such as the age credit or Canada Child Benefit;
  • Not able to use the “Allowable Business Investment Losses” in the future.
  • Attribution of income issues if you sell shares to a spouse and they do not pay for the shares, or if they miss interest payments if you financed the sale.

Please contact your trusted Stark & Marsh representative as soon as possible if you would like to explore the options available in your situation and the implications that may result.

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