beyond MD with Dr. Yatin Chadha Ep #98 - Death and Taxes for Incorporated Professionals in Canada - with Mehul Gandhi, CFP, CLU, TEP
Aug 28, 2025
Mehul Gandhi, a Certified Financial Planner and Trust and Estate Practitioner at Westmount Wealth, shares invaluable insights tailored for incorporated small business owners in Canada. He discusses the intricate layers of tax that estates face upon death, emphasizing the importance of proactive strategies like estate freezes and loss carrybacks. Mehul highlights the necessity of keeping wills updated and explores insurance options to tackle illiquidity challenges. His engaging anecdotes illuminate how effective planning can significantly reduce tax burdens and ensure smooth wealth transitions.
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Deemed Disposition Is The Real Estate Tax
- Canada has no estate tax; instead assets are deemed disposed at death and capital gains are taxed on fair market value minus adjusted cost base.
- For corporate owners the deemed disposition often applies to shares with a nominal ACB, creating large taxable gains on death.
Shares' ACB Drives The Big Tax Hit
- When a physician owns shares of a Holdco the ACB of those shares is often nominal, so the deemed disposition can equal the full value of underlying assets.
- That creates a large taxable capital gain on the deceased's shares even though the corporation actually holds the investments.
Liquidity Needs Create Additional Tax Layers
- Executors often need liquidity to pay death-triggered taxes and must extract cash from the corporation, which can trigger additional corporate-level taxes.
- Selling corporate assets to generate cash therefore often creates a second layer of tax and can produce taxable dividends on extraction.