The Money Scope Podcast

This lively discussion dives into the intricacies of incorporation for medical professionals, emphasizing the right timing and tax efficiency. The hosts tackle the challenge of balancing debt repayment and investments while addressing common misconceptions about corporate compensation. Insights on navigating capital gains tax changes spark further debate about the necessity of incorporation. Alternative investments, especially in real estate, are scrutinized for their complexities. Ultimately, financial independence emerges as a fluid concept, highlighting the essential role of professional planners.

Tune in for a lively discussion from a finance conference, where experts unpack the ins and outs of incorporating as a business owner. Discover the challenges of income smoothing and the myths surrounding incorporation. Learn about optimal compensation strategies and how they can minimize tax liabilities. Engage with topics like tax integration, eligible dividends, and the risks of financial products. With a fun Star Wars theme, expect insights sprinkled with niche references that will keep you entertained and informed!

Understanding the implications of the 2024 Federal Budget and its proposed changes to capital gains taxation is crucial for individuals and corporations alike. In today’s episode, we take a deep dive into the Canadian federal budget for 2024 and its impact on capital gains taxation. In our conversation, we discuss the technical details of capital gains taxation and its historical context and offer practical advice for navigating the proposed changes in the 2024 federal budget. We discuss the increase in the capital gains inclusion rate and how these changes will affect individual investors and corporations. Discover the mechanics of capital gains tax in Canada, essential tax planning strategies, the importance of diversified tax exposure, and the concept of capital gains harvesting. Gain insights into the impact of the changes on the retirement plans of incorporated business owners and professionals, the role of optimal compensation in realizing capital gains, and approaches for navigating the proposed changes. Join us as we delve into the complexity of tax planning for incorporated business owners and the importance of long-term projections, personalized advice, and strategic decision-making for realizing a capital gain. Tune in now! Key Points From This Episode: (0:00:00) Overview of the changes and their relevance for Canadian investors.  (0:07:59) How capital gains tax works in Canada and its impact on taxable income.  (0:13:34) Reasons for the variation of capital gains inclusion rates.  (0:18:18) The differences in tax treatment for individuals versus corporations.  (0:22:41) Capital gains in a CCPC, how it works, and the role of a shareholder.  (0:29:36) Implications of the changes on Alternative Minimum Tax (AMT) in Canada.  (0:37:58) Learn about the ‘breakeven horizon’ and essential capital gain considerations.  (0:46:35) Capital gain harvesting and how optimal compensation ties into it.  (0:58:17) Explore the trade-offs of realizing a large capital gain and tax-reducing strategies.  (1:12:30) Hear case studies that illustrate the application of various tax-reducing strategies.  (1:29:56) Impact of capital gains inclusion rates on retirement planning for CCPCs.  (1:37:36) Final takeaways and tax planning recommendations.    Links From Today’s Episode: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p Dr. Mark Soth (The Loonie Doctor) — https://www.looniedoctor.ca/ Dr. Mark on X — https://x.com/LoonieDoctor Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/  Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Episode 10 & 11: Case Conference — https://moneyscope.ca/2024/04/12/ep-10-11-case-conference-corporate-investing-puzzle-pieces/ Episode 13: Optimal Compensation from a CCPC — https://moneyscope.ca/2024/04/26/episode-13-optimal-compensation-from-a-ccpc/ Rational Reminder: Episode 304 — https://rationalreminder.ca/podcast/304 The Loonie Doctor Calculators — https://www.looniedoctor.ca/canadian-financial-calculators/#tax Realize or Defer Capital Gains Calculator — https://research-tools.pwlcapital.com/research/realize-gain Conquest Planning — https://conquestplanning.com  

Business owners often have reservations about paying into the Canada Pension Plan (CPP). Many think they’re getting a bad deal by paying both the employer and the employee portion of the contribution, but can they do better by paying themselves dividends? In the last two episodes, we did an extensive review of how you can compensate yourself as a business owner through a private corporation. Today, we take a deeper look at two of the payroll expense aspects that often come up in discussions with financial planners: CPP and Employment Insurance (EI). If you are self-employed, there are a few things you need to consider, including your decision to pay yourself a salary or take dividends. We discuss that in this episode, as well as whether self-employed business owners are really getting the short end of the stick when it comes to CPP and EI contributions. Tuning in today, you’ll learn about some of the unique features of CPP, how it’s calculated, and the three major risks it offers protection against, plus we walk you through various models to illustrate the consequences of paying yourself dividends versus salary. We also delve into EI for self-employed business owners, the special benefits thereof, models that consider different amounts of income and consumption, and much more. For a comprehensive guide to CPP and EI for self-employed business owners, don’t miss this episode of Money Scope with Benjamin Felix and Dr. Mark Soth!   Key Points From This Episode: (0:00:20) Reasons that today’s topic on CPP and EI is so complex.  (0:04:04) How CPP is calculated: an overview of what you pay and what you receive.  (0:05:59) Whether or not business owners get a bad deal with CPP.  (0:11:34) Viewing CPP as a tax and when paying dividends versus salary is favourable.  (0:17:33) The unique features and benefits of CPP and the risk protection it offers.  (0:25:15) Assessing the value creation and performance of a pension fund like CPP.  (0:30:42) Crunching numbers to calculate a combined CPP benefit for a household.  (0:33:52) Making the comparison between paying CPP and investing in a corporation.  (0:37:23) Tax planning consequences of paying dividends to avoid paying into CPP.  (0:41:16) Various models to illustrate many of the scenarios we covered in this episode. (0:48:36) Why paying into CPP and dying early results in a bad financial outcome.  (0:51:36) Comparing CPP with other corporate and personal investment options.  (0:59:54) Key takeaways on CPP; a chance to buy into a truly inflation-indexed annuity.  (1:01:48) An overview of employment insurance (EI) for self-employed individuals.  (1:05:38) EI special benefits that self-employed business owners can access.  (1:13:55) Insight into EI for incorporated versus non-incorporated business owners.  (1:23:43) Our post-op debrief of today’s episode on CPP and EI!    Links From Today’s Episode: Dr. Mark Soth (The Loonie Doctor) — looniedoctor.ca Dr. Mark on X — twitter.com/LoonieDoctor Benjamin Felix — pwlcapital.com/author/benjamin-felix  Benjamin on X — twitter.com/benjaminwfelix Benjamin on LinkedIn — inkedin.com/in/benjaminwfelix Aravind Sithamparapillai — ironwoodcanada.com/aravind-sithamparapillai Sebastien Betermier — sbetermier.com   Papers Mentioned: ‘Five Examples of Direct Value Creation and Capture in the Pension Fund Industry’ – papers.ssrn.com/sol3/papers.cfm?abstract_id=4616266

Learn how to create an optimal compensation strategy plan by planning your consumption, utilizing salary dollars wisely, and factoring in Canada Child Benefit clawbacks. Explore the complexities of compensation planning in Canadian Controlled Private Companies (CCPCs) with strategies to minimize tax liabilities and maximize income. Discover the importance of balancing salary and dividends, tax deferral strategies, and the benefits of utilizing notional accounts like the Capital Dividend Account (CDA) for tax advantages.

Explore the complexities of paying yourself as a Canadian business owner through a corporation, including salary vs. dividends, optimizing tax efficiency, navigating tax codes, income splitting, and strategic financial planning for long-term success.

Today’s Case Conference episode is a supplement to Episodes 10 and 11 and uses several case studies to examine key subjects such as corporate bloat, tax-efficient retirement planning for high-income earners, the importance of diversifying your asset allocation, and more. For our first case, we take a step-by-step look at the decision to retain earnings in your corporation, and examine why you need to consider using some of that money for things like your personal RRSP and TFSA accounts. Our second case includes a number of examples. Using multiple simulations, we unpack how you could potentially sabotage the benefits of a corporation by letting its passive assets get too big. To wrap things up, we discuss another common temptation: the urge to transform your corporation into a tax-efficient, eligible dividend-generating powerhouse. We cover a lot in today’s episode, so be sure to tune in for a deep dive on everything from addressing corporate bloat to diversifying asset allocation! Key Points From This Episode: (0:02:16) Our first case study concerning corporations, RRSPs, and TFSAs. (0:08:32) When to use a TFSA and why it will depend on your unique circumstances. (0:11:30) Our second case study on corporate bloat and optimal compensation for tax efficiency.  (0:16:38) Simulations of different combinations of earning and spending using Mark’s optimal corporate compensation algorithm.  (0:19:50) Breaking down tax-efficient retirement planning for high-income earners.  (0:29:06) An example detailing a high earner and their spending, passive income limits, corporate bloat, and tax implications.  (0:35:12) Why it’s so important to be able to measure progress towards your financial goals.  (0:38:12) Strategies for dealing with corporate bloat, tax optimization, and more.  (0:41:41) Our third case study where we examine what happens when you’re overly focused on Canadian dividends and capital gains.  (0:43:43) Why it’s so important to diversify your asset allocation.  (0:50:51) Negotiating fees and how this could be affected by upcoming regulations in 2024.    Links From Today’s Episode: Meet with PWL Capital — https://calendly.com/d/3vm-t2j-h3p Dr. Mark Soth (The Loonie Doctor) — https://www.looniedoctor.ca/ Dr. Mark on X — https://twitter.com/LoonieDoctor Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/  Benjamin on X — https://twitter.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/  

Accountants and financial advisors offer excellent professional support, but it’s also important to keep yourself informed and understand key tax implications when it comes to managing your corporate account. In today’s episode, we take a closer look at the type of information you should arm yourself with to help you optimize your tax planning and manage your corporate investments efficiently. Tuning in, you’ll learn why personal investing can often be surprisingly tax-efficient, why the biggest challenge is moving money out of the corporation into your personal accounts in a tax-efficient way, and why the best way to achieve this is with a CDA. We break down key aspects of tax drag and tax deferral in corporate investments and what you need to know about tax planning for a corporate account. Our conversation also covers how to use ETFs and corporate class funds for tax deferral within a corporation, why spending and giving are important financial skills that you should practice, how to be a good steward of your wealth, plus a whole lot more. For all the important details on tax planning and how to manage your corporate investments, be sure to tune in for this informative conversation!   Key Points From This Episode: (0:01:27) Managing investments with accountants and financial advisors, keeping yourself informed, and the missteps Ben has seen when onboarding new clients. (0:04:21) The major buying power that CDAs represent. (0:05:34) Taxes, investing, and prioritizing a diversified executable investment strategy that suits your goals and risk tolerance. (0:07:43) An overview of tax drag with corporate investing. (0:12:41) The active-passive income limit problem and how to avoid it. (0:14:25) A rundown of corporate tax deferral on investments.  (0:19:42) Relevant details on tax planning for a corporate account.  (0:24:31) Navigating more complex products and strategies, like insurance. (0:34:09) How to use ETFs and corporate class funds for tax deferral within a corporation. (0:41:19) Asset allocation, location, managing risk, and a reminder to be careful that the downsides don’t exceed your tax savings. (0:44:08) Advice for avoiding inefficiencies in corporate investing when you have a high income and don’t spend much personally. (0:46:10) Why spending and giving are important financial skills and why you should prioritize being a good steward of your wealth.   Links From Today’s Episode: Dr. Mark Soth (The Loonie Doctor) — https://www.looniedoctor.ca/ Dr. Mark on X — https://twitter.com/LoonieDoctor Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/  Benjamin on X — https://twitter.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ HXS ETF vs Conventional S&P 500 ETFs in a Corporation HXDM ETF For International Exposure in a Corporate Account HXCN vs ZCN Tax Efficiency in a Private Corporation Corporate Class Bond ETF (HBB) in a Private Corporation  

In today’s episode, we delve into the complex topic of investing in Canadian corporations, something that will be deeply relevant to many of our listeners. Given the intricate interplay of investments and taxes within this context, it's crucial for corporate and business owners to grasp the fundamentals. We start off by unpacking key details of what defines a corporation, the intricacies of taxation for Canadian companies, and the nuances of passive income. Our conversation then goes on to cover tax integration, how to navigate its advantages and disadvantages, and what you can do to ensure that you avoid a large tax bump. We also break down the distinction between notional and real accounts, how they are used, tax deferrals, capital gains, and how to implement good insurance and estate planning. Today’s episode covers a lot and makes for excellent reference material. Tune in today for a comprehensive breakdown of everything you need to know when it comes to investing in Canadian corporations! Key Points From This Episode: (0:01:01) Investing in Canadian corporations and why it’s such a complex subject. (0:03:44) Understanding exactly what a corporation is and what a corporation isn’t. (0:06:06) The main reasons for a separate operating company and a holding company.  (0:08:08) Navigating liability and investment properties as a physician.  (0:11:42) Taxation of active and passive investment income inside of a Canadian Controlled Private Corporation (CCPC).  (0:16:06) What is considered passive income and the nuances within that.  (0:20:50) Tax integration, advantages and disadvantages, and how to avoid a big tax bump.  (0:23:43) Fears around the passive income limit, and why these concerns are overblown. (0:26:23) Taxation of corporate investments and why tax is a secondary consideration.  (0:27:16) A breakdown of notional and real accounts and how they are used.  (0:33:42) Eligible and non-eligible dividends and dividend tax.  (0:43:49) Understanding unfavourable tax integration with foreign dividend income.  (0:49:04) Tax deferral, capital gains, and the most valuable notional account.  (0:54:09) How to implement good insurance and estate planning.  (0:58:48) A review of today’s content and what we’ll be discussing next time.    Links From Today’s Episode: Dr. Mark Soth (The Loonie Doctor) — https://www.looniedoctor.ca/ Dr. Mark on X — https://twitter.com/LoonieDoctor Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/  Benjamin on X — https://twitter.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/  

Delve into tax-efficient investing strategies, the risks of chasing dividends, leveraging home equity for investments, comparing bond tax efficiency, and exploring corporate-class bond ETFs. Learn about the free dividends fallacy, benefits of high dividend yield stocks, and the importance of structuring portfolios with tax implications in mind. Gain insight into leveraging home equity to defer tax, assessing risk profiles, and optimizing investment strategies for a prosperous financial future.