David Burnie, a certified financial planner at Ryan Lamontagne Inc. in Ottawa, said tax deferral was the biggest advantage for doctors who use professional corporations.

For example, a doctor who reported all revenue and expenses as an individual could see themselves hit with personal income tax rates in the highest brackets, which would be above 50 per cent in Ontario.

By comparison, an incorporated practice would be taxed at a small-business corporate rate of about 12 per cent in Ontario. A doctor could then take out a small salary or be paid through dividends, either of which would place them in a lower tax bracket.

The excess income could remain in the corporation and be invested, Mr. Burnie said, and withdrawn later, possibly in retirement.

He said the changes to capital-gains taxes would affect physicians when they sell investments held inside the corporation, sell shares of the corporation, or if they sell commercial real estate if the clinic moves locations or winds down upon retirement.

To partly offset this, the government is increasing the lifetime capital-gains exemption on the sale of small-business shares to $1.25-million, up from $1-million. The budget also introduced even more relief for small businesses in some sectors, but it does not apply to professional corporations.

The Globe and Mail - Chris Hannay - April 23, 2024

Link: https://www.theglobeandmail.com/business/article-capital-gains-tax-canadian-medical-association/



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