Question

Richard is a major shareholder in a private corporation, holding $10,000 shares currently worth $98 each....

Richard is a major shareholder in a private corporation, holding $10,000 shares currently worth $98 each. His adjusted cost base is $42 each. He expects the shares will continue to increase in value and he is considering an estate freeze to minimize his tax liability when he dies. If no rollover provisions apply, what is his taxable capital gain?

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Answer #1

An estate freeze is a strategy followed by the estate owners to their beneficiaries without tax consequences.

As per Section 86 estate freeze,  the owner freezes his value of shares in fixed-value preference shares.

The company issues new preferred shares to the owner with voting rights. These shares have a fixed redemption value. The owner will be able to redeem these shares at a fixed value and capital gain will be recognized only that point.

Therefore, in the given case the capital gain will arise only when the shares are redeemed.

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