Weekly Tax Tips
Corporate Group Loss Utilization
6 Aug 2009
Where you have more than one corporation, you may find that you have income in one corporation and losses in another (or property with an accrued gain in one corporation and property with an accrued loss in another). If this is the case, there are a number of strategies to consider, including:
- Merge the corporations – It may be possible to merge one or more corporations together so that income and losses (or capital gains and capital losses) are offset directly.
- Review intercorporate interest and expense charges – Subject to reasonability, it may be possible to adjust intercorporate charges so that income is increased for corporations with unapplied losses.
- Transfer a gain property to a loss corporation before a sale – Depending on the circumstances, it may be possible to transfer a property with an accrued gain to a corporation with unapplied losses prior to a sale. This could allow the loss corporation to use its losses to offset the gain.
- Loan funds to loss corporations without interest – Where a corporation has losses, an interest-free loan to that corporation will enhance its ability to generate income.
Contact your BDO advisor to discuss which planning ideas will be beneficial for you.
This tax tip is a publication of BDO Dunwoody LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of 6 Aug 2009.
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