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Generosity
Education
Tim Kirby, CFA
ASK THE EXPERT
Charitable giving can benefit
your business and the causes
you care about
By TIM KIRBY
AS A BUSINESS owner, finding ways to reduce your tax
liability while contributing to causes that matter can
be a powerful combination. Charitable giving can play
an important role in achieving tax goals, but, as with all
things tax related, there are complexities to navigate
and pitfalls to avoid. Speaking with a tax advisor is
crucial to developing a strategy that maximizes benefits
for your business and the community. Here, I’ll answer
some common questions about how charitable giving
can help businesses with their tax strategies.
EDMONTON COMMUNITY FOUNDATION (ECF): What are
some examples of business situations that can trigger
tax implications?
TIM KIRBY (TK): Selling a business or capital assets,
receiving a large bonus, or corporate restructuring all
have tax implications. These events often trigger capital
gains taxes, income taxes or other tax liabilities. As a
business owner, you need to plan in advance how to
handle these to ensure your financial obligations don’t
hinder future growth or personal finances.
ECF: What are the biggest considerations when dealing
with these tax scenarios?
TK: You must understand the full scope of potential tax
liabilities and how these events impact short-term and
long-term finances. You’ll also need to evaluate how
various tax-planning strategies, including charitable
donations, can mitigate these liabilities. It’s important
to consider how tax implications align with your overall
business and personal goals, such as retirement planning or
future investments.
ECF: How can charitable giving help to offset these tax events?
TK: Charitable giving can reduce taxable income through
deductions and credits, which in turn can lower the tax
burden in specific situations, such as the sale of a business
or realizing a significant capital gains on the disposition of
capital assets such as stocks, bonds or vacation properties.
By donating to registered charities, businesses can reduce
their taxable income while supporting causes they care
about. Certain types of corporate income tax are refundable,
and a donation strategy can benefit the donor by triggering
a tax refund while furthering the corporation’s philanthropic
objectives. A well-structured charitable giving strategy can
be a win-win for the business and the community.
ECF: Who would you recommend having these
conversations with?
TK: It’s essential to consult with a qualified tax advisor
and a financial planner who can guide your business
through tax strategy decisions. A charitable giving advisor
or representative from a charity can help align your
philanthropic goals with the best tax strategies. Collaborating
with professionals who understand the full spectrum of your
personal and business financial and charitable objectives is
crucial to maximizing charitable, business and tax benefits.
ECF: Why is it important to receive assistance from someone
who can speak about the benefits of selling a business, and
the unexpected consequences from the sale?
TK: Selling a business can trigger unforeseen consequences,
such as capital gains taxes or changes in business structure
that might impact your personal finances. Understanding
the after-tax bottom line following a sale is more important
than focusing on the top-line sale price. Having a team of
professionals to help navigate the benefits and potential
drawbacks of the sale ensures that you can make financially
sound decisions aligned with your long-term objectives. Tax
and donation planning can often bridge valuation gaps on
proposed sale transactions.
Tim Kirby is a Partner at Felesky Flynn LLP and specializes
in estate and succession planning, corporate and personal
tax planning, and mergers and acquisitions. He is recognized
as a leading tax lawyer by The Best Lawyers in Canada™ and
is ranked as a featured Leading Lawyer in Corporate Tax,
Finance and M&A, and Estate & Personal Tax Planning –
Estate & Tax Planning by Canadian Lexpert®.
ecf.ca
ecf.ca
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