Tax Traps & Tips: Why It Pays to Stay "Connected"

The Income Tax Act (ITA) contains a myriad of terms that describe and define the nature of relationships between taxpayers for income tax purposes. Taxpayers can be “connected,” “associated,” “affiliated,” “related,” and/or “not deal[ing] at arm’s-length.” For many accountants, it can be difficult to remember the distinctions between these terms. Unfortunately, failing to remember these distinctions—particularly with regard to the definition of “connected corporations”—can prove costly.

As this article will demonstrate, concluding that two corporations are connected when, in fact, they are not, can result in material adverse income tax consequences.

Shane Onufrechuk, CA, Senior Tax Advisor at Davis LLP authored this article in the June 2010 edition of Beyond Numbers, a publication of the Institute of Chartered Accountants of British Columbia.

To read the entire article, please visit ICABC's website.