Today, the government announced that it will not be moving ahead with its proposed legislation concerning converting income into capital gains. The draft legislation was originally released in mid-July.
While today's government briefing did not specifically reference the controversial draft section 246.1, it is believed that this section, as well as the drafted expansion rules to section 84.1 of the Income Tax Act, will not be enacted.
This comes as a relief to most practitioners, as these sections were fraught with issues and unintended consequences.
As a result of the announcement today, it appears that:
- "Pipeline" planning is still a viable method to avoid double taxation in situations where "hard" cost base exists; and
- Capital dividends can be paid out of corporations now with no concerns.
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