Tuesday, September 12, 2017

Justin Trudeau and Bill Morneau - A Lesson In Using Private Corporations as a Tax Strategy

With Canadian private corporation owners about to experience a major change in how they are taxed, I wanted to take a look at how Mr. Trudeau and Mr. Morneau have availed themselves of the current tax landscape.  Fortunately for us all, the Office of the Conflict of Interest and Ethics Commissioner has a website which contains a searchable database which lists the public declarations from all MPs, right up to the Prime Minister, the man in charge of the government that is about to make these changes.  With that in mind, let's take a look at the declarations for the two gentlemen responsible for one of the most significant changes in the Canadian personal tax landscape since the early 1970s.

1.) Private Corporation - dividends were paid from 7664669 Canada Incorporated which holds a significant interest in 176078 Canada Incorporated.  Earlier declarations (February 4, 2014) show that this company owns publicly traded securities and that 3323561 Canada Inc. was an affiliated corporation.

Shares of 7664699 Canada Inc. are currently in a blind trust.

2.) Private Corporation - joint ownership in 9190-0563 Quebec Incorporated

In previous public declarations, particularly the one dated September 21, 2009, we get more information on Mr. Trudeau's assets:

1.) Co-owner of a residential property in Montreal, Quebec

2.) Other sources of income included employment income with JPJT Canada Inc. (a company at which Mr. Trudeau is President - company offers public speaking services).

3.) Co-owner and Vice President of 90562 Canada Limited which owns investments and pays Mr. Trudeau dividends.  This is the company that held Pierre Trudeau's portfolio of securities which were inherited by his sons upon his death.  The company pays out dividends to both heirs.

4.) Co-beneficiary and Board Member of the Pierre Elliot Trudeau Trust.

From what I can see, from his public declarations, Mr. Trudeau has at least 6 private corporations, some of which are affiliated with others and some of which pay Mr. Trudeau dividends, a preferred method for removing assets from a private corporation from a tax perspective.  From information released during the 2015 election, Mr. Trudeau's inheritance was worth about $1.2 million in 2015 and his public speaking business, JPJT Canada Inc. earned him more than $450,000 in its best year.

1.) Beneficiary of the Nancy McCain 2013 Family Trust which owns interests in NCM Holdings Inc, an investment holding company which holds a nominal interest in White Marsh Holding Company Inc.  (note - Nancy McCain is Bill Morneau's spouse and one of the heirs to the McCain family fortune).  Nancy McCain is President and Director of NCM Holdings Inc.

2.) Employment income including dividends, interest and capital gains from investments from 1193536 Alberta Limited

3.) Joint ownership with 4 siblings of 2254165 Ontario Inc., a real estate holding company located in Toronto, Ontario

4.) Sole ownership of 2070689 Ontario Limited a holding company located in Toronto, Ontario

5.) Joint ownership with 4 siblings of 1446977 Ontario Inc., a real estate holding company located in Toronto, Ontario

6.) Joint ownership with 4 siblings of 2135042 Ontario Inc., a real estate holding company located in Toronto, Ontario

7). Joint ownership with 4 siblings of 2135041 Ontario Inc., a real estate holding company located in Toronto, Ontario

8.) Joint ownership with 2070689 Ontario Limited of 1193536 Alberta Limited, an investment holding company located in Calgary, Alberta

Bill Morneau's spouse, Nancy McCain, is President and Director of 2070689 Ontario Ltd. and President and Director of 1193536 Alberta Ltd.

From what I can see from his public declarations, Mr. Morneau has ownership in at least 7 private corporations, excluding those of his spouse, Nancy McCain.  Unfortunately, we have no idea of the assets held in each of these corporations nor do we know their value, however, we can safely assume that they are rather substantial given Mr. Morneau's previous seven figure salary and his connection to the McCain family fortune.

It is quite apparent that Messrs. Trudeau and Morneau know of what they speak when they talk about the wealthy abusing Canada's private corporation tax incentives.  In both cases, these gentlemen have taken the private corporation strategy to a point that is far beyond the relatively simple strategy used by an average Canadian taxpayer who utilizes the strategy to balance out income inequities that are associated with running a higher risk private business.  At least they know all about "tax fairness".

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