Succession Planning

The Lifetime Capital Gains Exemption (LCGE) lets eligible individuals shelter a substantial amount of capital gain — into the millions of dollars and indexed over time — realized on the sale of qualified small business corporation (QSBC) shares, or qualified farm or fishing property. For many business owners it is the single most valuable relief available on a sale.

To use it on a share sale, the shares must meet the QSBC tests at the time of sale: broadly, the company must be a small business corporation using substantially all of its assets in an active business in Canada, the shares must have been held by the seller (or a related person) for the prior 24 months, and an asset-use test must be met throughout that period.

Many companies do not satisfy these tests by default, often because of excess investments or cash. Advance planning — sometimes called "purification" — can position a company so the shares qualify when a sale eventually happens, and the exemption can sometimes be multiplied across family members.

Canada does not levy an estate tax or an inheritance tax in the way some other countries do. Instead, the Income Tax Act generally treats a person as having disposed of their capital property at fair market value immediately before death — the "deemed disposition" under subsection 70(5). The resulting capital gain is taxed on the deceased's final return, and the estate pays that income tax.

Certain rollovers can defer the tax — most importantly the spousal rollover, which lets qualifying property pass to a surviving spouse or a qualifying spousal trust at cost rather than at fair market value, deferring the gain until the spouse disposes of the property or dies.

Private-company shares, real estate, and investment portfolios are the assets most affected, and the tax on death can be substantial. Planning — including the use of trusts, freezes, and life insurance — can reduce or fund the liability.

An estate freeze is a tax-planning strategy that locks in the current value of an owner's interest in a business (or other appreciating asset) for tax purposes, so that any future appreciation accrues to the heirs or successors rather than the owner.

The owner typically exchanges their common shares for fixed-value preferred shares equal to the current fair market value of the business, and new common shares — which capture future growth — are issued to the next generation or a family trust. The owner's eventual deemed-disposition tax on death is then capped at the frozen value, and the owner can keep control by holding voting preferred shares.

No. Canada does not levy an inheritance tax or an estate tax. What it has instead is the deemed disposition on death: a deceased person is treated as having sold most of their capital property at fair market value immediately before death, which triggers capital-gains tax on any accrued gains. The estate, not the beneficiaries, generally bears that tax.

Beneficiaries usually receive their inheritance without a separate tax on the receipt itself, but the estate may have already paid significant capital-gains tax before distributing. Planning — the spousal rollover, the principal residence exemption, the lifetime capital gains exemption, and post-mortem techniques — is aimed at managing that capital-gains bill. The rules interact and vary with the assets involved, so a review of the specific estate is worthwhile.

An estate freeze is a reorganization that "freezes" the current value of a business owner's shares at today's value, so that future growth accrues to the next generation or to a family trust. The owner typically exchanges their common shares for fixed-value preferred shares (often using section 85 or section 86), and new common shares are issued to children or to a trust.

The purpose is usually succession and tax planning: it caps the owner's tax exposure on death at the frozen value, shifts future growth to the successors, and can multiply access to the Lifetime Capital Gains Exemption across family members where the structure qualifies. It can also support income-splitting where the tax-on-split-income rules permit.

An estate freeze is a significant, fact-specific reorganization that must be coordinated with corporate law, family circumstances, and the relevant anti-avoidance rules. It should be designed and documented carefully.

The choice has significant tax consequences and the buyer and seller usually have opposing preferences. Sellers often prefer a share sale, because it can access the Lifetime Capital Gains Exemption on qualifying shares and generally produces a single layer of capital-gains tax. Buyers often prefer an asset sale, because it lets them step up the cost of depreciable assets and avoid inheriting the company's historical liabilities.

An asset sale inside a corporation can create two layers of tax — at the corporate level on the sale and again when proceeds are distributed to shareholders — though planning can mitigate this. The right structure depends on the company's assets, its share status, the parties' relative bargaining power, and the timeline.

Because the structure drives the after-tax outcome, it is worth modelling both options early in negotiations rather than after a deal is signed. Planning before the sale preserves the most options.

On death, subsection 70(5) of the Income Tax Act generally deems the deceased to have disposed of each capital property at its fair market value immediately before death. Accrued capital gains are realized and taxed on the final (terminal) return, and registered plans such as RRSPs and RRIFs are generally brought fully into income unless they pass to a qualifying recipient.

The spousal rollover is the main deferral: property left to a surviving spouse or a qualifying spousal trust can transfer at the deceased's cost, so the gain is deferred rather than taxed immediately. Without a rollover, the tax falls in the year of death.

Where the estate holds private-company shares, additional planning may be needed to avoid double taxation when the company's value is later distributed. Coordinating the will, beneficiary designations, and any corporate structure is what keeps the tax outcome efficient.

The Lifetime Capital Gains Exemption is available per individual. A discretionary family trust holding shares of a Qualified Small Business Corporation can allocate a capital gain on a future sale among several beneficiaries, each of whom claims their own exemption against their portion of the gain.

Spreading the gain across several family members can shelter a large multiple of what one person could shelter alone. The structure has to be in place well before any sale: the shares must qualify and be held for at least 24 months, and the beneficiaries must be residents of Canada to use the exemption.

If you die without a valid will, you are said to die intestate, and provincial or territorial intestacy legislation decides who inherits your property and in what shares. Those default rules are fixed formulas based on family relationships; they do not account for your particular wishes, for blended-family dynamics, for a disabled dependant, or for anyone you wanted to provide for who is not a close relative.

Intestacy also means the court appoints an administrator rather than an executor of your choosing, and it can complicate guardianship for minor children. Because the intestacy rules differ from province to province, the outcome of dying without a will depends on where you lived. A valid will lets you direct all of this yourself rather than leaving it to a default formula.

"Surplus stripping" refers to arrangements that try to extract a corporation's retained earnings as lower-taxed capital gains rather than as higher-taxed dividends. Section 84.1 of the Income Tax Act is an anti-avoidance rule aimed at certain non-arm's-length share transfers that would otherwise convert dividends into capital gains, and it can recharacterize the result as a deemed dividend.

The rule frequently arises in family succession — for example, when a parent sells shares of the family company to a corporation owned by their children. Recent legislation created defined exceptions for genuine intergenerational business transfers that meet specific conditions, but those conditions are detailed and must be satisfied to obtain the relief.

Because the line between legitimate planning and offside surplus stripping is technical and shifting, transactions in this area should be structured with current rules and the general anti-avoidance rule firmly in mind.

Qualifying for the Lifetime Capital Gains Exemption on a share sale requires meeting the qualified small business corporation tests, and a common obstacle is having too many non-active assets — surplus cash, investments, or redundant real estate — on the company's books. "Purification" is planning that removes or repositions those assets so the active-business tests are satisfied.

Typical steps include paying out excess cash, moving passive investments to a separate holding company, and ensuring the company keeps substantially all of its assets in an active business in Canada. Because the tests look back over a 24-month period, this planning generally needs to be done well before a sale, not on its eve.

Where the structure permits, the exemption can sometimes be multiplied among family members through a family trust or direct shareholdings, subject to the tax-on-split-income rules. The earlier this is planned, the more options remain available.

A family trust holds property for the benefit of family members under the control of trustees. In tax and estate planning it serves several purposes: it can hold the growth shares in an estate freeze so future growth accrues outside the founder's estate, it can multiply access to the Lifetime Capital Gains Exemption among beneficiaries, and it can provide flexibility in how and when value reaches the next generation.

Trusts also have important limits and rules. The tax-on-split-income rules restrict income-splitting with certain family members, the 21-year deemed-disposition rule requires planning to avoid a tax hit at that anniversary, and attribution rules can apply where property is transferred to a spouse or minor children.

A trust is a powerful tool when it fits the family's goals, but it adds administration and must be set up and maintained correctly. Whether one is appropriate depends on the specific facts and objectives.

To qualify for the exemption on the sale of Qualified Small Business Corporation shares, three tests must be met. First, the corporation must be a Canadian-controlled private corporation at the time of sale. Second, the asset-use tests must be satisfied: throughout the 24 months before the sale, more than half of the corporation's assets must have been used in an active business carried on primarily in Canada (the 50% test), and at the time of sale a substantial majority of its assets must be so used (the 90% test). Third, the shareholder must have held the shares for at least 24 months continuously before the sale.

They cover different moments. A will takes effect when you die and directs how your property is distributed, who administers your estate, and who cares for your minor children. A power of attorney takes effect while you are still alive but unable to act for yourself — through illness, injury, incapacity, or absence — and authorizes someone you choose to make decisions on your behalf.

Powers of attorney come in two functions: a financial (property) power of attorney for money and property, and a personal-care power of attorney for health-care and personal decisions. An enduring or continuing power of attorney is the form that survives your incapacity, which is when it matters most. A complete estate plan generally includes both a valid will and powers of attorney; British Columbia uses a representation agreement for personal-care decisions.

When a shareholder of a private corporation dies, the same underlying value can be taxed more than once: first as a deemed disposition of the shares on death, and again when the corporation's value is later distributed to the estate or heirs. Post-mortem planning is designed to reduce or eliminate that potential double — or even triple — taxation.

Common techniques include the "pipeline" strategy and the subsection 164(6) loss carryback, each suited to different situations and each with its own conditions and timing. The subsection 164(6) approach, for instance, generally must be implemented within the estate's first taxation year.

Because the relief depends on acting within strict deadlines after death, executors and beneficiaries of private-company estates should obtain advice early — well before the first anniversary of death — to preserve the available options.

A section 85 rollover lets a taxpayer transfer assets — such as real estate, equipment, or shares — to a corporation in exchange for shares without an immediate tax bill. It requires a joint election by the transferor and the corporation on Form T2057, and the elected amount must fall between the asset's cost base and its fair market value.

A section 86 reorganization, by contrast, is an exchange of all the shares of one class for shares of another class within the same corporation. It is the provision most often used to carry out an estate freeze, and it applies automatically when the conditions are met rather than requiring a joint election.

An estate freeze locks in the current value of a business owner's shares for tax purposes and shifts future growth to the next generation, usually through a family trust. The owner exchanges their growth-bearing common shares for fixed-value preferred shares equal to today's value, and new common shares are issued to children or a family trust to capture future appreciation.

The benefit is that the owner's capital gain on death is capped at today's value rather than the much larger future value, while the post-freeze growth accrues to the next generation outside the owner's estate. A freeze also sets up the family trust to multiply the lifetime capital gains exemption across several beneficiaries on a future sale. A freeze caps the tax rather than eliminating it, and it has to be structured and documented carefully, so it is planning to undertake with professional advice well before a sale or transition.

The general rule of thumb is that once your business generates $30,000 or more in a year, you are required to charge and collect GST/HST. Many owners cross that threshold without realizing it and later learn — often during an audit — that they owe the tax even though they never collected it from their customers, which can be a costly surprise.

The correct rate depends on where your customer is and where the goods or services are supplied, not where you are: for example, a Toronto business charges 13% HST to an Ontario customer, 5% GST to an Alberta customer, and 0% to a customer outside Canada. Once you register, you can also claim input tax credits for the HST you pay on your own business expenses, which reduces the net amount you remit. The safest practice is to register for an HST number and apply the correct tax to every transaction.

Probate fees are calculated on the total value of the assets passing through the will that is probated. Using two wills lets you separate assets that require probate from those that do not. A primary will covers assets that need probate, such as real estate and certain financial accounts. A secondary will covers assets that can bypass probate, such as shares in privately held companies, artwork, and jewelry.

Because only the assets in the probated (primary) will attract probate fees, segregating private-company shares and similar assets into a secondary will can produce substantial savings for the estate.

Yes. An executor owes a fiduciary duty to administer the estate properly, and can be held personally liable for losses caused by mistakes or negligence — for example, mismanaging estate assets, failing to pay the estate's taxes or debts, or distributing assets to beneficiaries before all liabilities are settled. Distributing too early is a common source of personal exposure, because the executor can be left on the hook for a tax bill the estate no longer has the funds to cover.

Executors reduce this risk by obtaining professional legal and tax advice, keeping clear records, communicating with beneficiaries, applying to the court for directions where the will is unclear, and obtaining confirmation from the tax authority that the estate's taxes are paid before making the final distribution. Executor's insurance is also available for honest mistakes. Acting as an executor is a serious responsibility, and getting advice early is part of doing it safely.

Yes. The US imposes estate tax on the US-situs assets of non-resident, non-citizen individuals — most commonly US real estate and shares of US corporations — even where the owner has no other US connection. Under domestic US law the exemption for non-residents is very small, which can expose Canadians who own US property or US-listed shares.

The Canada-US tax treaty softens this with a prorated unified credit, calculated by reference to the ratio of US-situs assets to worldwide assets. For many estates that credit eliminates the exposure; for larger worldwide estates, US estate tax can still apply.

Planning levers include holding US real estate through a Canadian corporation or a properly structured entity, life insurance to fund the projected liability, and trust planning. Because the exposure depends on the size and composition of the whole estate, it is worth modelling in advance rather than discovering at death.

The attribution rules can tax income or gains from gifted property in the hands of the person who made the gift rather than the recipient. They apply most directly to gifts to a spouse or to a minor child — so, for example, income earned on an investment gifted to a spouse is generally taxed as the donor's income.

Two common ways to manage the rules are to lend rather than gift the asset, charging interest at the prescribed rate, which avoids attribution; or to transfer assets that do not produce income but are expected to appreciate, such as growth stocks or real estate, because capital gains are not subject to the same attribution.

Yes, significantly. Probate fees — sometimes called estate administration tax — are charged on the value of the estate, and the structures range from modest flat fees to percentage charges that scale with estate size. Alberta, for instance, uses a flat-fee schedule capped at a few hundred dollars regardless of estate value, while Ontario and several other provinces charge per-thousand rates that can add up to thousands of dollars on a large estate. Quebec generally does not require probate where the will is notarized.

Because fees are usually based on the value passing through probate, strategies that keep certain assets outside the probated estate — assets held in joint tenancy, assets with valid beneficiary designations, and a secondary will for private-company shares — can reduce the fee base. These strategies need to be set up correctly and coordinated with the rest of the plan. Rates change, so confirm the current figures for the relevant province.

An estate freeze caps the value of a business owner's shares at today's value so that future growth accrues to the next generation. The owner exchanges their common shares for fixed-value preferred shares, and the corporation issues new common shares — usually worth a nominal amount — to children or a family trust. Because the new shares start at nominal value, there is no taxable event when they are issued.

After the freeze, future growth accrues to the next generation's shares, and the tax on that growth is paid much later, when they eventually sell. Because of the time value of money, paying that tax decades from now is far cheaper in real terms than paying it on the owner's death. A freeze can attract CRA scrutiny, so a proper valuation — ideally by a certified business valuator — and a price-adjustment clause are commonly used.

Corporate-owned life insurance is a policy a corporation takes out on the life of a key individual, with the corporation paying the premiums and receiving the death benefit. It serves several purposes: providing a financial safety net for business continuity if a key person dies; funding buy-sell agreements so a deceased shareholder's interest can be purchased without straining the company; and, with a whole-life policy, accumulating cash value on a tax-deferred basis.

A further advantage is that, on the death of the insured, the death benefit received by the corporation (less the policy's adjusted cost basis) can be credited to the corporation's Capital Dividend Account and then distributed tax-free to shareholders.

A Henson trust is a discretionary trust used where a beneficiary has a disability and receives, or may receive, means-tested government assistance. If a disabled person inherits money outright, the inheritance can disqualify them from those benefits. A Henson trust is structured so the trustee has absolute discretion over distributions, which means the beneficiary has no fixed entitlement the benefits authority can count as their own asset.

The trustee can then use the trust to fund the beneficiary's supplemental needs — things the government program does not cover — without jeopardizing eligibility. Because the rules governing disability benefits and the recognition of Henson trusts vary by province, the trust has to be drafted against the specific provincial program. For families with a disabled member, omitting a Henson trust where one is needed is a costly and avoidable mistake.

Where possible, sellers usually prefer to sell shares rather than assets, because the Lifetime Capital Gains Exemption can shelter a gain on qualifying shares but not on a sale of assets. The complication is that buyers often prefer asset sales, which are cleaner and avoid inheriting the company's historical liabilities.

To use the exemption on a share sale, the shares generally have to meet the qualified small business corporation tests at the time of sale, which can require advance planning — sometimes called purification — to remove non-active assets such as excess cash. Because the structure drives the after-tax result, it is worth modelling both options well before a sale rather than after a deal is signed.

Crystallization means triggering a capital gain on paper — without an actual sale to a third party — so you can use your Lifetime Capital Gains Exemption now, before a possible increase in the asset's value or a change in the law reduces the amount available.

It is usually done by valuing the qualifying shares and electing (commonly under a subsection 85(1) rollover) to a deemed disposition at fair market value, then sheltering the resulting gain with the exemption. This resets the cost base of the shares to their current value, so less gain is taxable on an eventual sale, and it locks in today's exemption limit.

A secondary will is a separate will that deals specifically with certain assets — most commonly shares of a private corporation — alongside a primary will that covers everything else. Business owners use one for two reasons. First, it can keep private-company shares out of the probated estate, which both speeds the transfer of ownership and reduces probate fees, since those fees are typically calculated on the value passing through probate.

Second, it allows the shares to transfer to a chosen successor quickly, so the new shareholder can step in and keep the business running without the delay that probate of the main estate can cause. The primary and secondary wills must be drafted to dovetail — each clearly governing its own assets — to avoid conflict or overlap. A secondary will is a standard piece of business succession planning, and it works best when coordinated with the rest of the owner's estate and tax plan.

It can be. If your corporation provides services that an officer or employee of the client would normally perform, and you function much like one of the client's employees — same work, under their direction, without genuine independence — the Canada Revenue Agency can treat your corporation as a "personal services business." Where that designation applies, the corporation loses the small business deduction and most of its deductions are denied, which can dramatically increase the tax.

The agency looks at the substance of the relationship, not just the fact that you have a corporation: your financial risk, who controls how the work is done, who supplies the tools, and whether you could send a replacement. Workers in industries that encourage incorporation, such as trucking, are especially exposed. If you are concerned that you may be operating a personal services business, it is worth getting advice before an audit raises the issue.

Yes. Under subsection 160(1) of the Income Tax Act (and subsection 325(1) of the Excise Tax Act), if a tax debtor transfers property to a non-arm's-length person — a spouse, child, sibling, or related corporation — for less than fair market value, the recipient can be assessed for the transferor's tax, up to the benefit received. Transfer a $20,000 car for $1 and the recipient received a $19,999 benefit and can be assessed for up to that amount.

There is a hidden danger: even if the transferor owed no tax on the date of the transfer, the CRA can later reassess them for an earlier year, and that liability is treated as having existed retroactively — so the recipient can still be pursued. Because there is no due-diligence escape from a debt that did not yet exist, it is important to get advice before any transfer of property between related parties.

Canadian tax rules are generous to charitable gifts, and the structure of a gift materially affects the result. One of the most efficient techniques is donating appreciated publicly listed securities directly to a charity rather than selling them first: the capital gains tax on the donated shares is eliminated, and you still receive a donation receipt for the full fair market value.

Families who give substantial amounts over time often establish a private foundation or use a donor-advised fund at a community foundation. Both allow a deductible gift now with grants directed to charities over many years. Gifts made through a will can offset tax on the estate's terminal return, and gifts of life insurance can turn a modest premium into a larger eventual gift with favourable treatment.

The common thread is that the form, timing, and vehicle of a gift drive its efficiency. Coordinating giving with the rest of a family's tax and estate plan is what turns generosity into an integrated part of the picture rather than an afterthought.

Legitimate asset protection is entirely legal — but it has to be done prospectively and transparently, well before any claim arises. The law draws a sharp line between organizing your affairs sensibly in advance and transferring assets to defeat a creditor who is already on the doorstep. The latter can be reversed and can carry serious consequences; the former is sound planning.

Compliant asset protection uses familiar structures for their protective side-effects: holding surplus investments in a holding company separate from an operating business, so operational creditors cannot reach the family's accumulated savings; using trusts to hold assets outside any single individual's name; keeping personal and business assets properly separated; maintaining adequate insurance; and using domestic marriage or cohabitation agreements for the family-law dimension.

The unifying principle is timing and transparency. Structuring done in advance of any claim, and disclosed where disclosure is required, is effective and above-board. Asset protection is never about hiding assets or evading existing creditors — done properly and early, ordinary well-documented structuring is all that is required.

Wills handle distribution. Tax planning handles what's left after the deemed disposition on death, the capital-gains rollover to a spouse, the post-mortem pipeline, and US estate tax for snowbirds. The two work together.

A pipeline transaction lets the estate of a deceased shareholder extract corporate value as a return of capital instead of a deemed dividend, avoiding double taxation. It typically requires a holdco freeze and is most effective when planned within the first year after death.

Sellers usually prefer a share sale (Lifetime Capital Gains Exemption can shelter up to ~$1M+ of gain on Qualified Small Business Corporation shares). Buyers usually prefer asset sales (step-up in basis, lower successor-liability risk). The price negotiation is partly about who absorbs the tax differential.

It depends on the province and on the class of shares. Provincial Colleges of Pharmacists regulate who may own and control a pharmacy. In most provinces, only licensed pharmacists may hold the voting shares of a pharmacy corporation, while non-pharmacist family members (a spouse, children, or a family trust) may hold non-voting shares. A will that leaves voting shares to a non-pharmacist can lead the College to refuse registration or suspend the Certificate of Accreditation until control is restored to a licensed pharmacist.

Quebec is stricter — only licensed pharmacists may own a pharmacy, and ownership must be direct rather than through a holding company, trust, or family members. Where no pharmacist heir exists, the usual approach is to authorize the executor to sell the shares to a qualified pharmacist purchaser. Confirm your province's rules before structuring your will.

An indexed exemption for capital gains on Qualified Small Business Corporation shares (and qualified farm/fishing property). Multiplying it across family members through estate freezes and family trusts is one of the highest-leverage tax-planning moves available to Canadian business owners.

In an asset sale, the buyer acquires individual assets — inventory, fixtures, and goodwill — rather than the corporation. The proceeds are generally treated as business income and recapture at the corporate level, the vendor cannot use the Lifetime Capital Gains Exemption (LCGE) on goodwill held in the corporation, and each licence, contract, and permit must be transferred individually.

In a share sale, the buyer acquires the shares of the Pharmacy Professional Corporation. If the corporation qualifies as a Qualified Small Business Corporation (QSBC), the vendor can claim the LCGE on the capital gain, and there is no need to re-register licences or contracts. A share sale generally produces a better after-tax result for the seller, which is why many pharmacists structure the corporation so a share sale is feasible. The right choice depends on the corporation's liabilities, its QSBC status, and the buyer's preferences.

The LCGE is available per individual. A discretionary family trust that owns Qualified Small Business Corporation (QSBC) shares can allocate the capital gain on a future sale among several beneficiaries — for example, a spouse and adult children — so that each claims their own exemption against their share of the gain. With several beneficiaries each able to shelter roughly $1.25 million (2025), the family can shelter several million dollars of gain that a single owner could not.

The structure has requirements: the trust deed must permit capital-gains allocation, the beneficiaries must be eligible, the shares must independently qualify as QSBC shares, and the trust must have held the shares long enough to satisfy the 24-month holding-period test — so the planning has to be done well before any sale. In a pharmacy, the trust must hold non-voting shares, and voting control must remain with licensed pharmacists.

To claim the Lifetime Capital Gains Exemption, a pharmacy corporation generally needs at least 90% of its assets used in an active business at the time of sale or death. If a life-insurance policy's cash surrender value is recorded as a passive investment inside the operating Pharmacy Professional Corporation, it can count as a non-active asset and jeopardize that QSBC status.

Holding the policy in a Holding Company instead keeps the operating corporation's assets "pure," lets the Holdco accumulate the cash value and invest surplus dividends, and segregates the insurance proceeds for family use or buy-sell obligations. On death, the death benefit (less the policy's adjusted cost basis) creates a Capital Dividend Account credit in the Holdco, allowing tax-free capital dividends to the estate or shareholders.

Purification is the process of removing or restructuring passive and investment assets — excess cash, marketable securities, non-business real estate — so that a corporation meets the Qualified Small Business Corporation (QSBC) tests and the shares qualify for the Lifetime Capital Gains Exemption. Common techniques include transferring excess cash and investments to a Holding Company, paying dividends or bonuses to reduce retained earnings, selling non-operating assets, and moving corporate-owned insurance to a Holdco.

Because two of the three QSBC tests look back over the 24 months before a sale or death, purification should begin at least 24 months ahead. Purification crammed into the final weeks before closing invites the CRA to treat it as part of the disposition and to challenge the holding-period test, so the earlier the corporation is cleaned up, the safer the exemption claim.

When a pharmacist dies owning corporation shares, the same value can be taxed twice: once as a capital gain on the deemed disposition of the shares at death, and again as a dividend when the corporation's retained earnings are later distributed to the estate or heirs.

A pipeline plan addresses the second layer. The estate incorporates a new corporation, transfers the deceased's shares to it under a section 85 rollover in exchange for a promissory note equal to fair-market value, then amalgamates or winds up the original corporation into the new one. Over time the new corporation repays the note from the retained earnings as a capital repayment rather than a taxable dividend. The CRA generally expects a reasonable delay (often around 12 months) before repayment to confirm the reorganization is bona fide. The result is that only the capital gain at death is taxed. An alternative, the subsection 164(6) loss carry-back, suits estates where the corporation will be wound up shortly after death.

Under section 167 of the Excise Tax Act, the sale of an entire business as a going concern can be relieved of GST/HST where both the buyer and the seller are registrants and the buyer continues to operate the business immediately. The election is made jointly on the prescribed CRA form and should be referenced in the purchase-and-sale agreement.

For a pharmacy sale, the election can remove a significant amount of tax from the transaction. It is worth confirming registrant status on both sides and including the election in the definitive agreement so it is not overlooked at closing.

The consequences can be severe. Every pharmacy must have a licensed pharmacist acting as Designated Manager, and at death the executor must promptly appoint a replacement and notify the provincial College within the deadline (often 30 days). If no licensed pharmacist is in place, the College can require the pharmacy to close, prescriptions transfer elsewhere, and goodwill erodes quickly.

On the tax side, the deemed disposition of the corporation's shares at death can trigger a large capital-gains liability, and if the corporation is not a Qualified Small Business Corporation on the date of death, the Lifetime Capital Gains Exemption may be lost. A will that grants the executor authority to operate the pharmacy, appoint a Designated Manager, and carry out post-mortem reorganizations — combined with advance purification and, where appropriate, an estate freeze and a family trust — preserves both the business value and continuity of patient care.