Sale of Shares versus Sale of

assets
Analysis

The idea is to determine if it is better for an individual (Shareholder) to sell his shares or have the company sell
its assets.

If the shareholder sells his shares, he will receive the funds directly (after paying taxes on the TCG).

If the company sells the assets, the money belongs to the company after it pays taxes.

In order to compare both, the company would need to be wound up after it sells its assets and pays its liabilities
(including taxes on the disposition of its assets).

When the wind up occurs the shareholder will receive the remaining funds in the company (after the company
sells its assets and pays its liabilities, including taxes on the disposition of its assets).

These funds will be taxed as a liquidating dividend to the shareholder. After the shareholder pays tax on the
liquidating dividend the remaining funds belong to him.

Which ever of these two alternatives provides him with more funds is the one you will recommend he does.
(Does he sell the shares or the company sells the assets and winds up).
Template - Sell of Shares for shareholder

Proceeds from sale of shares (1) $ x

ACB ( x)
Capital gain $ x

TCG 50% $ x
C.G. exemption $( x)
Taxable Income $ 0

Tax (TI * Tax Rate Given) (2) $ x

Proceeds from above (1) $ x

Tax from above (2) $( x)

Net cash to shareholder (1) – (2) $ XX

 Template – Sale of assets by corporation

Step 1 Set up the following schedule and complete;

Calculate the tax implications of the sale of assets and payment of liabilities

Proceeds ABI TCG CDA Non Eligible

RDTOH

Opening balance xx xx

Inventory xx xx - - -
Building xx xx xx xx -
Land xx xx xx -
Marketable Securities xx - xx xx -
Cash xx - - - -
------------- ----------- ------------- --------- -----------
xx xx xx xx xx
Liabilities (xx)
Tax (1) (xx)
RDTOH (2) xx
-------------

Funds available to xx
Distribute (A)

[1]
Tax: on ABI xx * % = xx
on TCG xx * % = xx
($xx)

[2]
RDTOH: opening balance xx + TCG xx * 30 2/3% = $xx
Step 2: Calculate Liquidating dividend (Deemed Dividend and TCG)

Funds available from schedule (A) $ xx

PUC of shares ( xx)
Deemed dividend (B) $ xx
CDA ( xx)
Deemed taxable dividend $ xx

Funds available (A) $ xx

Deemed dividend (B) ( xx)
Adjusted proceeds $ xx
ACB Shares ( xx)

Capital gain $ xx
TCG $ xx
Step 3: Calculate the Personal Tax

TCG (Previous step) $ xx

Taxable Dividend (Previous step) $ xx

Tax on TCG (Tax Rate Given) $ xx

Tax on Taxable Dividend (Tax Rate Given) $ xx
Personal Tax payable $ xx

Funds Available from schedule (A) $ xx

Personal Tax Payable above ( xx)
Net cash to shareholder $ xx

Decision: Compare net cash from sale of shares (Step 1) to net

cash from sale of assets (Step 3). Recommend the one that
provides the most net cash.