CFIB is urging the ministers to delay the planned CPP expansion and the federal carbon backstop as well as to reject adopting the new federal rules for
passive investment income.
* Excess net passive income tax: Imposed if an S corporation has accumulated earnings and profits at the end of the tax year and its
passive investment income exceeds 25% of the corporation's gross receipts.
The taxpayer represented that it was aware that having excess
passive investment income could subject it to tax but was unaware that this could cause a termination of its S election.
About 83 per cent of
passive investment income is earned by Canadian-controlled private corporation (CCPC) owners making more than $250,000.
Price would also resign from his managing partner position at the Georgia-based Chattahoochee Associates LP, a surgical group, but would still receive "
passive investment income from it."
Nevertheless, Zucman reflects the common view that the so-called benefits principle still makes sense, because most active business income is earned by corporations and most
passive investment income is earned by individuals.
It's been said that income tax, because of the new 3.8 percent XIII on
passive investment income, is the new "estate tax" for many clients.
Secondly, if you have income over the $200,000/$250,000 threshold, you will be subject to an additional 3.8 percent tax on the lesser of
passive investment income or modified adjusted gross income in excess of the threshold.
However, certain caveats apply--one of the most important being that the new tax applies only to
passive investment income.--NAMC
Examples of non-core assets owned by a manufacturing or service company might include: real estate that is lying idle, or generating
passive investment income from third parties; shares or bonds that are not related to the company's main line of business; subsidiaries or investments in other companies unrelated to the company's core business.
In addition, a tax is imposed at the corporate level on excess "net passive income" of an S corporation (
passive investment income reduced by certain expenses connected with the production of such income) but only if the corporation, at the end of the tax year, has accumulated earnings and profits (either carried over from a year in which it was a nonelecting corporation or due to an acquisition of a C corporation), and if
passive investment income exceeds 25% of gross receipts.
For most of its existence, the I&D tax was narrowly focused on
passive investment income It was not intended in 1923 or thereafter to tax income earned from the performance of services, or other forms of investment income, such as capital gains or rents.
