In this webinar, Nicola Wealth CEO, John Nicola will address timely taxation topics to help you understand the developments in Canadian tax policy in relation to the taxation of homes, wealth, capital gains, and marginal tax rates. John will further prepare you to navigate the current tax environment by reviewing several tax planning options available to you and how these strategies integrate with overall portfolio design.

1. Welcome | 2021 Tax Planning

2. If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold, I’ll tax the heat,
If you take a walk, I’ll tax your feet.
90%
83%
98%
Maximum Tax Rates
UK Income Tax Rates
1966 1974 (Income) 1974 (Investment)
Let me tell you how it will be
There's one for you, nineteen for me
'Cause I'm the taxman
Yeah, I'm the taxman

4. Possible Tax Changes
• 1% tax on wealth over $10M (proposed by NDP)
• Capital gains Including rate to rise to 75% from 50% (effective
tax rate from 27% to 40%)
• 3% tax in Banks and Lifecos on profits over $1 billion
• Luxury Tax of 20% on value of cars and planes over $100,000
and boats over $250,000
Things to Consider
• Banks and Lifecos are widely held in pensions, retirement plans, mutual funds etc. This would be a new tax on retirement
savings.
• New Biden tax rates for capital gains will now be 28.8% instead of 43.6%.
• Wealth taxes dropped or rejected by other countries (Germany and France) sometimes is used in countries with no income tax
(France averaged $5M Euros in tax per year from 2012-2018. PBO estimate is $5.6B of new tax in the first year).

7. Back to the Future

10. 41.5
38.6
35.8
35.4
34
32.7
32.7
32.1
29.2
0 10 20 30 40 50
US
China
Australia
Italy
Canada
UK
France
Japan
Sweden
Gini co-efficient
Gini co-efficient

11. The US=Richer Rich and Poorer Poor

12. Jennifer Sidey
Age 28
Jagmeet Singh
Age 42
Median Age 2020
Median Age 1980

13. Jennifer Sidey
Age 28
Jagmeet Singh
Age 42
3X wealth

14. $-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
25 30 35 40 45 50 55 60 65 70 75 80
Wealth Required To Be In
The Top 1% in Canada
Average $2.4M ($1.9M USD)

15. • $2.1 trillion in defined benefit
pension plans (75% public)
• $7000/yr/person for health care
(about $150,000 PV based on
median age)
• Other government benefits
including school, infrastructure

16. Tax Reform 2018 (updated 2021)
Before Tax Reform
• Dividend compensation if SBD
• Income split using dividends and trust
• Accumulate passive assets in CCPC
and recover RDTOH when dividends
paid
• SBD not impacted by passive assets
After Tax Reform
• Salary or Dividend situation
dependent
• Over 65 on with spouse otherwise
labour or capital
• CCPC still better but try and minimize
taxable passive income
• Start losing SBD at $50,000 of passive
income. 100% gone at $150,000. Does
it make much difference?

17. Tax Reform 2018 (updated 2021)
Observations and General Guidelines
• Can make sense to now maximize CPP depending on assumptions and
incremental benefits
• Blend of salary and dividends may be ideal
• After that it depends on whether or not one wants to recover RDTOH at
blended rates at retirement or high marginal rates now .
• Likely better to not try and recover RDTOH and wait until lower income years
or no active business income ( means current income would be all T4)
• Look for guidance on maximum salaries for spouses

18. Planning Options
Tax Efficient Asset Allocation
IPP vs. RRSP
Prescribed
Rate Loans
Insurance With or
Without Leverage
Corporate
Structuring
Philanthropy

19. $135,500 $133,200 $132,700
$0
$54,000
$24,000
$64,500
$12,800
$43,300
0
50000
100000
150000
200000
250000
Salary Eligible Dividend Non Eligible Dividend
Tax Outcomes
($200,000 pre-tax income BC rates)
Spendable Income Corp Tax Personal Tax
Observations
• Net spendable income is
close
• Salary allows for $27,830
in RRSP deductions or up
to $45,000 in IPP
contributions
• Salary allows for CPP
contributions
• Dividends would be
better if RDTOH can be
recovered

20. 5% Yield
Net taxable income
allocated to children
Blended Family
Tax Rate = 15%
Prescribed Rate Loans
Considerations
• Cost to set up Trust ($5000)
• Tax returns for children
• Rights to allocated income
• Tracking expenses
• Prescribed rates will rise (but
can lock in now)
$10,000/yr.=1%
Lend $1M

21. Tax Reform 2018 (Updated 2021)
How RDTOH would work in GRIP environment
(assumes maximum personal tax rates)
Taxable Passive Income $100,000
Tax Payable corporately $50,700
RDTOH $30,700
Dividend required to recover RDTOH $80,800
Personal Tax @48.9% $39,500
Net Corporate tax $20,000
Total tax $59,500 (59.5%)
Personal tax on $100,000 Bonus $53,500 (53.5%)

22. What should they do?
• Defer RRSP, IPP, and CPP
income until age 71
• Take dividends only from
their Holdco
The Facts
• Bob and Dana are both 65
• They have just sold their
business
• Over the years they have had
to pay corporate tax of 50.7%
on their taxable passive
income in their holding
company
• Their RDTOH balance is
$500,000
• Overall corporate savings are
$4M
• They have RRSPs, IPPs and CPP
• They would like $180,000 to
$200,000/yr. in after tax
income
Holdco
$4,000,000 Investments
$500,000 RDTOH

23. Holdco
$4,000,000 Investments
$500,000 RDTOH
$125,000
Dividend
(Ineligible)
$125,000
Dividend
(Ineligible)
$23,500 Tax $23,500 Tax
$95,000
RDTOH

24. The Net Results
• Bob and Dana receive $250,000/yr. in dividends
and pay $47,000 in combined tax (spendable
income $203,000)
• The $250,000 triggers $95,000 in refundable
corporate tax (38% of the dividend)
• This effectively drops the tax rate on passive
investment income earned in the Holdco to
about 34% from 50.7%
• To make this work Bob and Dana take no other
income from other sources (CPP / RRSP etc.)
• Within 6 years they should recover all of their
RDTOH
• A different model may be required once CPP /
RRIF income begins

25. Individual
Pension Plans

26. New IPP Age 60: Maximum Income & Past Service
Contributions
New IPP in 2021 60-Year-Old
$ 1,200,000
$ 1,550,000
2021 Terminal Funding
Total Funding Available
40,000
2021 Current Service Contribution
$ 310,000
Employer Past Service Contribution
(490,000)
Transfer From Employee’s RRSP
$ 800,000
Value of Pension (1991 – 2021)

27. $26,000 $40,000
$310,000
$1,200,000
$1,550,000
RRSP IPP current IPP past
service
Terminal
funding
IPP total
IPP vs. RRSP: Terminal Funding at 60
Total Funding
$1,550,000

28. IPP: Yes or No?
• When income received it can be split with
spouse.
• Future earnings to age 71 can be tax deferred.
• Contributions tax deductible.
• Amortize funding over 10 years or more if
required.
• Trigger pregnant gains in the year IPP funding
occurs?
• Generally better than RRSP’s after age 50
Issues
• Limited to RRSP eligible assets
• Residual assets fully taxable at death
except when donated
• Restricted Liquidity

29. • Reduce taxable income on non-registered accounts
• Look for growth assets , capital gains and eligible dividends
Portfolio Design

30. Cdn Equities
25%
Foreign
Equities
25%
Real Estate
35%
Life Insurance
5%
Private Equity
7%
Alternatives
3%
Asset Allocation for Taxable Private Corporation

31. Bonds
15%
Mortgages
30%
High Yield
Bonds
15%
Global
Bonds
15%
Private Debt
25%
Asset Allocation for Registered Plans and Foundations
Interest Bearing
Tax deferred in
registered accts.

33. Asset Class Canadian Equities Foreign Equities Real Estate Fixed Income Life Insurance Private Equity Totals
Asset Allocation 25.0% 25.0% 37.0% 0.0% 5.0% 8.0% 100%
Return – last five years % 6.0% 8.3% 10.5% 4.2% 5.0% 13.1%
Weighted Return 1.5% 2.1% 3.9% 0.0% 0.3% 1.0% 8.8%
Return – last 5 years
$
$60,000 $83,000 $155,400 $0 $10,000 $41,920 $350,320
Corporate Tax
Rate passive
income
Personal Tax Rate
- Ordinary income
Personal Tax Rate -
Ineligible
Dividends
Personal Tax
Rate Eligible
Dividends
Amount Of Capital RDTOH Rate
Corporate Rate -
Eligible Dividends
Small
Business Tax
rate
General
Biusiness tax
rate
50.7% 53.5% 49.5% 36.5% $ 4,000,000 38.3% 38.3%
12% 27%
Portfolio
Return %
Portfolio Return
$
Taxable Income
Corporate
Tax Payable
RDTOH CDA
Personal Dividend
To Recover RDTOH
Tax On
Personal
Dividend
Net Corporate
Tax
Total Tax
Personal and
Corporate
Integrated tax
rate
8.8% $ 350,320 $ 98,804 $ 46,461 $32,539 $ 36,440 $ 84,958 $ 38,245 $ 13,922 $ 52,167 14.9%
Sample Client

34. $350,320
$98,804
$52,167
Returns Based on $4M Portfolio
Taxable Analysis for Corporate Assets
(average annual to Sept 2021)
Total Return Taxable Return Corporate and Personal Tax

35. 8.8%
7.5%
14.9%
5-Year Results (Sep 2021)
Average Annual Tax Results
Pre-Tax Return After-Tax Return Effective Tax Rate

36. • Full tax credit on
gift
• No capital gains tax
on shares
• Tax savings
potential of 80% in
BC / Ontario
• Can be donated to arms
length foundation or
charity
• Valuation issues
• Preferred shares paying
dividends might be best
• Insurance to redeems at
death
• Effective Tax shelter
• AMT can be an issue
• Little or no benefits in
tying to charitable gift
• Stand alone strategy
• Some policies have
value far in excess
of cash value
• Premiums can be
deductible

37. Private Giving Foundation
• Created in 1997
• 300 Donor advised accounts
• $150M of capital
• $10M of distributions in 2020
• NW pays all operating, reporting, legal, and
compliance costs
Donor Advised Funds

38. • Tax-free accumulation of cash value
• Good substitute for fixed income
• Strong collateral value with banks (90%)
• Reduce taxable income on passive assets inside
holdcos.
• Significant tax benefits when used in estate
planning strategies

39. Planning Options
Tax Efficient Asset Allocation
IPP vs. RRSP
Prescribed
Rate Loans
Insurance With or
Without Leverage
Corporate
Structuring
Philanthropy

41. Q &A | 2021 Tax Planning
Our question and answer period will begin shortly

42. THANK YOU
This material contains the current opinions of the author and such opinions are subject to change without notice. This material is distributed for informational
purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as
investment advice or a recommendation of any particular security, strategy or investment product. All investments contain risk and may gain or lose value.
Please speak to your Nicola Wealth advisor for advice based on your unique circumstances. Nicola Wealth is registered as a Portfolio Manager, Exempt Market
Dealer and Investment Fund Manager with the required provincial securities commissions.