6 worked Salary Versus Dividend Planning case studies — the position a client typically comes to us with, what we do, and what it is worth. Each is an illustrative example built on the rules that apply to salary versus dividend planning work, not a specific client's file.
Case Study 1 · Cross-border exposure resolved
Foreign Reporting Brought Current, $39,000 Recovered — Incorporated Consultancy, Hamilton
The situation — An incorporated consultancy, Hamilton, Ontario
Foreign holdings at an incorporated consultancy in Hamilton, Ontario had passed the reporting threshold without anyone noticing. Behind the disclosure problem sat a loss year carried forward by default when carrying it back would have produced a refund cheque.
What we did for An incorporated consultancy, Hamilton, Ontario
We reconstructed the capital dividend account from the underlying transactions and filed the subsection 83(2) election before the next distribution left the company. We claimed the treaty relief and foreign tax credits on the Canadian return and corrected the disclosure position for the open years.
The result — An incorporated consultancy, Hamilton, Ontario
The treaty position was accepted and $39,000 was recovered. Reporting is now current and the annual process takes hours rather than weeks.
Case Study 2 · Cash and remittance control
Instalments Rebased, $131,000 Of Cash Returned To The Business — Three-Location Franchisee, Moncton
Client: A franchise operator with three locations · Where: Moncton, New Brunswick · Engagement: 10 weeks, fixed fee
Cash returned$131,000
Instalment basisCurrent year
ReviewedQuarterly
The situation — A franchise operator with three locations, Moncton, New Brunswick
A franchise operator with three locations in Moncton, New Brunswick was paying instalments calculated on a prior year. That year no longer reflected the business. Passive investment income that had crossed the $50,000 grind threshold unnoticed was tying up $131,000 of cash.
What we did for A franchise operator with three locations, Moncton, New Brunswick
We rebased the instalments on the current-year estimate rather than the prior-year default. Alongside that, we modelled salary against dividends across both the corporation and the shareholder’s personal return, then set the remuneration mix for the year.
The result — A franchise operator with three locations, Moncton, New Brunswick
$131,000 of cash stayed in the business, the penalty cycle ended, and the instalment position is reviewed each quarter against actual results.
Client: A second-generation family manufacturer · Where: Surrey, British Columbia · Engagement: 6 weeks, fixed fee
Penalty cancelled$64,000
Relief applicationGranted
ReturnAccepted as filed
The situation — A second-generation family manufacturer, Surrey, British Columbia
A second-generation family manufacturer in Surrey, British Columbia had already missed one deadline and was about to miss a second. Behind it sat a distribution treated as tax-free capital dividend with no election ever filed. A penalty of $64,000 was accruing.
What we did for A second-generation family manufacturer, Surrey, British Columbia
We split the work into what had to happen before the deadline and what could follow it. Then we moved passive holdings into a separate structure so the operating company’s small business limit stopped grinding down.
The result — A second-generation family manufacturer, Surrey, British Columbia
The outstanding return was accepted as filed, and the taxpayer relief application cancelled $64,000 of the penalty already assessed on the earlier year.
Case Study 4 · Structure rebuilt
Holding Structure Added, $46,000 Saved Annually — Professional Corporation, Barrie
Client: A professional corporation · Where: Barrie, Ontario · Engagement: 7 weeks, fixed fee
Annual saving$46,000
ReorganisationTax-neutral
StructureMatches operations
The situation — A professional corporation, Barrie, Ontario
The structure at a professional corporation in Barrie, Ontario needed fixing. The file was carrying a balance-due date the owner believed was the same as the filing date. Every option for fixing it ran through a reorganisation that had to be done without triggering tax.
What we did for A professional corporation, Barrie, Ontario
We worked with the client's lawyer. Together, we reviewed each capital cost allowance pool and set the claim at the level that kept the small business deduction fully used rather than wasted. We also prepared the elections, resolutions and valuations the structure needed to stand up.
The result — A professional corporation, Barrie, Ontario
The structure now matches the business. Annual saving of $46,000, and the reorganisation itself was tax-neutral.
Case Study 5 · Sale and succession
$755,000 Sheltered By The Lifetime Capital Gains Exemption — Holding and Operating Companies, Halifax
Client: A holding company and its operating subsidiary · Where: Halifax, Nova Scotia · Engagement: 11 weeks, fixed fee
Gain sheltered$755,000
ClosingOn schedule
Share qualificationMet
The situation — A holding company and its operating subsidiary, Halifax, Nova Scotia
A holding company and its operating subsidiary in Halifax, Nova Scotia had an offer on the table and 19 months to close. The shares did not qualify for the capital gains exemption. A minute book with no resolutions behind a decade of dividends was part of the reason.
What we did for A holding company and its operating subsidiary, Halifax, Nova Scotia
We purified the corporation so the shares met the qualifying tests. We documented safe income before the inter-corporate dividend was paid, so subsection 55(2) had no room to recharacterise it as a gain. All of it was done well ahead of the closing date.
The result — A holding company and its operating subsidiary, Halifax, Nova Scotia
The sale closed on schedule with $755,000 sheltered by the lifetime capital gains exemption across the shareholders.
Client: A CCPC with two shareholders · Where: Kelowna, British Columbia · Engagement: 10 weeks, fixed fee
Proposed tax cleared$70,000
Review duration10 weeks
OutcomeNo change
The situation — A CCPC with two shareholders, Kelowna, British Columbia
A CCPC with two shareholders in Kelowna, British Columbia was selected for review. Two corporations under common control filing as if each had its own $500,000 limit had shown up in the CRA's automated matching. The proposed adjustment on salary versus dividend planning came to $70,000.
What we did for A CCPC with two shareholders, Kelowna, British Columbia
We carried the non-capital loss back against the two profitable years and recovered tax already paid instead of holding a carry-forward balance. Every figure in the response traced to a source record the auditor could verify without asking a second question.
The result — A CCPC with two shareholders, Kelowna, British Columbia
The review closed with no change. $70,000 of proposed tax came off the table, and the documentation now in place makes the next review a short one.
Reviewed by Udit Gupta, Founder and Tax Accountant for the 2025 tax year. These case studies are illustrative worked examples composed from the CRA rules that apply to this type of work, not specific client files; figures are representative and outcomes depend on your own facts.
