The authors summarize some methods for avoiding or mitigating corporate attribution:
- The corporate attribution rules do not apply where the transferee is a small business corporation.
- The transferor could consider effecting a freeze using a stock dividend. (But will the CRA apply GAAR?)
- The rules do not apply where the designated person’s shares are held in a trust described by subsection 74.4(4).
- A corporation could transfer property (that was not received from an individual) to another corporation that will be frozen.
- The freeze corporation can repay loans or redeem shares that generate the deemed interest.
- The freezor can receive interest or dividends as part of his or her ‘compensation’, which would reduce or eliminate the deemed interest.
Player, Katlai and Neilson “Corporate Attribution: Avoid It or Apply Mitigation Strategies” 12:2 Canadian Tax Focus (May 2022)