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March 2, 2024

Tax Perspectives

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Please note that these publications may not be up-to-date as taxation matters are subject to frequent changes.

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Fall 2003
Volume 3, Number 3

The information in Tax Perspectives is prepared for general interest only. Every effort has been made to ensure that the contents are accurate. However, professional advice should always be obtained before acting and TSG member firms cannot assume any liability for persons who act on the basis of information contained herein without professional advice.

Non-Compete Payments now Taxable

By Kim Moody, CA, TEP
Moodys LLP Tax Advisors (Calgary)

In the previous issue of Tax Perspectives, we discussed the Manrell case and the strategy of tax-free non-compete payments on sale of a business. Legislation is to be introduced to eliminate this unintended benefit.

After October 7, 2003, non-compete payments will be taxable as income or capital gains, depending on the circumstances. An exception will be made for amounts received before 2005 that were paid based on a written arm's length agreement made before October 8, 2003. Note though that these may still require substantiation, especially as to the reasonableness of the amount.

Well, it was great while it lasted.