Case Study 02 · Real Estate
12 Properties. 2 Corporations. Why Is This Realtor Still Overpaying?
Manitoba Realtor Corp · PropCo · Realtor $252,000 · Spouse $120,000 · 2 Minor Children · 12 Properties
Manitoba · 2025 · 2 Minor Children · 12 Properties
$248K
Tax — No Blueprint
Annual family tax unstructured
$143K
Tax — With Blueprint
Annual tax with architecture
$105K
Annual Saving
Family tax saving per year
$580K
5-Year Saving
Cumulative excess tax avoided
The Situation
This Manitoba realtor operates through a sales corporation with 12 investment properties — 4 inside a PropCo and 8 in personal names. Combined family income is $372,000. The solo realtor structure carries active PSB risk under ITA s.125(7): if assessed, the SBD is denied, the general 27% rate applies, and most expenses become non-deductible — a retroactive exposure exceeding $120,000. Eight personally-held properties generate $240,000 in annual rental income taxed at Manitoba's 50.4% top rate. There is no HoldCo, no TOSI review on PropCo dividends, no IPP, and no estate structure.
Critical Gaps
Personal Services Business Risk — Existential Threat
Solo realtor corps are CRA's primary PSB target. If assessed under ITA s. 125(7): SBD denied, 27% general rate, most expenses non-deductible. Retroactive exposure: $120,000+. Must be addressed before any other planning.
PropCo TOSI + Attribution — Unresolved
PropCo shares 50/50. If transferred for nil consideration, ITA s. 74.1 attribution applies — all PropCo dividends and capital gains report in the realtor's hands. Prescribed rate loan required to cure going forward.
$240K Personal Rental Taxed at 50.4%
8 properties in personal names generate $240K/year at Manitoba's top marginal rate. An ITA s. 85(1) rollover to a corporate vehicle saves ~$37,440/year on this income alone.
No HoldCo — No Creditor Shield, No AAII Fix
Without a HoldCo, there is no vehicle to receive tax-free intercorporate dividends (ITA s. 112(1)), hold COLI to neutralize the $96K AAII grind, or provide separation between operating risk and accumulated wealth.
Current Structure vs. Fiscal Architecture Blueprint
| Area | Without Structure | With Architecture |
|---|---|---|
| Block 1 — Realtor Business Corporation (Manitoba) — PSB Risk Active | ||
| Gross commission income | $252,000 | $252,000 |
| Salary + IPP + operating expense deductions | No optimization | ($160,000) deducted |
| Corporate taxable income | $222,000 | $92,000 |
| Corporate tax — 9% SBD (if not PSB) | ($19,980) | ($8,280) |
| ⚠ If PSB assessed — 27% general rate, most deductions denied | ($59,940) risk | Mitigation underway |
| AAII grind: $96K PropCo AAII reduces Realtor Corp SBD by $230K | SBD limit: $270K | COLI mitigating |
| Block 2 — PropCo Rental Income (4 properties × $2,000/month avg) | ||
| Gross PropCo annual rental income | $96,000 | $96,000 |
| PropCo tax @ 27% general rate (specified investment business) | ($15,120) | ($15,120) |
| PropCo TOSI + attribution audit — dividends to spouse | Risk unresolved | Exclusion review in progress |
| Block 3 — Personal Rental Income (8 properties in personal names) | ||
| Gross personal rental income (~$20,000/month) | $240,000 | $240,000 |
| Personal tax @ Manitoba 50.4% top rate on net $160K | ($80,640) | ($80,640) — pending s. 85(1) transfer |
| After s. 85(1) transfer to corporate structure @ 27% | Not done | ($43,200) — saves $37,440/yr |
| Block 4 — Personal Income Extraction (Manitoba) | ||
| Personal tax on full Realtor Corp extraction | ~($94,000) | ~($38,000) |
| Spouse tax on $120K employment income (MB rates) | ($38,400) | ($38,400) |
| Spousal RRSP (realtor contribution) | $0 sheltered | $32,490 sheltered |
| IPP corporate contribution (ITA s. 147.2) | $0 | ~$30,000 deducted in Corp |
| Block 5 — Estate & Creditor Position | ||
| No HoldCo — Realtor Corp + PropCo earnings creditor-exposed | Fully exposed | HoldCo incorporated |
| 8 personal properties — no corporate protection | All exposed | s. 85(1) transfer planned |
| Estate freeze + family trust (ITA s. 86 + s. 110.6) | None | Up to $5M LCGE — 4 persons |
| Total Annual Family Tax | ~$248,140 | — |
| Total Annual Tax — With Architecture | — | ~$143,040 |
| Annual Family Tax Saving With Architecture | — | ~$105,100 |
Red = current cost. Green = with architecture. Figures are estimates based on 2025 rates.
5-Year Cumulative Cost of Inaction
| Year | Tax — Current | Tax — Architecture | Annual Saving | Cumulative Saving |
|---|---|---|---|---|
| 2025 | $248,140 | $143,040 | $105,100 | $105,100 |
| 2026 | $260,547 | $150,192 | $110,355 | $215,455 |
| 2027 | $273,574 | $157,702 | $115,872 | $331,327 |
| 2028 | $287,253 | $165,587 | $121,666 | $452,993 |
| 2029 | $301,616 | $173,866 | $127,750 | $580,743 |
The Architecture Blueprint — 7 Core Levers
PSB Documentation
Legal opinion + documented entrepreneurial evidence. Multi-client proof, own brand, subcontracting capability, financial risk. Moving toward 5-employee safe harbour.
ITA s. 125(7)
Incorporate HoldCo
Manitoba HoldCo above Realtor Corp and PropCo. Tax-free intercorporate dividends (ITA s. 112(1)). Creditor shield on surplus. Vehicle for COLI and estate freeze.
ITA s. 112(1)
COLI in HoldCo
Exempt policy neutralizes the $96K AAII grind. Cash value builds creditor-protected. On death: full benefit to CDA — tax-free extraction for spouse under ITA s. 89(1).
ITA s. 89(1) · s. 125(5.1)
s. 85(1) Rollover — 8 Properties
Transfer 8 personally-held properties to corporate vehicle at ACB, deferring capital gains. Rental income taxed at 27% corporate vs. 50.4% personal — saves $37,440/year.
ITA s. 85(1)
Estate Freeze + Family Trust
ITA s. 86 freeze on HoldCo. Discretionary trust holds new common shares. LCGE: $1.25M per person — $5M combined pool across 4 persons.
ITA s. 86 · s. 110.6
PropCo TOSI Fix
Prescribed rate loan from realtor to spouse funds PropCo share subscription at FMV. Cures attribution under ITA s. 74.5. Unlocks income splitting at spouse's lower rate.
ITA s. 74.5 · s. 120.4
IPP + Spousal RRSP
IPP deducts ~$30K/year at corporate level. Spousal RRSP: realtor contributes $32,490 at his marginal rate — future withdrawals taxed at spouse's lower rate.
ITA s. 147.2 · s. 146
“12 properties. 2 corporations. $372,000 in combined family income. Yet the current structure costs this family $248,140 per year in tax. The PSB risk sits above everything. Eight properties bleed at the top marginal rate. There is no HoldCo. With the Blueprint: $143,040 in tax — a $105,100 annual saving. Over five years: $580,743.”
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All Fiscal Architecture Blueprint Diagnostics are conducted under the supervision of Olutosin Oluwasanmi, Managing Counsel, Ellan Law Corporation — a member in good standing of the Law Society of Manitoba. This case study is illustrative and does not constitute legal or tax advice.