Planning for Large Capital Gains – Controlling Your Taxable Income
What This Covers
This session explores how the Infinite Banking Concept (IBC) can be strategically used to reduce taxes in years when you receive a large capital gain, such as from real estate sales, stock options, business exits, or severance. Through a case study, the presenters show how a couple leveraged their whole life insurance policy to smooth taxable income and save $46,000 in taxes in one year.
Why Clients Use It
Clients often use IBC to:
Prepare for windfall events (real estate sales, severance, investment exits)
Reduce taxes by controlling when and how income is reported
Maintain access to capital through policy loans, without triggering new tax events
Preserve future flexibility with minimal restrictions
Key Insights by Timestamp
00:00–02:00
“What is Infinite Banking?”: Defined as “an exercise in imagination, reason, logic, and prophecy” (Nelson Nash, p.14).
It’s about thinking differently about money and control.
03:00–06:30
Intro to Windfall Planning
Types of windfalls:
Stock options
Real estate or business sales
Severance or retirement packages
Investment liquidations
06:30–09:30
Real Case Study Overview
Couple aged 66 and 65
Selling a personally owned property with $200,000 capital gain
Wanted to avoid high taxes while still buying a new home in Florida
Husband had an IBC policy started at age 50
10:00–12:30
Using IBC to Smooth Income
Capital gain would add $100K to taxable income (50% inclusion rate)
Instead of taking from RRSP (taxable), they used $100K of policy loans to cover lifestyle costs
Policy loan avoided bumping income bracket
Saved $46K in taxes
12:30–16:30
Tax Breakdown
Previous year income: $120K → Tax = $30K
With capital gain: $220K → Tax = $76K
Using policy loan kept taxable income at $120K → tax savings = $46K
16:30–18:30
Flexibility and Control
Loans taken quarterly to reduce admin
Could repay loan interest only (~$6,500)
Could also use tax savings to repay policy loan
Client stays in full control
20:00–22:30
Tool for Tax Planning
Recommended website: eytaxcalculators.com
Helps estimate tax burdens across income levels and provinces
Reinforces the importance of thinking ahead
Key Takeaways
IBC isn’t just for retirement. It’s a tool for active tax planning.
Clients with real estate or investments should plan for capital gains years.
Policy loans offer tax-free access to cash, enabling you to shift income reporting intentionally.
Maintaining control over your income stream can drastically reduce your tax burden, especially during big financial events.