Case Study: Mississauga Family Physician Saves $87K/Year via MPC Restructure + IPP
Reviewed by Bader A. Chowdry, CPA, CA, LPA on
By Bader A. Chowdry, CPA, CA, LPA · Last updated July 19, 2026 · Reviewed July 19, 2026 · 5 min read
Quick answer: A Mississauga family physician billing $650K OHIP + $75K non-OHIP through a 12-year-old Medicine Professional Corporation was paying full Ontario general corporate rate (26.5%) because passive investments inside the MPC had grown to $180K/year of interest and dividends — fully eliminating the small business deduction. Restructure into an individual pension plan (IPP) + non-connected investment corporation restored the SBD, generated an $87K annual tax saving, and preserved LCGE runway.
This is a medical practice accountant Mississauga engagement — a solo family-practice MPC with $2.4M of retained earnings sitting in the wrong place.
The challenge
A 47-year-old family physician in Mississauga had operated a solo family-practice MPC since 2014. Annual revenue: $650K OHIP + $75K non-OHIP (executive medicals + medical-legal reports). MPC retained earnings had grown to $2.4M invested in a Canadian dividend + bond portfolio inside the MPC, generating $180,000/year of passive income (mostly eligible dividends + interest).
Under section 125(5.1) of the Income Tax Act, every $1 of MPC passive income above $50,000 in the prior year reduces the current year’s $500,000 small-business limit by $5. At $180K of passive income, the small-business limit had been fully eliminated for three straight years. The MPC was paying the full Ontario general combined rate of 26.5% on all active professional income instead of the small-business rate of 12.2%.
Delta: 14.3 percentage points × $500,000 active income = $71,500/year of avoidable corporate tax. On top of that, the physician’s TFSA and RRSP were maxed; no IPP had been set up.
What we did
Insight Accounting CPA — led by Bader A. Chowdry, CPA, CA, LPA — restructured the MPC over an 18-month window:
- Purified the MPC. Distributed $2.4M of passive assets to the physician-shareholder via a series of eligible + non-eligible dividends (partial capital dividend account for the tax-free half of prior years’ realized gains).
- Set up a non-connected investment corporation (“Holdco”). Holdco is owned personally by the physician-spouse (not the physician, and the spouse has no ownership in the MPC), so the corporations are not associated under section 256. Passive assets moved from MPC to Holdco via after-tax reinvestment.
- Established an Individual Pension Plan (IPP). The physician’s T4 salary was set to $180,500 to max both the RRSP room ($32,490 for 2026) and generate maximum IPP contribution room. The MPC deducted $91,000 of IPP contributions in year one plus a $215,000 past-service catchup for the prior 12 years of employment.
- TOSI-safe spouse dividend re-org. The physician’s spouse turned 65 mid-window; the excluded-amount exclusion for a spouse over 65 opened. $50K/year eligible dividend to spouse post-65.
“Passive-income drift is the single most common reason a mature MPC leaks tax. The mechanics are entirely fixable, but they need a re-org — a re-file of the T4/T5 mix won’t do it.” — Bader A. Chowdry, CPA, CA, LPA
The result
Comparing the year before restructure vs. the year after:
| Item | Before | After | Delta |
|---|---|---|---|
| MPC passive income | $180K | $28K | -$152K |
| MPC active income taxed at SBD rate | $0 | $500K | +$500K |
| MPC corporate tax on active income | $132,500 (26.5%) | $61,000 (12.2%) | -$71,500 |
| IPP contribution deduction | $0 | $91K + $215K catchup | -$306K (year one) |
| Personal tax on $50K spouse dividend | $27K (top marginal, TOSI) | $10K (gross-up/credit at spouse’s marginal, no TOSI) | -$17K |
| Total year-one saving | ~$87,000/year ongoing + $102K one-time from catchup |
Additional benefit: because passive assets moved to a non-connected Holdco, the MPC’s 90% asset-use test for future QSBCS + LCGE qualification is now clean. The physician can sell the MPC in 2032 with the LCGE fully available.
Relevant tax provisions
- Income Tax Act section 125(5.1) — passive income reduction of small-business limit.
- Income Tax Act section 256 — associated corporation rules.
- Income Tax Act section 120.4 — Tax on Split Income (TOSI); excluded amount for spouse over 65.
- Income Tax Act section 110.6 — Lifetime Capital Gains Exemption (2026 amount $1,275,000).
- Income Tax Regulations Part LXXXIII — Individual Pension Plan (IPP) rules.
What this could mean for your practice
If your MPC has $1M+ of retained earnings invested inside the corporation and you have not restructured your passive-income exposure in 3+ years, you may be paying full general corporate rate on active practice income. The fix combines an IPP for the shareholder-physician, a non-connected investment corporation for surplus passive assets, and a TOSI-screened family-dividend policy.
Insight Accounting CPA has applied this restructure pattern across multiple Ontario physician and dentist engagements, recovering the small-business deduction within one fiscal year in each case.
Read the full Medical Practice CPA guide →
Frequently asked questions
Q: Is a non-connected Holdco owned by my spouse really not associated with my MPC?
It depends on the section 256 tests. Being owned by a spouse alone is not enough — the spouse must be the sole voting shareholder, the corporations must not have cross-ownership of shares, and the “de facto control” test under section 256(5.1) must be met. Attribution rules under section 74.1 may still apply if the physician funded the spouse’s Holdco shares. Insight Accounting CPA models each fact pattern.
Q: What does an IPP setup cost?
Actuarial setup: $3,500-$6,000 one-time. Annual actuarial valuation: $1,500-$3,000. Trustee fees: 0.5%-1% of assets under management. For a physician with $200K+ of tax-deductible contribution room, the IPP pays for itself in the first year via corporate tax savings.
Q: Can I do this restructure if my MPC is jointly owned with another physician?
Yes, but the plan is more complex. Group-practice MPCs must coordinate the associated-group calculations under section 256 across all physician-shareholders. Each physician’s non-connected Holdco must be genuinely independent.
Q: How long does the restructure take?
12-18 months. The IPP setup is 2-3 months; the passive-asset purification requires spreading dividend distributions across two-plus fiscal years to manage personal tax brackets; the Holdco setup and reinvestment can happen in month one.
Composite case study — the facts are aggregated from three separate Insight Accounting CPA engagements between 2022 and 2025. All client-identifying details are anonymized. The tax mechanics and outcome ranges are real. Bader A. Chowdry, CPA, CA, LPA. Insight Accounting CPA Professional Corporation, Mississauga, Ontario. This is general information for Ontario physicians. It is not tax, legal, or accounting advice for your situation. Please engage Insight Accounting CPA — or another Ontario CPA firm led by a Licensed Public Accountant — before acting.
Additional CRA & Government Resources
Source: CRA — Form T2057, Election on Disposition of Property Under Subsection 85(1).
Source: Ontario — Business Corporations Act, R.S.O. 1990, c. B.16.
Source: CRA — Corporation Income Tax Return.
Important — informational only, not advice. Do not use this article to make any decision.
This article is published by Insight Accounting CPA Professional Corporation for general educational purposes only. It is not tax, legal, accounting, financial, or investment advice, and nothing in this article should be relied upon — by anyone, for any purpose — to make a business, tax, financial, accounting, legal, or investment decision.
Tax law, CRA administrative positions, court interpretations, and Ontario provincial rules change frequently, sometimes retroactively, and the content of this article may be incomplete, simplified, out of date, or wrong by the time you read it. The right answer for your specific situation depends on facts this article does not know — your structure, history, jurisdiction, filings, contracts, and goals.
Before acting, engage your own Chartered Professional Accountant or qualified advisor who has reviewed your specific circumstances in writing. Insight Accounting CPA Professional Corporation, the author, and any contributors expressly disclaim all liability — direct, indirect, or consequential — for any action taken or not taken on the basis of this content.
Insight Accounting CPA Professional Corporation is led by Bader A. Chowdry, CPA, CA, LPA — licensed by CPA Ontario under the Public Accounting Act, 2004. To engage us for situation-specific advice, book a free 30-minute discovery call.
