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Exam 9: Other Income, Other Deductions, and Other Issues

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Question 1

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For purposes of deducting child care costs, how is an "eligible child" defined?

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An eligible child is defined in ITA 63(3...

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Question 2

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Upon the death of a taxpayer, which of the following statements is correct?

A) Capital property that is bequeathed to a spouse is transferred on a rollover basis.
B) Capital property that is bequeathed to a spousal trust is deemed to be sold at fair market value.
C) Capital property, whether bequeathed to a spouse or to anyone else, is transferred on a rollover basis.
D) Capital property, whether bequeathed to a spouse or to anyone else, is deemed to be sold at fair market value.

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Question 3

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During 2020, Jan Harding accepted a job transfer from British Columbia to Ontario. She will begin her new position on December 1. Her new salary will be $102,000 per annum or $8,500 per month. Upon arriving, Jan spent 25 days staying in a hotel due to an unfortunate delay in moving into her new residence. Jan incurred expenses related to the move of $13,402. Included in this total was $1,125 for meals and $2,125 for hotel stays while waiting for her new residence to be ready. How much can she claim on her 2020 tax return for moving expenses?

At her death on August 1 of the current year, Nancy Mori owned stocks with an adjusted cost base of $11,000 and a fair market value of $20,000, and a term deposit of $30,000. She also owned a building that had a cost of $98,750, a fair market value of $110,000, and a UCC of $70,000. She bequeaths all of her assets to a spousal trust. Her Taxable Income at death arising from the dispositions is nil.

Mr. Randy Cleroux owns 1,000 shares of Lyton Industries Ltd. These shares have an adjusted cost base of $105 per share. On December 31, 2019, the shares are trading at $156 per share. At this time, he gives 400 of these shares to his 12 year old son. He gives the remaining 600 shares to his wife. During 2020, the shares pay eligible dividends of $4.50 per share. On December 31, 2020, both his son and his spouse sell their shares for $142 per share. Assume that Mr. Cleroux does not elect out of ITA 73(1). Indicate the tax consequences of these transactions for Mr. Cleroux, his son, and his spouse, in each of the years 2019 and 2020. If there are no tax consequences for either individual in a given year, you should clearly state this fact in your answer.

On December 31, 2019, Mr. Tom London gives shares with an adjusted cost base of $21,500 and a fair market value of $35,200 to his wife, Barbara London. On February 24, 2020, the shares pay eligible dividends of $2,060 ($2,843 taxable amount)and, on August 31, 2020, Mrs. London sells the shares for $39,800. Assume that Mr. London does not elect out of ITA 73(1). What are the tax consequences for Mr. and Mrs. London in each of the years 2019 and 2020? If there are no tax consequences for either individual in a given year, you should clearly state this fact in your answer.

Elijah, aged 62 and Dara, aged 68 are married. Elijah collects CPP of $7,200 and has a $35,000 withdrawal from his RRSP. If Elijah shares the maximum amount of pension income with Dara, what will his Net Income For Tax Purposes be?

With respect to spousal and child support, which of the following statements is NOT correct?

John Withers is receiving an annuity payment of $500 per month. How will this payment be taxed?

What is the Canada Learning Bonds program? Briefly describe the program.

Earnings on amounts contributed to an RESP accumulate on a tax free basis.

One of your clients is a successful businessman with both a spouse and a minor child that have no income of their own. He would like to transfer some of his income into their hands for tax purposes. However, he is concerned about the income attribution rules. Provide him with three tax tips for dealing with these rules.

Which of the following statements with respect to Subdivision d income inclusions is correct?

Hugo owns a farm. Both Hugo and his son work on the farm raising sheep. On February 16, 2020 Hugo sold a shearing machine to his son for $5,000. The original cost of the machine was $10,000, the UCC is $8,000 and the fair market value is $5,000. The machine was the last asset in its CCA class. On September 1, 2020, his son took the machine to an auction in another province where an enthusiast bidder paid $6,000 for it. The tax consequences are:

Lance Mann dies, leaving a depreciable property to his son, Paul Mann. The property has a capital cost of $150,000 and a fair market value of $120,000. It is the only asset in a CCA Class with a UCC balance of $100,000. The tax consequences of this bequest would be:

Which of the following is NOT a requirement for spousal support payments to be deductible?

John Travis owns a depreciable property that has a fair market value of $295,000. Its capital cost was $350,000 and it is the only asset in its CCA class. The balance in its CCA class is $245,000. John sells the property to his brother for its fair market value of $295,000. Later in the year, prior to taking any CCA on the asset, his brother sells the property for $315,000. Determine the amount of income that would be recorded by Mr. Travis and his brother as a result of these transactions.

Ms. Veronica Lox owns securities with an adjusted cost base of $150,000 and a fair market value of $175,000. She sells these securities to her father for $210,000. He immediately sells them to an arm's length party for $175,000. Determine the tax consequences for Ms. Lox and her father.

Martin Ho owns a farm property. Relevant information is as follows: Land - The land has an adjusted cost base of $435,000 and a fair market value of $584,000. Building - The barn has a UCC of $140,000, a capital cost of $165,000, and a fair market value of $175,000. The property is transferred to his son. The son pays $470,000 for the land. No payment is made for the barn. Describe the tax consequences of this transfer for both Martin and his son.

Hans Myers wishes to transfer an investment to his wife, Olga. However, Olga does not have sufficient cash to purchase the investment for fair value. Hans would like to loan the funds to Olga to facilitate the purchase, as he wants the income on this investment to be reported by her. Olga will pay interest on the loan, as Hans expects the investment to generate substantial income. Which one of the following is NOT a requirement to ensure that the income on this investment will be taxable to Olga, and not attributed to Hans, in the future?