Non Cap. LCF: March 22/04 = 7yr March 23/04 = 10 yr After 2005 = 20 yr Transfer to a Corp.

Transfer to a Corp. & Partnership must calculate income as if it were a separate person resident in Canada. || Ex) Both Jon and Rob, only source of income  trust. The left over income is to remain in
Gross Div. Grossed Federal Div. Tax Credit (DTC)
Tax Value FMV Redemption of Shares: General partners are jointly and severally liable for the debts of the company. || General the trust, to be paid out to both at the time of Mr. Rosen’s death. Dec. 31/14 Year End:
Up Up Accounts Receivable $240,000 $224,000 1)Build. cost = $942,000 partners are entitled to participate in the management of the company. || Unless the Interest Income On Government Bonds $ 55,000
Eligible 38% 138% 6/11*gross up Building (Note1) 832,000 1,047,000 2) two assets in Class 8. partnership agreement states otherwise, general partners are entitled to an equal share of the Eligible Div.s Received From Canadian Corp.s 245,000
(CCPC) 20.727% *Div. received Depreciable Assets - A: cost= $54,000 profits of the business. [Advantages of Partnership: They may be able to split income
106,000 123,000
FMV= $65,000.
Revenues From Rental Property 394,000
Non-Eligible 18% 118% 13/18* gross up CCA Class 8 (Note2) with family members who are employed by the business. || They may be able to reduce
B:Cost =$66,000 Cash Expenses On Rental Property 247,000
Div.s 13%* Div. received Goodwill Nil 400,000 their personal income taxes during the start-up years. ] [Joint venture might be recognized
Inventories 440,000 462,000 FMV= $58,000. On Sep. 01/14, the rental property was sold. The property consisted of an apartment
Eligible Div. ex) Eligible Div. = $4,000*1.38 = 5520 || Fed. DTC = 4000*(6/11)*(38%) =829 because it would demonstrate one of the following factors: Co-venturers do not have the
Land 300,000 622,000 3) Machine cost = $425,000 building and the land on which it was located, all of which was transferred into the trust
Conditions is required for ITA 55(2) (Cap. gains stripping rules) to apply: power to bind other co-venturers contractually.] [Partnerships/ joint ventures: Neither
Machinery (Note3) 394,000 546,000 when it was established. The relevant info. related to the disposition is as follows:
|| There is a disposition of shares by a Corp. to an arm’s length party. || The Corp. that has disposed The transfer of the Summers joint ventures nor partnerships are taxable entities. || All partners in a partnership are
of the shares has received Div.s that are deductible under ITA 112(1). || One of the purposes of the Temporary Investments 84,000 74,000
Industries’ assets to subject to the same CCA decision in a given tax year, while members of a joint venture Building Land
Div. received by Corp. was to significantly reduce a Cap. gain on the disposition of shares. || Total Assets $2,396,000 $3,498,000
Summers Inc. is on July 1, may each decide their own amt of CCA to be deducted. || The concept of a joint venture is POD $1,857,000 $1,100,000
Liabilities -142,000 -142,000
2015, and an election will be not recognized by provincial legislation while the concept of a partnership is.] [ACB of a Undepreciated Cap. Cost 1,371,000 N/A
ITA 84.1 (Div. stripping rules) to be applicable:|| The shares that are disposed of must have been
Net Assets $2,254,000 made under ITA 85.
$3,356,000 partnership interest: || The share of the business income for the preceding year. || The Capital Cost/ACB 1,620,000 785,000
held as Cap. property. || The share disposition must be made to a Corp. with which the taxpayer does
Summers Inc. will assume
not deal at arm’s length. || The taxpayer who disposes of the shares must be a Canadian resident. original cost of her partnership interest. || The amt of cash that she withdrew from the This is the first disposition of capital property by the trust since its establishment.
the liabilities of Summers Industries and, in addition, will issue $1,600,000 in new debt to Ms.
Considered part of the boot received by a transferor in an ITA 85(1) rollover: Summers. With respect to share consideration, the new Company will issue preferred stock with a business in the preceding year.] [LP At-risk rules is: To ensure that the tax deductions
|| Debt securities of the transferee || Assumption of transferor debt by the transferee. || Cash. FMV of $400,000 and common stock with a FMV of $1,364,000. GRIP balance is NIL. Avail. to limited partners do not exceed the amt they have at-risk.] {{The establishment Trust
Jon (35%) Rob(25%)
of a trust: Naming individual beneficiaries is not necessary as long as the beneficiaries (40%)
In ITA 85.1(Share for share exchange): This rollover provision is commonly used in business Receivables /Temp. Investments: Exclude the AR from ITA 85 election, If AR is transferred are members of an identifiable group (e.g., the settlor’s children). || The settlor must Interest Gov. Bonds
combination transactions.  One requirement for ITA 85(1) with the consideration that the Corp. under ITA 85, cant election under ITA 22, $16,000 ($240,000 - $224,000) loss will be a Cap. loss, $19,250 $13,750 $22,000
must give the transferor in exchange for property transferred to the Corp.: The consideration given which will be disallowed under ITA 40(2)(g) because the transfer is to a Corp. controlled by the clearly intend to create a trust. || The property to be held in the trust must be known with Eligible Div. Rec. 85,750 61,250 98,000
to the transferor can only include at least one share of the Corp. transferor. certainty. || There must be an actual transfer of property to the trust.|| Trust is deemed to
be: an individual. [A testamentary trust is one that is established at the time of an Gross Up Of 38 % 32,585 23,275 37,240
A/R can be transferred using ITA 22 or ITA 85(1), but not both. Advantages of ITA 22: The Minimum Elected Values:
acquiring corp will be able to ded. bad debts reserve after the transfer || Vendor will be able to deduct
(1) The min. elected value for a dep. property, individual’s death. || Trust return is due 90 days after the trust’s year end.|| $40K TCG Land [(1/2)($1,100 - $785] 55,125 39,375 63,000
Accounts Receivable $ 224,000 under ITA 85(1)(e), is the least of the UCC for the
exemption Avail.|| If the trust cont. to exist 36 months after the individual’s death, 29%
any resulting loss as business loss || The acq. Corp. may incl. income as a result of the transaction. class, the cost of the individual property, and the TCG Build.[(1/2)(1,857- 1,620)] 41,475 29,625 47,400
Temporary Investments 74,000 rate applies] [Alter ego trust. There is a deemed disposition of certain types of property
FMV of the individual property.
Pref. shares are issued in an ITA 86 reorg. , it is important that they have characteristics that Inventories 440,000 Net Rental Income (1) 138,600 99,000 158,400
Asset A* 54,000
when an individual passes away. This would include property held by one type of trust
serve to establish their FMV. To establish the FMV of preferred shares: Class 8 Depreciable Assets (1) 106,000
Asset B** 58,000 for which the deceased taxpayer was a settlor. || When assets are transferred out of an alter Net Taxable Income $372,785 $266,275 $426,040
||A provision which requires redemption at a specified value at the discretion of the shareholder. Machinery 394,000
||A claim to assets that has priority over the C/S in the event of liquidation. ||A fixed div. rate. || Total $112,000 ego trust to anyone other than the settlor, the proceeds of disposition to the trust will be (1) The net rental income, including the recapture of CCA:
Land 300,000 the FMV of the assets transferred.|| ] [Inter vivos trust :||The trust will not be taxed on
Conditions are required Under ITA 86 (Exchange of Shares in a Reorganization) : Building 832,000 Revenues From Rental Property $394,000
* A (Least Of $106,000, $54,000, And $65,000) income that is distributed to the children during the year. || The settlor will recognize the Cash Expenses On Rental Property ( 247,000)
|| Transferor of the original shares must receive shares of the new Corp. as consideration for his Goodwill 1 accrued capital gains on the securities at the time of their transfer to the trust. || The income
** B (Least Of $106,000, $66,000, And $58,000) Recapture Of CCA:
shares. || The new shares that will be issued must be authorized by the Corp.’s articles of in Corp.
Total Elected Value $2,370,001 retained in the trust will be taxed at the max. 29% rate.] [The amts will be included in of Capital Cost Of The Building $1,620,000
(currently, or through an amendment prior to the reorganization). ||The original shares must be
held by the owner as Cap. property. || NI For Tax of a trust: || Retained income which has been allocated to a preferred UCC Balance ( 1,371,000) 249,000
ACB Of The Consideration: ABC of the non-share consideration would be its FMV, in the beneficiary of the trust. || Amts paid or payable to a beneficiary of the trust. || Amts that
The application of ITA 88(1), winding up of a 90 % owned subsidiary: || A write up of non-Dep. case of debt, would be its face value of $1,742,000 ($1,600,000 + $142,000 [new + old debt]).
have been paid to a beneficiary but have been designated not to have been paid. ] [ || Items Net Rental Income, Including Recapture $396,000
Cap. property may be avail. || Subsidiary losses will become avail. to the parent company in its first Total Elected Value $2,370,001
taxation year which begins after the windup. || The tax values of the subsidiary assets will be
that can be allocated to beneficiaries of a trust: Recapture of CCA on the disposition of
Tax Payable for the Trust = Federal Tax Before Credits - Federal Div. Tax Credit

Dividend Stripping: || 1) PUC Reduction = Incr. in LSC, Less Excess: { (PUC and
ACB of Shares) + Over Non-Share Consi.} || 2) Deem.Div. = Incr. in LSC + FMV
Non-Share Consideration ( 1,742,000) trust depreciable assets. || Gains resulting from the disposition of trust cap. property. ||]}}

of Boot – PUC and ACB of Shares – PUC Reduction || 4) Taxable Non- Eli Div.
carried forward to tax records of the parent company. || Disposed assets at UCC to parent, the bal. Fed Tax Pay. = [(29%)($426,040)] - [(6/11)($37,240)] = $103,239
before CCA is Nil and no CCA is taken by Sub because CCA is claimed by parent|| Avail. For Common And Preferred Shares $ 628,001 {{[ Residency: || Canadian residents must report their worldwide income for tax purposes.

||5) Adjusted POD = Proceeds before Adj. of Shares (Elected Amount) –

Assets not ideal For ITA 85(1): ||A/R (S22) ||Shares quali. for QSBC ded.||
ACB Of Preferred Stock (FMV ) ( 400,000) || If an indiv. is a resident of Canada for part of the calendar year, that indiv. only has to Inter vivos trust, all of its income is subject to federal tax at 29% [ITA 122(1)].

Deemed Dividend || 6) Capital Gain = Adjusted POD – ACB of Share ||

||GRIP when amalgamated company is a CCPP || Non-Cap losses || Net Cap. Losses|| will flow through from a

||Dep. assets with terminal loss ||Non-dep. assets w/ accrued cap. losses||
predecessor company to an amalgamated company under ITA 87 (100% owned) ACB Of Common Stock (Residual) $ 228,001 report his worldwide income during the period of residency for Canadian tax purposes. ||An Total PUC= $628,001 ($142,404 + $485,597), which also equal to $2,370,001 (elected value)
indiv. can be a resident of Canada for tax purposes, even if she is not a Canadian citizen.]

= Deem. Div *Gross Up|| Fed Non-Eli. DTC = [13/18] * Gross Up

Application of ITA 87: || Losses of the two predecessor companies can be used by the amalgamated company in PUC Of The Pref And C/S: The PUC calculation would begin with less $1,742,000 (non-share consideration). It is also equal to the total ACB of the two classes
its first taxation year. || The Dep. Cap. property of the predecessor companies will be carried forward to the tax [Income that are subject to withholding tax under Part XIII when paid to a non- of shares ($400,000 + $228,001).
the legal stated values of the shares. These were $400,000 for the pref. resident: A withdrawal from a RRIF by a former resident of Canada.|| A deferred bonus
records of the amalgamated company at UCC values. ||Cap. Div. acct of the predecessor companies will be avail.
stock and $1,364,000 for the common stock. ITA 85(2.1) reduction: Input Tax Credit (ITC) [1]:
to amalgamated company if a private company. || GRIP bal. is avail. to amalgamated company if it is a CCPC|| from a former employer who is resident in Canada. ||Dividends received from CCPC. ]
Total Increase In LSC ($400,000 + 1,364,000)
Ex) A store is currently operating as a proprietorship. Sadia wants to transfer her proprietorship assets to a $1,764,000 [Residency of Individual (ITA-5) : Basic ties: Dwelling|| Spouse or partner || Dependents|| Ex) Retail business situated in Newfoundland. Purchases
Less Excess Of:
Corp. in exchange for shares and non-share consideration. Under ITA 85(1) the transfer and elected transfer ] [Part Year: Departing Canada Latest (recent) Date of: Departure || Departure of spouse Revenues: Amort Exp.
price on inventory equal to the FMV> Cost . Result: ||Business Income= FMV-cost = transfer price - tax value ||
Total Elected Value ($2,370,001) and dependents || establishment of new resident || ] [Deemed Resident (ITA-250(1)): Fully Taxable Goods $175,000 Salaries+Wages
Ex) Jessica Huebner wishes to transfer a piece of machinery to a Corp. using ITA 85(1). This machinery is Over The Total Non-Share Consideration 1,742,000 (628,001)
Sojourners (183 days) – Do not stay overnight|| Ambassadors of Canada (Government Exempt Services 50,0000 $225,000 Inteterst Exp.
currently used to produce income. It has a Cap. cost of $500,000, a UCC balance of $112,000 and a FMV of Reduction In PUC $1,135,999 Officials) || A child of deemed resident provided that the dependent has income less than Less: Expenses Other Op. Exp.
$100,000. || Under ITA 85(1), the terminal loss could be deducted if the use of the property is changed to non- Equipment
income producing asset at a later date after the transfer. || Basic personal tax credit($11,327).]  Chapter 21: [|| In a province, there can be a COGS $(95,000)
The PUC reduction would be allocated on the basis of FMV s as follows:
provincial sales tax or the HST, but not both || Long-term residential rents are exempt from Amort. Exp. (15,000) Building [a]
Ex) Mr. Chu wishes to transfer his proprietorship to a Corp.. Will has no eligible Cap. property on the B/S of
the proprietorship, but you recommend that he transfer goodwill at an elected value of $1. || To ensure the Pref. Stock [($1,135,999) ($400,000 ÷ $1,764,000)] $257,596 GST. || Manitoba and Saskatchewan charge GST at the same rate.] [Canadian government Salaries+Wages (12,000) GST Refund
goodwill is incl. in the election, and also ensure the transfer of goodwill is not considered a gift. || Common Stock [($1,135,999) ($1,364,000 ÷ $1,764,000)] 878,403 compensate for the regressive nature of the GST: || By providing a refundable GST tax Interest Exp. (35,000) (167,000) = GST on Sale [1] [2] – ITC [1]
Ex) Fatuma would like to transfer her Corp. to her son. Her son will not have the funds to purchase all of the Total PUC Reduction $1,135,999 credit that is avail. to low income individuals. ||] [Despite several advantages of transaction Income Before Taxes $ 58,000 [1]
shares for at least 5 yrs. || An ITA 86 reorganization of share capital. || will permit Fatuma to transfer the future At the given rate (5%)
taxes, such as their simplicity, they are not the only source of revenue for the Fed. Less: Fed+Prov. Taxes (18,000) [a]
(100% - % used for
growth of the company to her son without any immediate tax effect for herself. Subsequent to applying this reduction, the remaining PUC:
government. income taxes are still used as a significant source of revenue for the Net Income $40,000 providing exempt supply)
ITA 85 (Non-Dep Prop): || 1) TCG= ½ *[Elected Value – ACB || 2) Shareholder Benefit (SB) = FMV of Total Preferred Stock Common Stock
Consideration – FMV of Prop. ||3) Total Addition to NIFTP= TCG + SB ||
government because they are less regressive than transaction taxes.] [ Fully taxable Other Information: = Rate x remaining Bal.
Legal Stated Capital $400,000 $1,354,000
4) ACB of Pref. Shares = Elected Value – ACB of Note (FMV) + SB || supplies are taxed at the HST rate and zero-rated supplies are taxed at 0% || Expenditures Inventories of taxable goods decreased by $10,000 [2]
Sales- Exempt supplies
PUC Reduction ( 257,596) ( 878,403)
5) PUC Red. = Incr. in LSC, Less Excess of: (Total Elected) + Over the Non-Share Consideration || related to both types of supplies are eligible for Input Tax Credits (ITC). || Zero-rated during the year. || A capital expenditure was made during - Zero related Supplies
Total PUC $ 142,404 $485,597 supplies are taxable at 0%, while exempt supplies are not taxable. Expenditures related to
ITA 85 (Transfer of Shares): 1) PUC Red. = Incr. in LSC,Less Excess of: { (PUC and ACB of Subj. Share) + Over the year at a HST inclusive cost of $56,500. The expenditure
the Non-Share Consideration} || 2) PUC New Shares = PUC of Old – PUC Red. || 3) Deemed Div (Non-Eli) = Incr. zero-rated supplies are eligible for ITC, any exempt supplies are not eligible||] {[A GST was for equip. that will be used 60 % for the provision of fully taxable goods. HST was paid on the
in LSC + *Non-Share Consideration, Less: {PUC and ACB of Subj. Share + PUC Red.} || Sale of Assets: [1] A/R no section 22 election
|| A/R FMV – A/R Actual cost = A/R G/(L) + A/R allowance = A/R Cap. G/ (L) * 50% = Allowable G/(L) || rebate is Avail. to employees of a GST registrant located in a province that does not acquisition of all assets on which amortization is being taken during this period. || All of the Other
4) TCG=1/2*[ Elected POD for Subj. Shares - Deem. Div - ACB of Subj. Shares] (* can be cash or note) Operating Expenses involved the acquisition of fully taxable supplies and were acquired to assist in the
participate in the HST program. The calc. is based on a factor of 5/105 of: || All eligible
ITA 84(3): Redemption of Pref. Shares: || 1) Deemed Div. (DD) = POR – PUC of Redeemed Shares || [2] Inventory  || FMV Inventory – Inventory Cost = Inventory (ABI) || provision of fully taxable supplies. || Of the Salaries And Wages, 40 % were paid to employees involved
expenses for fully taxable supplies deducted in the calc. of net employment income,
2) Adj. Deemed Div. = Deemed Div. – **Amt Deemed not to be a Div. {(DD – [(% of O/S)*Income since acq]} || [3] Market Security  || FMV Market Security - Market Security cost = Market Security (ABI) || in providing exempt services. | |Newfoundland participates in the HST program. The HST rate in the
3) TCG = ½*[POR- Adj Deemed Div. – ACB] ** 55(2) = Div. is received in conjunction with dispo. of shares to
including capital cost allowances.||] [ Part I Tax On Non-Resident - Types Of Income :
province is 13 %. When the Quick Method is used in the province, the remittance rate is 4.4 % for a
arm’s length. Div. was to red. The cap. gain that normally result from dispo. of shares. [4] Land  || FMV Land – Land Cost = Capital Gain * 50% = TCG / CDA || Employment In Canada || Carried On Business In Canada || Disposition Of Taxable retail business and 8.8 % for a service provider.||
Share Exchange: 1) PUC Red. = Incr. in LSC, Less Excess: { (PUC of C/S) + Over Non-Share Consi.} || 2) ACB [5] Building/ Equipment  || FMV Building – Cost Building = Capital Gain * 50% = TCG / CDA || Canadian Property ] [Part XIII Tax: Property income (interest, rents, royalties, and Notes:
Pref. Share= ACB of C/S – (Non- Share Consi. + Gift) || 3) Deem. Div. (Non-Eli.) = PUC of New Share + Non- || FMV Building – UCC Building = Recapture (if negative all in ABI) || dividends) are subjected to tax under Part XIII || General rate is 25% || Assessed on gross Amort. Exp. does not affect the HST
|| FMV Equip. – UCC Equip. = Recap. (if neg. all in ABI) if positive then Terminal Loss fully deductible||
HST Collected [(13%)($175,000)] $22,750
Considi. – PUC of Old Shares || 4) Adj Proceeds= {POD Lesser: FMV of Shares Given Up[a] || Non-Consi + Gift amt of income received – no deductions|| ] } { A tax that is assessed on specified types of calc.||No ITC on Salaries/Wages,
[b] }, Less Deem. Div. || 5) TCG = ½ *[ Adj. Proceeds – ACB of Old Shares] || [7] Customer List  || FMV List – Cost of List = Gain/(Loss) on list * 50% = Taxable gain (ABI) / CDA|| transactions. - Transaction Tax} {An entity who is registered to collect and remit the Credits On Current Expenditures: amort. expense, interest ||
[a] % shares own * Share’s FMV [b] Gift = FMV of Shares Given Up – [ Cash Receive + Pref. Shares] || CEC of List – [ (3/4)* [lesser of: cost or proceeds of customer list] = Recap. (ABI)|| Purchases [(13%)($95,000 - $10,000)] ( 11,050)
GST/HST. – Registrant} {Goods and services that are not subject to the GST/HST. -
Limited Bump Up of Non- Dep Asset: 1) Excess = ACB of Shares – (a) Tax Val. of Net Assets at Wind.Up – Div [8] Goodwill  || FMV Goodwill – Prev. Balance = Goodwill * 50% = Goodwill (ABI) || Amortization Expense Nil **Rate usage = (100% - % used for
Exempt Goods and Services} {Goods and services that are taxable at a zero GST/HST
Paid since acq. || 2) Non-Dep. Asset B-Up = FMV of Non-Dep. Asset at acq – Cost || (a) Total Equ. – Liab. [9] Tax on ABI and Investment Income [- TCG] (different rates!) Salaries And Wages Nil providing exempt supply)
rate. Registrants who sell such goods are eligible for input tax credits. - Zero-Rated
Tax Conseq. Cash Distribution 1)Total Distri. = Avail Cash + Div. Refund (RDTOH Bal) || 2) Deem.Div. = Total Corp. Rate = 38% || Abatement = 10% || SBD = 17%|| GRR = 13% || Add. Refund. = 6.667%||
Goods And Services } { A combined federal/provincial sales tax that is generally assessed Interest Expense Nil
Distri. – PUC || 3) Div. Subj. to Tax = *Deem.Div. – CDA (Election) || 4) Deem. POD = Total Distri. to Shareholder ABI= 38%-10%-17% = 11% + Prov. Tax rate | | TCG = 38%-10% + 6.667% + Prov. Rate Other Oper. Exp. [(13%)($35,000)] ( 4,550) Ex) $300 is the Build., will be used
– Deem.Div || 5)TCG = Deem. POD – ACB of Shares || * Subj. to Eli./Non-Eli. Div. Tax
on the same basis as the federal GST. – HST} {Any business or trade carried on by a 22% for providing exempt supplies.
[10] RDTOH = Open RDTOH + [ Least of: || 26-2/3% Of Investment Income
Reorganization - ITA 86 Application: Financial Distress || Estate Freeze|| Takeover By Key Employee || 26-2/3% * (TI - Amt Eligible SBD) || Part I Tax Payable ||] person, or any supply of real property made by a person. - Commercial Activity} {A tax Credits On Capital Expenditures Rate usage = 100%-22%= 78%
ITA 86 Tax Consequences: || Proceeds Of Redemption [(5)(d)] = PUC Of New Shares + Boot ||
based on the value added to a product at each stage of production or distribution by a [(13%)(100%)($56,500 ÷ 1.13)] ( 6,500) ITC= (78%)(5%)(300)
a. Avail. Funds: b. Deemed Taxable Div.: particular entity. - Value Added Tax } { An amt, claimable by a registrant, for GST/HST
|| POD [(1)(c)] = ACB Of New Shares – Boot || PUC Reduction [(2.1)(a)]= New LSC, Less (Old PUC - Boot)|| HST Payable $ 650
ITA 86(2) Gifting Rule Conditions : FMV of old shares > FMV of new shares + boot || Excess can be regarded as Proceeds of Asset paid or payable on goods or services that were acquired or imported for consumption, use, Cap. Expenditures: Equip. & Build.
Fund for Distribution [1]
a gift (A related party is a shareholder who will benefit) +Marketable Security? or supply in the course of the registrant’s commercial activity. - Input Tax Credit (ITC)}
Less: Paid Up Capital (PUC) Kole’s HST included taxable sales of $197,750 [(113%)($175,000)] is less than $400,000
ITA 86(2) – Gifting Results || POD (Old) - ITA 86(2)(c) - Lesser Of: Boot + Gift || or || FMV Of Old Shares  If +Cash not Purchased {A provision that allows employees to recover the GST/HST paid on their employment
Loss On Old Shares: Deemed Nil Under ITA 86(2)(d) || Gain Will Be Taxed =Deemed Dividend and it is not engaged in an ineligible business such as accounting, Kole can use the Quick
+RDTOH related expenses.- Employee +Partner GST/HST Rebate} {A method of determining
ACB (New) - ITA 86(2)(e): || ACB (Old), Less (Boot + Gift) || Less: Capital Div. Account (CDA) Method. The Quick Method calculations would be as follows:
-Due to shareholders? GST/HST amts payable or receivable that is avail. to registrants with annual GST/HST
ITA 84.1: Avoiding Deemed Div. take back max. non-s boot) higher of:
= Deemed Taxable Div. (Non-Eligible)
-Accounts Payable taxable sales, incl. those of associated businesses, of $400K or less. Specified percentages Basic Tax [(4.4%)(113%)($175,000)] $8,701
a)PUC or b) ACB NI for Tax on Residents =
- Income Tax Payable are applied to the GST/HST inclusive sales figures to determine the GST/HST payable or Credit On First $30,000 [(1.0%)($30,000)] ( 300) Employment Income [CDN &
d. Tax. Cap. Gain on Disposition of Shares:
ITA 87 – Amalgamation: The effect on Rollover: = Fund for Distribution [1] the refund. Input tax credits on capital expenditures are tracked separately. - Quick Total Before Capital Foreign] + Investment income
Streamlined method: Fund for Distribution [1] Method – Also, Apply Given % to GST Inclusive Sales (Varies By Province) || 1% credit [CDN & Foreign] (Interest,
Asset Rollover @ Available to registrants with annual
c. Deemed Taxable Div.: Less: Deemed Dividend Expenditures $8,401
CG/CL @ 50%, etc.) + Business
on first $30,000} {Small Supplier Exemption: Small Supplier Threshold : <$30,000 per
Inventory Cost GST/HST taxable sales of < $1M in the Fund for Distribution [1] = Proceeds of Disposition Input Tax Credit On Capital Expenditures Income/(Loss )+ Spousal
year in taxable supplies || May Voluntarily Register: may want input tax credits. || Last 4
Dep. Cap. Property UCC preceding year. Additionally, annual Less: Paid Up Capital (PUC) Less: Original Cost of Shares
[(13%) (100%)($56,500 ÷ 1.13)] ( 6,500) receipts – Spousal payments –
Calendar Quarters Test: Over $30,000 on cumulative basis || Calendar Quarter: Over
Non-Dep. Cap. Prop. ACB GST/HST taxable purchases <$4M. HST Payable $1,901 RRSP contributions
=Deemed Div. = Capital Gain * 50% = Taxable Capital Gain $30,000 in a single quarter. } {ETA 123 – “Supply” means the provision of property or a
Eligible Cap. Prop. 4/3*CEC Less: Capital Div. Acct (CDA) service in any manner, including sale, transfer, barter, exchange, license, rental, lease, gift,
= Deemed Tax. Div. (Non-Eligible) f. Tax Payable: or disposition.} Foreign Investment Reporting Rules: CDNs are required to declare **Expenditures +Capital Real property: (Land and Building) can be credited.
Minimum Elected Amount Greater of: (i) FMV of boot or
Corp. Tax(Fed+Prov) Payable (on Incr. Tax. Income) foreign property in excess of $100,000. [Foreign Property: • Life insurance policy you own Usage <10% = Nil, usage >90% = 100% credit, 10% < X% <90% = X% || Personal Cap.
(ii) lesser of: a) FMV of property | b) ACB |c) UCC/CEC (*exception: goodwill/software) e. Tax on Incremental Income: Less: (Fed + Prov) DTC [{(13/18) + ? }* gross-up] from a foreign issuer • Interest you own in any offshore mutual funds • Any real estate you Property (Furniture & fixtures): >50% in CA = 100% credit, <50% in CA = Nil||
Assumed Debt: Allocated to the Elected amt of the asset || New Debt: Tax Value – New Debt Deemed Taxable Div.(Non Eligible) =Tax Payable
|| Pref. Shares = FMV – Tax Value || C/S = FMV- Pref. Share Gross Up (18%) own held outside Canada • Money in a foreign bank account • Shares you own of a foreign Ex)Warsame operates a store in Saskatchewan. The prov. sales tax is 5 % and it is a non-participating
=Grossed Up Div. company • Interest you hold in a non-resident trust • Bonds or debentures owned from province. The store had fully taxable purchases of $280,000 and purchased capital items (not including
GST +PST: MB (5% + 7%) || SK (5% + 5%) || BC (5% + 8%)] [HST at 15% - NS] g. Cash Retained After: foreign countries • Income you earn from foreign property.] [ Foreign property you can real property) with a cost of $15,000. This store uses the streamlined method of accounting for input
[GST+ QST – QC (5% + 9.975%)] [HST at 13%: NB || NF || ON] [HST at 14% - PEI ] + Taxable Capital Gain Fund for Distribution [1] – Tax Payable
= Incremental Taxable Income exclude: • Any property you own primarily for personal use • Any property you use for running a tax credits. Both amts include PST and GST. ITC to claim = 14,048 [(5/105)(280,000 + 15,000)
business like a building, equipment and inventory. note: FMV not relevant ]  ITC is not permitted for club fee as the fee is not ded. for income tax purpose
Ex) Partnership Income Allocation Withdrawal of Partner: Ex) Testamentary Trust ITA 70(6)(b): Chris Jill passed away On Jan 31/15, his will [ Partner to Partnership Rollover - ITA 97(2)-Transfer to Canadian partnership with Ex) Jan 1/15, Derek acquires a 5% interest in a LP for $150. Ian pays an immediate deposit
Revenues $1,555,400 came into effect and as a result all of his property was transferred to a testamentary trust. an election by all partners : Disposition and Acquisition at elected value (tax value)  of $75 with the bal. due in 2017. At year ending Dec 31/14, the partnership determines that it
Non-Eligible Div. Rec. Canadian Corp. 70,400 Adj. Cost Base: The trust will have a Dec 31 year end. The transferred property is as follows: Partnership to Partnership Rollover - ITA 98(6): Auto. (no election required) || Must has a $25 cap. gain and a $60 business loss. At-risk AMT = [$150 - $75 + {(5%)($25)}]
Gain On Sale Of Shares Of CDN Public Corp. 114,400 Initial Capital Contrib. include all property || All partners must have been in old partnership ||ITA 98(6) views the Ex) The interest PMT made to a non-resident would be subjected to Part XIII withholding

settlor’s deemed POD of the FMV of $1,100, and will record a TCG = $50 [(1/2)($1,100
$1,000. On the date of the gift, the UCC was $750 and the FMV was $1,100. || The

- $1,000)]. Recapture of CCA of $250 ($1,000 - $750). || The trust acquires the property
Ex) A gift of depre. Cap. property is made to an inter vivos trust in favour of the
settlor’s adult children. The capital cost of the depreciable property to the settlor was

at a deemed capital cost of $1,100. However, for purposes of calc. CCA and recapture,
the ITA 13(7)(e) rules for non-arm’s length transactions apply and the value will be
+Additional Cap. Contrib. Tax Cost FMV Jan 31/15 old and new partnerships as the same partnership  Partnership to Proprietorship tax: If a resident of a country that does not have a tax treaty with Canada, earns $25,000 on
Total Revenues $1,740,200
-Own Drawing from Partnership Portfolio Investments $420,000 $646,500 Rollover applies automatically if: w/in 3 months of the end of an old partnership || one a loan to Gelato Limited, a CCPC. And owns 40% of the shares in the company.
Expenses:
+Share of Net BI GIC 172,500 172,500 partner cont. to carry on the business as a sole proprietor.||  ITA 85(2) allows rollover
Salaries To Staff ($629,200) Ex)Levi is a resident of the US, living in Michigan. He works and earns income in Canada all
+Share of Cap. Gains Rental Property: of partnership property to a Corp.  ITA 85(3) allows rollover of corporate shares to
Office Rent ( 140,800) Land 192,000 237,750 year as follows: || Employment income=$9,500 ||Business income = 30,000 || Capital gain
+Share of Charitable Don. partners for their interests  Rollover is automatic if: The corp. is a taxable CDN Corp. ||
Office Supplies ( 57,200) Building (Cost = $255,000) 207,000 369,000 from disposition of vacant land in Canada =10,000 || Interest income on bank account in
Adj. Cost Base [1] The partnership is wound up w/in 60 days of the transfer || Immediately prior to the wind up,
CCA On Office Equip. ( 63,800) Canada=500 || Income under Part I of the ITA =$35,000 [$30,000 + $5,000]. The
Income+Exp. amts were recorded by the trust: the partnership only holds money or assets received from the Corp.  Rollovers to a
Charitable Donations ( 138,600) TCG = ½*(POD -ACB[a]) employment income is exempt from taxation in Canada as it is less than $10,000.
Eligible Div. Rec. From Canadian Corp $ 24,000 Capital Beneficiary: Transfer at trust’s tax cost  Exceptions: Spouse or partner trust ||
Drawings By Jessica ( 319,000) [a]
ACB[1] - (Legal+ACCT fees) Interest On GICs 5,175 Alter ego trust ||Joint spouse or partner trust  Net Income Adj. - Deductions avail. for: Ex)Trent is the sole beneficiary of an inter vivos trust. During 2015, the trust had the
Drawings By Diana ( 336,600) ( 1,685,200)
Net Rental Income: Amts paid or payable to beneficiaries || Trustee’s or executor’s fees || Amts paid by the trust following income: Capital gain from share sale =30,000 || Eligible Div.s from publicly traded
Net Income (Accounting Values) $ 55,000 Note: the partners that stayed Rental Revenues $40,125
would have an increase in on behalf of beneficiaries Pref. Beneficiary Election : Income retained in trust, taxed in Canadian corp. =$ 70,000 ||Non-eligible div. from a family owned CCPC = 317,000 ||The non-
Rental Expenses Other Than CCA (9,000) hands of beneficiary || -Only applicable to beneficiaries: Who are eligible for the disability eligible Div.s and capital gain are distributed to Trent.
For the year ending December 31, 2014 the partnership incl. their ACB = amt paid. CCA Claimed (6,750) 24,375
an amt of $215,600 of WIP in the accting revenues for that year. tax credit; or Can be claimed as an infirm defendant over 17||  Amts deemed not to be Income Increase= Non-eligible Div.s received + Gross-Up on Non-eligible Div. + TCG
For the current year, the Revenues include the Dec 31/15 WIP = $510,400. Total Income (Jan31 to Dec 31 2015) $53,550 paid: A distribution that is taxed in the trust rather than in the hands of the recipient = 317,000 + [($317,000)(18%)] + [(1/2)($30,000)]= $389,060
While the Chark sisters have chosen to incl. WIP as revenue in their accting statements, beneficiary. Reasons for using: Lower rates|| Avoidance of instalments || Use of trust Ex)Mr. Hudson’s 23 year old daughter, Lianna, is the sole beneficiary of the Hudson family’s
Trust agreement: || Income= 25% to Jasmine and 65% to Louis. losses|| Amts retained for a beneficiary under 21 years of age :Retained in the trust but

$1,050 [$1,000 + (1/2)($1,100 - $1,000)]. ]

they have elected under ITA 34 to exclude these amts from their tax calculations. trust. This trust is an inter vivos trust. During 2015, the trust has the following activities:
The remaining income will be retained by the trust to be taxed in the hands of the beneficiary || Beneficiary must be under 21 during the year ||Amts
Net Income As Per Income Statement $ 55,000 distributed at the discretion of the trustees. No discretionary Receives Int. income of $150,000. || Charitable Donation of $10,000 || Distributes $75,000 to
Add back to Net Income: must vest irrevocably with the beneficiary. Income Allocations to Beneficiaries: To be Liana || Liana has no income other than what she receives from the trust, and is eligible only
Additions: distributions were made during 2015.||| deductible, amts must be paid or payable Not considered payable if: A beneficiary can
+Amortization for the personal tax credit. The federal Tax Payable for the trust for 2015.:
Previous Yr End WIP $ 215,600 Tax Consequence to Christopher death: only enforce PMT of an amt of income by forcing the trustee to wind up the trust. || The
+ ½ Meals/Entertainment Charitable donation tax credit = [(15%)($200) + (29%)($9,800)] = $2,872
Charitable Donations 138,600 there would be a deemed disposition of his capital property: beneficiary’s right to income is subject to the approval of 3rd party. ||PMT of income is at the
Drawings By Partners 655,600 1,009,800 Trust TP = [(29%)($150,000 - $75,000) ] - $2,872 = $18,878
Cap. Gain On Portf. Invest. ($646,500 - $420,000) $226,500 trustee’s discretion. ||The beneficiary has the power to amend the trust deed and must do so to
$1,064,800 Deduct to Net Income: cause the income to be payable. Ex)In 2013, Paul transferred property with ACB=$400 and FMV=$750 to alter ego trust.
-Max. CCA Capital Gain On GIC Nil The will bequeaths all property to the son. At his death 2014, the new FMV=800. Paul uses
Deductions: Capital Gain On Land ($237,750 - $192,000) 45,750 Residence of Corp.s  Incorp.. In Canada After April 26, 1965- Deemed Resident ||
Current Yr End WIP ($510,400) Incorp. In Canada Before April 27, 1965 -Deemed Resident If: Was Resident At Any any rollover to min. tax consequences.|| In 2013, a rollover would allow Paul to transfer his
*the rest are the same!! Capital Gain On Building ($369,000 - $255,000) 114,000 property to the trust tax free. The deemed proceeds for the settlor (Paul) at tax cost=$400, so
Dividend ( 70,400) Time or Carried On Business In Canada  Incorp. Outside Of Canada :Mind And
Capital Gain ( 114,400) ( 695,200) Taxable Capital Gains (50% *386,250) $193,125 Management Of Company  Canada/U.S. Tax Treaty: If resident in both CDN and U.S. no G/(L) on the transfer. The trust acq. the property at a deemed cost= $400. In 2014, the
Ex) CCA: Class 50
[(1/2)(55%)($10,000)] Recapture On Building ($255,000 - $207,000) 48,000 there will be deemed to be a resident of the country in which it is incorporated  Non- trust transf. the property to his son, the trust will have TCG= $200 [(1/2)($800 - $400)]||
Net Business Income $369,600
Recall: half yr rule Total Income In Final Tax Return $241,125 Resident Corp.s are liable for CDN source income from: ||Business| Capital Gains on the Ex) Jane has operated a business for 30 yrs and has accumulated securities that earn interest
Partnership Share TI disposal of “Taxable Canadian Properties”||  Taxable Canadian Propery: 1. Real income of $40,000/yr. Her other sources of income places her on the top bracket for personal
Allocated Taxable Income: property located in Canada ||2. Property used to carry on a business in Canada (including tax. Her son (22 yrs old) has no income for tax purposes and only tax credit avail for him is
Partnership BI 369,600 50% 184,800 Jasmine (25%) Louis (65%) Trust (10%) basic personal. If Jane transfers the interest from the securities to a trust with her son as
TCG [50%*114,400] 57,200 50% 28,600 eligible capital properties and inventory)||3. Shares of CDN resident private Corp.s ||
Eligible Div.s Received $ 6,000 $15,600 $2,400 4. Shares of Non-resident private Corp.s, if at any time in the last 60 months, the FMV of beneficiary the fed. taxed saved = {(29%*40,000)-[(15%)*(40,000-11,138)]}=7,271
Partnership Div. Received 70,400 50% 35,200
Gross Up on Div. Rec. (38%) N/A 41,536 Gross Up (24,000*38%) 2,280 5,928 912 the company’s real and resource properties made up >50% of the FMV of all its properties || Ex) Mandy borrows $250 and invests it a Canadian rental property. It produces gross rental
Interest On GICs (5,175) 1,294 3,364 518 5. Shares of any public Corp.s, if at any time in the last 60 months, the owned by non- income of $36. The interest costs on loan totals $3, and other exp. of operating the property,
Taxable Income (TI) 249,000 Net Rental Income ($24,375) 6,094 15,844 2,438 resident and/or related non-arm’s length persons (taxpayer owned) ≥ 25% of the shares of incl. max. CCA, total $10. Rental income under : Part I = 23 (36-10-3) || Part XIII = 36
Charitable Donations 138,600 50% 69,300 Net Taxable Income $15,668 $ 40,736 $6.268 any class || 6. Partnership interest, if at any time in the last 60 months, > 50% of the Ex)Tara is a real estate agent her HST= 13%. She earns commission income, and pays her
partnership’s value was derived from Taxable Canadian Property  U.S./Canada Tax employment related expenses herself. Tamara has claimed the following expenses on her
Donations : Fed. Tax credit= $20,069 [(15%)($200) + (29%)($69,300 - $200)] assuming this
is their only charitable donation. [Deduct on 1ST day of the following fiscal yr] Federal Tax Payable for the Trust = Fed. Tax Payable Before Credits – Fed. DTC Convention : Income taxable if a permanent establishment || Excludes certain facilities (e.g., T777 – Statement of Employment Exp. for 2014: Office Supplies (100 %) =$1,100|| Auto. gas
Federal Tax Payable = [(15%)($6,268)] - [(6/11)($912)] = $ 443 storage facility) || An agent who can conclude contracts is viewed as a permanent and maintenance (87%)= 4,176 ||Auto. insurance (87 %)=3,132|| CCA on car (87%)=5,791
Dividends Fed. DTC of $4,576 [(13/18)(18%)($35,200)]. {Added on the 1st day of the
establishment.  Employment Income ITA 2(3) – Non-residents taxed on employment Tara’s Employee HST Rebate=1,273 [(13/113)($1,100 + $4,176 + $5,791)]
following fiscal year (no gross up for this purpose)}  TCG : { Full amt added (net amt if Income that remains in a testamentary trust is taxed in the same as an
income earned in Canada  ITA 115(2) – Deemed employment income || Non-residents
losses) on the 1st day of the following fiscal year }  Ded. Exp. Incurred Personally: Any Individual (graduated rate) but will not be able to use personal tax credits Ex) Danielle is a U.S. citizen who lives in US - employed 2 days/week in Calgary During the
under ITA 118 to reduce the amt of Tax Payable. remunerated from a Canadian source || Non-residents receiving signing bonuses for work to
interest exp, related to financing their cap. contrib. The business portion of any exp. current yr, she is paid $15,000 (CDN). In addition, she maintains a savings account at a bank
be performed in Canada US/CDN Tax: $10k rule – no tax if < $10k || 183 day rule
Ex) Limited Partnership (LP)  On Jan 1, 2015, Federek Jonas, decided to acquire a 6 % Ex) Inter Vivos Trust ITA 73(1.01)(c)(i): trustees do decide on U.S./CDN treaty limits to: Real property in Canada || Property that is part of a permanent in Windsor. This account earned interest of $1,500 during the current year. ||In Canada for
LP interest in the WMAC Partnership. As a result of the partnership, he has agreed to pay the percentage of each type of the trust’s income that will be distrib. less than 183 days but she earned more than $10k CND so she will be taxed. The interest, it is
establishment ||Investments whose value is primarily attributed to real property in Canada
$20,000 for his interest in the Partnership with $5,600 paid in cash and he signed an interest each year. Yr End Dec 31/15, the income earned by the assets in Trust: an arm’s length pmt and does not involve participating debt, Part XIII tax is N/A. || Part XIII
Fed Rates: Divided U.S./Canada tax treaty : Rate to 5% if U.S. recipient is a Corp. and owns 10 % or tax is, in general, applicable to interest pmt to non-residents. When the pmt is to the U.S., the
free promissory note for the remaining balance. The promissory note is payable in 5 equal Eligible Div.s Received From Canadian Corp.s 64,000 more of payor if not 15% rate for other dividends to U.S. recipients  Royalties U.S.
([>44,701 is 15%) tax treaty specifies: Canada cannot assess Part XIII tax on interest payments to the U.S.
annual instalments of $2,880, due on Dec 31 of each year, beginning in 2015. In addition, Interest From Canadian Sources $ 37,000 (89,401- 44,701) * 22%) /Canada Tax Treaty: Reduces rate to 10% || Reduces rate to nil for copyright and computer
the agreement states that the general partner will acquire Federk’s partnership interest on Capital Gains 86,000 [(138,586-89,401) *26%]  software royalties.  Rents (10%) : If in rental business – Part I applies || If not, Part XIII Therefore, exempts U.S. residents from Part XIII tax on all interest pmt.
Dec. 31/17, for $2,800 more than its FMV. Federk’s share of all income and losses of the Net Rental Income (After CCA Ded. Of $4,300) 39,000 (>138,586 is 29%) is assessed at 25%  Retirement related benefits- subject to Part XIII || Can also elect to Ex)A transfer of non-dep. capital property is made to spousal testamentary trust. The cost
Partnership is 6%. For the year ending December 31, 2015 sources of income and loss: Total Trust Income $226,000 be taxed under Part I  U.S./Canada tax treaty: Rate reduced to 15% for periodic PMTs || of the capital property = $1,000, and FMV = $4,500 at transfer. At the time of his death, the
Business Loss ( 270,000) In general, OAS and CPP received by U.S. residents will only be taxed in the U.S. decedent had net capital LCF in excess of $5,000. || Under ITA 70(6) rollover provision, the
time, the property is distributed to a capital beneficiary. On the date of distribution, the property has
children. At the time of this transfer, The capital cost =1,300 |UCC= $800 | FMV= $1,100. At a later

with deemed CCA =$200, resulting in a UCC of $1,100 (1,300-200). When the asset is transferred

of $900, resulting in no gain or loss on the transfer. The beneficiary will be deemed to have acquired
Ex) A gift of depre. capital property is made to an inter vivos trust in favour of the settlor’s adult

the property for the UCC amount of $900. However, the beneficiary will have a capital cost of $1,300
a UCC= $900 and FMV= $1,200. The settlor has deemed POD of the FMV=$1,100 therefore

to the capital beneficiary, the deemed proceeds to the trust will be the UCC at the date of distribution
recapture= 300 (1,100-800). The asset is recorded in the trust records at the settlor’s cost of $1,300,

Capital Gains 26,250 During 2015, the trustees distributed all of the interest to Melanie, as well as 60% of the cap. gains, deemed proceeds to the decedent is the property’s cost=$1,000, resulting in no G/(L) on the
Div.s, and net rental income. Melanie is a full time student for 12 months during 2015 and her Assets are transferred to a trust, deemed dispo. at FMV. Most transf. are taxable, so tax transfer. An alternative is to elect out of ITA 70(6) and transfer the property at its
Interest Income 30,000 tuition for the year was $12,500. She is a full time resident of becomes payable on any accrued gains (transfer trust at ACB, so no TCG). Transfers to
Non-Eligible Div. Rec. From Canadian Corp. $ 18,000 FMV=$4,500. The LCF is used to eliminate the tax on the resulting TCG =$1,750

the trust transfers the property to his daughter, there will be a rollover Avail., and the
Andrea will include a TCG= [(1/2)($750 - $400)] $175 in income. In 2015, when
a FMV=$750 to an inter vivos family trust to benefit his 3 adult children. In 2015,
Ex)In 2014, Andrea, who is 82 years old, transfers property with an ACB= $400 and

property to his daughter and wind up the trust. At this time the FMV of the property
has increased to $800. For both transactions, Andrea uses any rollovers that are Avail.
he becomes seriously disappointed with his two sons, and decides to transfer the

Alberta and has no other source of income during this year. to minimize the tax consequences. || In 2014, there will be no rollover Avail., and certain types of trusts (e.g., alter ego and joint spousal trusts) are exempt from the FMV [(1/2)($4,500 - $1,000)]. || Under ITA 70(6) rollover provision, the trust would record the
At-Risk Amt Dec 31/15: Trust (40%) Melanie(60%) deemed disposition rule. Any trust created the settlor during their lifetime would be an inter property at the decedent’s cost of $1,000. If the FMV election is made, the spousal trust will
ACB - December 31, 2015 $20,000 Interest Income Nil 37,000 vivos trust with Dec 31year end and subjected to the 29%. The trust would be taxable if have acquired the property at a deemed cost of $4,500. This higher value will serve to reduce
*Add: Share Of Income (Not Losses) 2015 TCG:[($86k)(1/2)= 43,000] 17,200 25,800 income was earned and retained in it. If settlors wanted to allocate income to beneficiaries, any future gain on the property when it is sold.
[(6%)($18,000 + $26,250 + $30,000)] 4,455 Eligible Div. Received 25,600 38,400 any amts paid or payable to the children would be taxed in the children’s hands. A trust tax
return is due 90 days after Dec 31. The 21 yr rule -any assets transferred to a trust are Ex) A gift of non-dep. capital property is made to an inter vivos trust in favour of the settlor’s
Subtotal $24,455 Gross Up On Div.s: adult children. The ACB of the property to the settlor = $1,000. Its FMV on the date of the
Amts Owed To Partnership ($14,400 - $2,800) ($11,520) [($64,000)(38%)= 24,320] 9,728 14,592 deemed to be disposed of at 21 year intervals throughout the life of the trust. (Before the 21
yr, the trust should transfer the shares to the children. This transfer would be at the ACB of gift is $1,500.  The settlor has deemed POD of the FMV = $1,500. The settlor TCG = $250
Other Amts That Reduce Risk ( 2,800) Net Rental Income: 15,600 23,400 [(1/2)($1,500 - $1,000)]. The trust will record the property at deemed cost = FMV= $1,500.
the shares to the trust, and therefore would not trigger capital gains.) The deemed
At-Risk Amt - December 31, 2015 $ 10,135 Taxable Income $68,128 $139,192
dispositions will be at FMV, and the trust would be obliged to pay income tax on any accrued Ex)A gift of non-dep. cap. property is made to an inter vivos trust in favour of the settlor’s
for subsequent recapture and capital gains calculation purposes.

The Tax Payable for the trust: gains. Income attributed to settlor for each designated beneficiary (spouse + child under 17 adult children. At the time of this transfer, the property cost = $1,200 & FMV= $1,500. At a
The agreement guarantees a value of no less than $2,800,
Taxable Income $68,128 yrs): [(A/B) * C]  A= Total amt payable to beneficiaries / # of beneficiaries || B= total later time, the value of property has increased to $2,000, this property is distributed to a cap.
even if the market value of the partnership interest is Nil, this Federal Tax Rate (Inter Vivos Trust) 29% income of person(s) attrib. to settlor || C= income from loaned property (interest) beneficiary of the trust. || The settlor has deemed POD of FMV= $1,500 & TCG= $150
amt is not at risk and reduces the at-risk amt.
Federal Tax Payable Before DTC $ 19,757 Corp. Reorg. could be used in forming a trust, to circumvent the deemed disposition issue. S86 could [(1/2)($1,500 - $1,200)] || The asset would be recorded in the trust records at the FMV=
Limited Partnership Loss for the year: Div. Tax Credit [(6/11)($9,728)] ( 5,306) be used where C/S owned are exchanged for Pref./S. Then, new common (growth) shares could be $1,500. || When the asset is transferred to the capital beneficiary, the deemed proceeds to the
Share Of 2014 Business Loss [(6%)($270,000)] ($ 16,200) Federal Tax Payable - Trust $ 14,451 issued or transf. to one or more trusts for the benefit of the children. The use of a trust in this, allows trust will be the carrying value of $1,500, resulting no gain or loss on the transfer. The
At-Risk Amt - December 31, 2015 10,135 parents to defer making a decision as to which of their children they eventually want to gift the C/S. beneficiary will be deemed to have acquired the property at a cost =$1,500.
The Tax Payable for Melanie would be calculated as follows:
Limited Partnership Loss For 2015 ($ 6,065) Ex) Tiasco Partnership was formed in 2014.The partnership agreement, partners has an equal Dual residency, the Canada/U.S. tax treaty has tie breaker rules: Permanent Home: home
Tax On $138,586 (6,705+9,834+12,788) 29,327
trust will not report any income.||

share in this income. Yr ending is Dec. 31/15, the partnership had an income of $580,000- the (dweling, rented or purchased) avail. in only one country. Centre of Vital Interests, if the
Deductible for the year (2015): Tax On the Remaining Income at 29% 176 calc. incl. ||Amort. Equip. of $48,000 (equal to CCA) || Non-eligible Div. received of $28,000
Federal Tax Before Credits $29,503 indiv. has permanent homes in both countries, or in neither, then this test looks to the country
Share Of 2015 Business Loss [(6%)($270,000)] ($16,200) || Gains on the sale of shares of $86,000|| Charitable donations of $8,000 ||
NRTC: Personal $11,327 in which the individual’s personal and economic relations are greatest. Habitual Abode, then
Limited Partnership Loss For 2015 6,065 Taxable Income=(50%)*[$580,000+(18%)($28,000) - (1/2)($86,000) + $8,000] =$275,020
Tuition 12,500 the country where the indiv. spends more time will be considered the country of residence, if
Deductible Loss For 2015 ($ 10,135) Ex)In 2014, the Empire partnership had accounting income of $234,000. Michelle has a 35% that is not enough- considered a resident of the country where the indiv. is a citizen. Last
Education[($400)(12)] 4,800 interest in a partnership. In determining this figure, the following items were deducted:
Textbook [($65)(12)] 780 resort, is “competent authority procedures”.
Limited Partneship LCF: $6,065 at the end of 2015. Partner salaries =$68,000. || Salaries to her spouse of $12,000 (he does the Immigration to Canada: Deemed disposition/reacq. at FMV of all property immediately before
ACB -Dec 31/15 to Jan 01/16: $29,407 * 15%= (4,411) accounting for the partnership). || Interest on capital contributions of $11,000. || entering Canada, properties excluded from this are taxable cdn property, inventories and eligible
ACB – Dec 31/15 $20,000 Div. Tax Credit [(6/11)($14,592)] ( 7,959) Personal exp. of the partners of $18,000. || Charitable contributions of $23,000. || capital property of business carried on in Canada, excluded rights of interest  Emigration from
Share Of Partnership Income For 2015 Federal Tax Payable - Melanie $ 17,133 Partnership Income=[(35%)($234,000+$68,000+$11,000 + $23,000 + $18,000)] =$123,900 Canada: Deemed disposition on leaving Canada on all property at FMV. If an individual, some
property excluded from this: real property situated in Canada, CDN resource and timber resource,
[(6%)($18,000 + $26,250 + $30,000)] 4,455 Salaries/ Interest on partner : No ded. || Treat as return of capital or allocation of income || property of business carried on in Canada through permanent establishment, excluded rights of interest.
Loss Deducted For 2015 ( 10,135) Only Inter Vivos - ITA 73(1.01)(c)(ii) Interest on partner loans is ded. – No adj.  Dividend income: Full AMT of dividends incl. in
The individual is entitled to receive all of the income of the trust that arises before the individual's -ITA 128.1(4)(d) election could be used to trigger a deemed disposition
partnership income (but not gross up) ||Partners gross up and claim DTC||  TC G/(L): Incl. in
ACB - January 1, 2015 $14,320 death, and no person except the individual may, before the individual's death, receive or otherwise partnership income || Partners can also ded. reserves||  Expenses of partners:– treated as a withdrawal
obtain the use of any of the income or capital of the trust.
At-Risk Amt on Jan 01/15 : $10,135 - $10,135 = NIL || *but on Dec31/15 repeat process! Reversionary Trusts - Attribution to settlor: If the transf. property can revert to settlor Partnership Income Incl. = Yr End Income + Current Yr. Add. BI – Prev. Yr. Add. BI
Ex) Sarah has a 50% interest in a partnership that was acquired on Jan 01/14 at $40,000. || If the settlor can determine the persons that will receive the transferred property ||The transferred ||Additional BI = Income for Yr End * (# days from fiscal yr end from Dec 31/ 365) |
The Net Business Income (BI for tax purpose) on Dec 31/14 was $50,000 that included property cannot be disposed of except with transferor’s consent Ex) Add. BI deemed to be earned from Apr 1 to Dec 31  Income for the yr*(275/365)
CCA ded. Of $36,000 but did not incl. TCG of $10,000 realized by the partnership. Transfers Of Property - No Rollover Provision : Ex)Tezuki is a partner in the Wonder Partnership. She has some vacant land that is in a perfect
During 2014, Sarah w/drew $15,000 from the partnership. Partner to partnership  Partner: disposition at FMV ||Partnership: acquisition at FMV || location for a building the partnership wants to construct. She transfers the land to the
ACB= Open ACB (Cap. Contrib.) – Drawings (salary) + share of [BI (no CCA adj) + CG] Partnership to partner  Partner: acquisition at FMV ||Partnership: disposition at FMV partnership in exchange for $107,000 in cash. The land cost her $47,000 and has a FMV of
ACB= 40,000-15,000 + (50%* 50,000) + ((50%)(2)(10,000)) = 60,000 $97,000. ||ACB of her partnership interest decreases by $10,000. [$107,000-$97,000] ||