Bob Carling is 75 years old. He has substantial assets and is trying to divest himself of some of them to reduce any taxes payable on his death. It is January 2020 and he was planning to do the following:

(1) Give his granddaughter, Janet, his 1,000 shares of Canadian Business Machines Ltd.
These shares cost him $5,000 in 2000 and are now worth $55,000. Every December 15, the company pays a dividend of $1 per share. Janet is 17. Next year, she will be 18 and plans to sell about 100 shares to fund her university education.

(2) Sell 10,000 shares of Lower Down Group to his wife. Bob purchased these shares in
1998 for $1,000. They are now worth $42,000. His wife will give him $42,000 in cash. Bob elected in his 2019 tax return out of the provisions of ssec. 73(1). The corporation paid dividends of $2 per share on June 30.

(3) Transfer $50,000 cash to his 40-year-old daughter, Dianne. He plans to lend it to her interest-free. She is a frugal woman and will put the money into a one-year investment that earns 7% interest.

Required: Show all calculations necessary to support your conclusions.

Outline the tax implications to both Bob Carling and the recipient of the asset. Use ITA references.

Answer rating: 100% (QA)

Question 1 CRA states that for as long as your children are under 18 a... View the full answer