Luna owns 15,000 shares of Sugar Inc., a publicly traded Canadian corporation. These shares were acquired many
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Question:
Luna owns 15,000 shares of Sugar Inc., a publicly traded Canadian corporation. These shares were acquired many years ago at a cost of $135,000. The shares are now worth $185,000.
In each of the following cases, assume that the purchaser immediately resells the shares for their fair market value of $185,000.
Case 1 Luna sells the shares to an arm's length party for $185,000.
Case 2 Luna gifts the shares to her 16 year old daughter.
Case 3 Luna sells the shares to her sister for $110,000.
Case 4 Luna sells the shares to her mother for $260,000.
REQUIRED
- For each of the Cases, determine the tax consequences of the disposition to Luna and the tax consequences to the purchaser on the resale of the shares. [7 Marks]
- For each of the four cases in Part A, explain why adjustments were required, or not required, to Luna's proceeds of disposition or the purchaser's cost.[7 Marks]
Related Book For
Intermediate Accounting Volume 2
ISBN: 9781260881240
8th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel
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