Early in 2015, Mr. Bourne bought 12,000 common shares in a public company for $10/share. These shares have an annual guaranteed eligible dividend of $6,000. It is January 1, 2020 and Mr. Bourne would like to transfer these shares to his wife or possibly to his 6-year-old daughter. The fair market value of the shares today is $18/share.

Required:

4 a) What are the income tax implications in 2020 for Mr. Bourne and his wife if the shares are gifted to his wife? Assume his wife eventually sells the shares for $200,000. What are the tax implications for both Mr. Bourne and his wife?

4 b) What are the income tax implications for Mr. Bourne and his 6-year-old daughter if Mr. Bourne sells the shares to his daughter for $1/share? What if his daughter later sold the shares for $200,000; what are the tax implications for everyone involved?

Answer rating: 100% (QA)

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