Assignment

Question 1

Identify the provision of the Income Tax Act that deals with each of the following items. Be as specific as possible in citing the reference to the Act.

1. Deductibility of personal and living expenses
2. Directors fees Income
3. Definition of automobile
4. Interest on money borrowed for passenger vehicle
5. Deductibility of work space in home for business

Use the format demonstrated below

You are required to present your answers all illustrated

Item Part Division Subdivision Section Subsection Paragraph Provision

Definition XVII - - 248 (1) - subsection248(1)

Of person

Limitation on deduction

Of RRSP Administration I B b 18 (1) (u) pargraph18(1)(u)

Fees

Deductibility of Personal

& living Expenses

Directors Fee income

Definition of Automobile

Interest on money

Borrowed for passenger

Vehicle

Deductibility of work space

In home for business

Question #2

Ms. Vanna Van der Vamp was born in Vancouver in 1971, was educated in waterloo, and has lived and worked I Canada all her life. Until mid-July 2018, she had been senior vice-president of Waterloo Debits Manufacturing Limited ( Waterloo Debits).

Effective July 15,2018, Ms. Van der Vamp was promoted to president of the corporations wholly owned subsidiary in Mexico, Mexican Credits Mfg. Ltd., and was paid by that corporation from that date. No define term was on her contract with the Mexican subsidiary. Ms. Van der Vamp is generally regarded as the leading candidate for the office of president of waterloo debits when the incumbent retires within the next several years.

Ms. Van der vamp left Canada on July 15, 2018 to take up her new position in Mexico. One of her two minor children stayed in Canada to complete his final year of high school, which was beginning in the fall of 2018. He stayed with one of the Van der vamps two married children who remained in Canada. The other unmarried child left with left with her mother for Mexico. Mr. Van der Vamp stayed in Canada until August 31,2018, when the sale of the Waterloo house closed, and while he arranged to conduct his international consulting practice from the Mexican home.

The van der Vamps did not sell their cottage in grand Bend, Ontario, on lake Huron, but they did enter into a long-term agreement with a realtor to have the cottage rented during the winter ski season and the summer vacation period, except for the first two weeks in August 2019 and thereafter when they intended to vacation there with their family.

In Mexico, Ms. Van vamp rented an unfurnished house which was smaller than their Waterloo house. She rented some basic furniture for the short period to September 2018 when most of her furniture from Waterloo was moved. The Van der Vamps Left some of the

Furnishings from their Waterloo home with their married children for their use. Title to this property was not formally changed, but the Van Vamps had listed this property in their wills as being transferable to these children on death. These children both had guest rooms in their homes which the van der Vamps and their unmarried children could use whenever they chose to. The Van der vamps maintained their portfolio of investments in Canada with the Canadian broker that they had always used. They did this because of their lack of confidence in other financial markets. Ms. Van der Vamp also decided to maintain her accumulated pension credits with Waterloo Debits, rather than transfer them to the Mexican Corporations Pension Plan. However, she did join the Mexican Companys plan for service after July 15, 2018. The Van der Vamps closed all of their bank accounts, except for one necessary for the running of the waterloo household until August 31,2018, at which time this account was also closed. They had funds transferred to a new account for the maintenance of the remaining unmarried child while he was in school. Ms. Van der Vamp terminated her Canadian health and car insurance and her business and social club memberships, except for one business club, which she retained on a noon-resident basis, effective July 15, 2018. They sold one car on July 15, 2018, and the other one on August 25,2018, but Ms. Van der vamp kept her Canadian drivers license in force. The Van de vamp and the unmarried child who moved with them spent about two weeks in Canada during the December holiday period visting with the other children. In addition, they planned a two-week vacation in August in 2019 and thereafter.

Required:-

The van der vamps are concerned about how to file their tax returns for 2018. Prepare an analysis for the tax person in your firm who will advise them on the income tax consequences of these facts. Evaluate in detail the alternatives in the residence issue at they relate to this fact situation for the year 2018. Discuss each possible degree of residence and its general tax consequences. State your conclusion on this case after weighing the relevance of the facts considered.