Bob (age 33) and Cindy (age 32) have been married for 12 years and are getting divorced. They have two children, Nicole (age 9) and Chad (age 5).

Bob started his own business three years ago and he thinks the tax-adjusted value is $201,000. He argues that the business is new and its value cannot be counted on, so it should not be divided. Bobs annual salary is $87,000. His expenses are $2,050 per month. This does not include any credit card or support payments.

Cindy is going back to school to become a nurse. She will finish her degree in three years, and then she will earn approximately $35,000 per year. She will earn no income while in school. Cindys expenses are $4,828 per month. This includes her tuition expenses, which average $350 per month. Bob is offering to help Cindy through school by paying spousal support of $2,000 per month for one year, then $1,500 per month for two additional years. The support will be indexed annually.

The children will live with Cindy. According to the Federal Child Support Guidelines, Bobs payments will be $1,245 per month to support the two children until they finish school or reach the age of majority. This number will drop to $774 per month (adjusted for the 3% growth rate) after the oldest child leaves home or school. They live in a province where the age of majority is 19 years.

The family residence is valued at $220,000 with a mortgage of $130,000 at 7.5% inter est for 15 years. Cindy would like to remain in the home with the children.

They also have a rental house worth $160,000 with a mortgage of $100,000. They receive $1,200 per month in rental income, and the monthly expenses are approximately $1,200 per month.

Cindys has two RRSPs with a tax-adjusted value of $17,000. She also inherited a family art collection about a year ago. The collection is valued at $43,000. Bob and Cindy have a joint Visa credit card that they both use with a balance of approximately $22,600. Without Bobs knowledge, Cindy also opened another joint American Expr ess credit card with a balance of approximately $5,000.

Bob has made the following proposal: Cindy will take the house, the rental, the RRSPs, her art collection, and the debt. Bob will keep only his business. Bob feels that since his business is so new and cannot be counted on, he is making a very generous proposal.

Assume they will each retire at age 65the age at which they will qualify for full OAS benefits and that Bob will be splitting his CPP with Cindy.

17. Garyboughtacottagein1977for$45,000.Whenhediedin2001,thecottagewasworth $250,000. In his will, he left the cottage in a trust to his daughter Beth, with the provision that she could receive full title after 10 years. After the 10 years, the cottage was worth $390,000. Barb held onto the cottage for 11 years and then sold it for $470,000. If the cottage is not her principal residence, what is her taxable capital gain in the year she sells it? (2 marks)

19. Rafaeladonatedapaintingtoaregisteredcharity.Anindependentappraiservaluedthe painting at $150,000. Rafaela bought the painting eight year ago for $60,000. Her income from other sources is $70,000.

a) What is her taxable income for the year? (2 marks)

b) How much of the $150,000 donation can she claim in the current year? (2 marks)

c) What is the value of her federal tax credit for the year? (2 marks)

d) How much of the donation can she carry forward to subsequent years? (1 mark)

20. Martyownsanautobodyrepairshop.Thebusinesshasnorealvaluewithouthimandthe building is pretty much a mess after being full of paint fumes for all those years but the land is worth $140,000 the land is also pretty much of a mess and it will cost a buyer about $100,000 to clear the land for another use. The adjusted cost base is $150,000 $80,000 for the land, $70,000 for the building.

He is very fond of animals and now wants to give the land and building to the Toronto Humane Society he is going to retire and live in his daughters basement (shes not too happy but since she will inherit a considerable amount of money when he dies, she has consented to this arrangement). Mark shuts down his business on December 15, 2018. His net income for the year was $45,000. He has taken Capital Cost Allowance of $66,000 on the building. HINT: Review Example 16 from chapter 12.

1. a) If this were a cash donation, what is the maximum he could claim on his 2018 tax return? (1 mark)

2. b) Including recapture, what is his total income? (2 marks)

3. c) How much can he claim as a tax deduction for 2018? (2 marks)

4. d) If his net income is $13,000 a year forever, how much of the donation will he be able to claim in total assuming he does not die for 30 years (he has lots of money but does not like to spend it. This is OK with his daughter!) (2 marks)