Introduction to Federal Income Taxatio 594 Gil and Ruth would like vour advice on the following issues: (I) Does the freeze work technically" their retirement? receive income from the business i (2) How will they continue What are the tax consequence of the proposed plan to both Gil's and Ruth's estates and to Cale as the beneficiary. Assume that Gil dies first and leaves his estate to Ruth. Then assume Puels dies and leaves everything to Gale (4) there a better plan? Before you meet with them you want to: (A) Assess the situation. (B) Identify the issues (C) Analyze the issues. (D) Advise/recommend. 117.875 More Edit oe fime, Georgette would like to slow down and spend more time with her fianc, whom sho will soon 120 and 22, ut Georgette is y of $22,000 per year. Candice ould be interested e ready to retire and still orgette, a single mother for several years, has a portfolio of Caradian public utility shares worth 000. The unrealized capit SP valued at approximately $490.00in on those shares is $120.000. She also has a self-directed 0. Georgette would like you to prepare a report outlining how she could plan for her new marriage and ent over the next few year retirem st Georgette in transferring her business to other fa estate planning arrangements that will Consider the optic mbers Problem 9 Gil and Ruth George have been friends of yours for many years. They have come to you for advice their estate plan since they want a second opinion to make sure it is going to do what they hope. Orillia Resorts Inc. (Resorts) is a company purchased by Gil about 20 years a Gil originally paid $200,000 th $2.4 million as a result of the increase in the value of lakefront property, The common shares have to operate a tourist of the 1,000 common shares of the company, which is now paid-up capital of $1,000. They have found that they are no longer able to Jook after the resort, now that they are both 68 rs old. Also, they feel that they a day. They have had discussions with mcess of transferring the business to their only child, their daughter, Gale, who has been working in the business and is ready to take over Gil has never used his capital gains exemntion equipment used in the business. They have not only assets in Resorts are the property and te relving on the business for their retirement income. As a result. they would like to keep voting control s long as they have an investment in the company. to spend their summers travelling, instead of working 14 yer and, on her recommendation, are now in the The plan proposed by their lawyer has the following steps. (1) Gil will exchange his common shares of Resorts for 2,400 voting Class A preference shares. Then Gale will purchase 1,000 common shares from the company for $1 per share. The prefer- ence shares are redeemable and retractable at $1,000 each with a non-cumulative dividend rate of up to 7%. (2) Gil will then transfer the preference shares of Resorts to a holding company (Holdco) in exchange for 13,518 Class B preference shares of 48 252 to use up his capital gain. transfer, he will elect under s re redeemable and retractable at $100 each with a non- exemption. ond rate of up to 7 % . . cumulativ (3) Ruth will pay $1,000 for 1,000 common shares of Holdco so she can receive dividends in their retirement years. The plan is that Resorts will pay a 7% dividend each year to Holdco and then Gil and Ruth will decide how much they will take out of Holdo de of the business to provide some security for them in retirement. This will give them some investment assets More Edit Introduction to Federal Income Taxatio 594 Gil and Ruth would like vour advice on the following issues: (I) Does the freeze work technically" their retirement? receive income from the business i (2) How will they continue What are the tax consequence of the proposed plan to both Gil's and Ruth's estates and to Cale as the beneficiary. Assume that Gil dies first and leaves his estate to Ruth. Then assume Puels dies and leaves everything to Gale (4) there a better plan? Before you meet with them you want to: (A) Assess the situation. (B) Identify the issues (C) Analyze the issues. (D) Advise/recommend. 117.875 More Edit oe fime, Georgette would like to slow down and spend more time with her fianc, whom sho will soon 120 and 22, ut Georgette is y of $22,000 per year. Candice ould be interested e ready to retire and still orgette, a single mother for several years, has a portfolio of Caradian public utility shares worth 000. The unrealized capit SP valued at approximately $490.00in on those shares is $120.000. She also has a self-directed 0. Georgette would like you to prepare a report outlining how she could plan for her new marriage and ent over the next few year retirem st Georgette in transferring her business to other fa estate planning arrangements that will Consider the optic mbers Problem 9 Gil and Ruth George have been friends of yours for many years. They have come to you for advice their estate plan since they want a second opinion to make sure it is going to do what they hope. Orillia Resorts Inc. (Resorts) is a company purchased by Gil about 20 years a Gil originally paid $200,000 th $2.4 million as a result of the increase in the value of lakefront property, The common shares have to operate a tourist of the 1,000 common shares of the company, which is now paid-up capital of $1,000. They have found that they are no longer able to Jook after the resort, now that they are both 68 rs old. Also, they feel that they a day. They have had discussions with mcess of transferring the business to their only child, their daughter, Gale, who has been working in the business and is ready to take over Gil has never used his capital gains exemntion equipment used in the business. They have not only assets in Resorts are the property and te relving on the business for their retirement income. As a result. they would like to keep voting control s long as they have an investment in the company. to spend their summers travelling, instead of working 14 yer and, on her recommendation, are now in the The plan proposed by their lawyer has the following steps. (1) Gil will exchange his common shares of Resorts for 2,400 voting Class A preference shares. Then Gale will purchase 1,000 common shares from the company for $1 per share. The prefer- ence shares are redeemable and retractable at $1,000 each with a non-cumulative dividend rate of up to 7%. (2) Gil will then transfer the preference shares of Resorts to a holding company (Holdco) in exchange for 13,518 Class B preference shares of 48 252 to use up his capital gain. transfer, he will elect under s re redeemable and retractable at $100 each with a non- exemption. ond rate of up to 7 % . . cumulativ (3) Ruth will pay $1,000 for 1,000 common shares of Holdco so she can receive dividends in their retirement years. The plan is that Resorts will pay a 7% dividend each year to Holdco and then Gil and Ruth will decide how much they will take out of Holdo de of the business to provide some security for them in retirement. This will give them some investment assets More Edit