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

1. 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]

1. 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]