Mrs$.$ Skylar LeeLee, a management consultant, is married with two children. Her son,

Braxton is $27$ years old, and her daughter, Melody, is $13.$ Mrs$.$ Lee has not previously gifted nor sold property to her spouse or either of her children.

View the property information.

on April $1$ of the current year, Mrs$.$ Lee owns the following properties:

Lee Consulting Ltd$.$

Mrs$.$ owns $100\%$ of the voting shares of Consulting Ltd$.,$ a Canadian$-$controlled private corporation $($CCPC$).$ These shares have an ACB of $214,000$ and a current FMV of $$474,900.$

Rental Property

Mrs$.$ Lee owns a rental building. The building was purchased at a cost of $$189,900$ and the land for $$99,700.$ On April $1$ of the current year, the UCC balance is $125,200,$ and its FMV is estimated to be$.$ $$275,300.$ Assume that the FMV of the land on which the building is situated remains equal to its cost of $$99,700$ and will remain so for the next three years.

Duke Inc.

Mrs$.$ owns $4,300$ shares of Duke Inc., a Canadian public company. These shares have an ACB of and a current FMV of $383,900.$

Farmland

Mrs$.$ owns farmland with a cost of $$79,800$ and a current FMV of $$174,600.$ Mrs$.\text{'}$s son Braxton uses the farmland in a farming business carried on growing various crops.

Mrs$.$ Lee is considering gifting all or part of the property to her spouse and$/$or her two children. Assume that $(1)$ each property is sold two years after being gifted for $$49,500$ more than its FMV at the time of the gift, $(2)$ no CCA will be claimed on the rental property once it has been gifted, and $(3)$ the TOSI rules do not apply to any of the property transfers.

Read the requirements.

For each of the properties, provide the income tax consequences on the assumption that the property is gifted to:

A$.$ Her spouse and that she does not elect to avoid the ITA $73(1)$ rollover.

B$.$ Her spouse and that she does elect to avoid the ITA $73(1)$ rollover.

C$.$ Her $13-$year$-$old daughter, Melody.

D$.$ Her $27-$year$-$old son, Braxton. The "income tax consequences" should include:

$$ the income tax that will be recognized by Mrs$.$ Lee at the time of the gift.

$$ the tax attributes of the property to the recipient of the gift.

$$ the income tax treatment of any income earned on the property, including dividends, rental income, or farm income; and

$$ the increase or decrease in net income that will be recognized by Mrs$.$ Lee, and$/$or the recipient of the gift when the property is sold two years after it was gifted.

Requirement A$.$

The property is gifted to her spouse, and she does not elect to avoid the ITA $73(1)$ rollover. $($Round your answers to the nearest dollar.$)$

Determine the tax consequences of the shares of Lee Consulting Ltd$.$

The shares in Lee Consulting Ltd$.$ could be gifted to Mr$.$ Lee with$----------------.$

decreased tax liability.

no change in tax liability.

increased tax liability.

The ACB for these shares would$------------------$

not change.

increase.

decrease.

Any dividends received by the spouse would be$-----------------------$

not be attributed back to Mrs$.$ Lee.

be attributed back to Mrs$.$ Lee.

Calculate the taxable gain that would be attributed to Mrs$.$ Lee

if Mr$.$ Lee subsequently sells these shares for $$49,500$ more than their FMV$.$

POD

ACB

Capital gain

Inclusion rate

Taxable capital gain

Determine the tax consequences of the rental property.

The rental property could be gifted to Mr$.$ Lee with $-----------$

increased tax liability.

no change in tax liability.

decreased tax liability.

The ACB and tax attributes of the building would $-----------------$

decrease.

increase.

not change.

Any rental income or loss received by the spouse would$----------------$

be attributed back to Mrs$.$ Lee.

not be attributed back to Mrs$.$ Lee.

Calculate the recaptured CCA from the rental property.

Capital Cost

UCC

Recaptured CCA

Next, calculate the taxable capital gain on the rental property.

POD

ACB

Capital gain

Inclusion rate

Taxable capital gain

Determine the tax consequences of the shares of

Duke Inc.

The shares in Duke Inc. could be gifted to Mr$.$ Lee with$----------$

$.$

no change in the tax liability.

decreased tax liability.

increased tax liability.

The ACB for these shares would $---------$

decrease.

not change.

increase.

Any dividends received by the spouse would$---------$

not be attributed back to Mrs$.$ Lee.

be attributed back to Mrs$.$ Lee.

If Mr$.$ Lee subsequently sells these shares for $$49,500$ more than their FMV$,$ what taxable gain would be attributed to Mrs$.$ Lee?

POD

ACB

Capital gain

Inclusion rate

Taxable capital gain

Determine the tax consequences of the shares of the farmland that could be gifted to Mr$.$ Lee with

increased tax liability.

no change in tax liability.

decreased tax liability.

The ACB for these shares would $------------------$

not change.

increase.

decrease.

Any farm income received by the spouse would$------------------$

not be attributed back to Mrs$.$ Lee.

be attributed