Myron Van Doulis, age 51, just left your office with his spouse, Jennifer Barnes. Over the past

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Question:

several years Myron, a former VP at TNS Communications, has been successfully promoted and earned $260,000 annual salary. The couple worked assiduously for their social position; Myron encouraged his wife to learn bridge, tennis, and to work as a charitable member of the local community. Jennifer continues to pay her law society dues, hoping that someday she will return to her profession. The couple has two children (age 12 and 19).

Myron's treadmill was running at full-speed until last month when TNS was suddenly acquired by MIC International. Myron's life was in crisis when the president, accompanied by a security officer, guided him from his office with a $170,000 severance package. The presidents of TNS and MIC both agreed that Myron's work ethic and performance were less than marginal when compared with the performance of MIC's senior vice president.

Over the past month, Myron has had time to reflect, ponder, and examine his future needs. One of his immediate concerns is his $170,000 severance pay.

In the details of Myron's severance package, MIC is willing to pay $70,000 retirement allowance. Assume for the purposes of this case that all of the $70,000 can be transferred directly to his RRSP. Myron can invest the $70,000 in the Province of British Columbia strip bonds with an annual yield of 5%.

MIC has also agreed to pay a cash settlement of $100,000, which Myron can invest in GIC with an annual GIC rate of 3.25%. Alternatively, Myron can invest in ITT shares, currently trading publicly at $16. The shares pay an annual 2% dividend.

A couple of years ago, Myron invested in a real estate project with his friend Jim, a real estate agent and part-time developer. Together, they purchased a parcel of land and constructed eight town homes at a cost of $4,000,000. All the homes were sold in this year for total amount of $4,800,000 to a single buyer, who planned to use them as rental properties. The buyer paid $2,000,000 cash at the time of sale with the balance to be paid equally over the next seven years. Myron's share of the profit on this real estate project was 30%. The project was funded entirely with bank financing. Myron wants to know the tax implications of these transactions involved in this real estate project.

Myron cleaned up the attic at home and found some items he didn't like to keep anymore. He sold these items as follows.

Proceeds Cost

Antique coat rack.................................$1,500 $200

Coin collection ....................................450 1,300

Stamp collection ..................................1,100 100

1964 Ford (a collector's item) ..................7,000 12,000

Myron wants to know the tax implications of these sales in the year. Meanwhile, Myron has net capital losses of $10,000 accumulated from the previous years and wonders if he can claim these losses.

Early in 2015, Myron purchased 3,000 common shares of a listed firm at $120,000. The shares paid 4% dividends annually. Myron would like to sell the shares to Jennifer and the two children equally at $1 per share. At the present time, the fair market value of the share is $42 per share. Are there any tax consequences associated with these transactions?

Myron can continue his adventurous trading in the options and derivative markets. One last problem: the CRA has disallowed his business loss of $90,000 in last year's income tax return. His trading in the options market generated losses of $90,000, including commission expenses. The CRA has assessed the loss as a capital loss because, in the prior year, Myron had reported his $22,000 in profits from trading in the options market as a capital gain and not as business income.

Required:

Draft a report to Myron, detailing and quantifying where possible, the income tax positions he faces.