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On January 1, 2023, Russell created a trust for the benefit of his 22-year old child. Russell gifted 500 shares of X Ltd., a Canadian
On January 1, 2023, Russell created a trust for the benefit of his 22-year old child. Russell gifted 500 shares of X Ltd., a Canadian public corporation, to the trust. At the time of the gift, the 500 shares were valued at $240,000. Russell had purchased the shares in 2008 for $90,000.
During 2023, the trust received $8,000 of eligible dividends on the X Ltd. Shares. The trust sold the shares in July for $360,000 to a third party.
REQUIRED
- What are the tax consequences to Russell of the gift of the shares of X Ltd to the trust?
- If all the income is kept in the trust and not distributed, calculate the combined tax payable for the trust. Assume the lowest combined marginal tax rate is 25% and the top combined marginal tax rate is 50%.
- Suppose that the trust is instead created for the sole benefit of Russells spouse, instead of his child. Please repeat parts a) and b) under this assumption.
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