PART $1$: TAX

$1\mathrm{.}1$ New Luxury Tax Research

You are a successful Tax Advisor for Wealth Inc. You have made your success from investing clients$$ wealth in Tax Havens like the Cayman Islands and Corporate Tax Havens like Luxemburg. Other strategies you use include setting up Trusts and financial products that provide tax shelters for your clients $($the $1\%).$

You are also a highly sought$-$after consultant. Your council is often requested by political parties and policy lobbyists.

During the first week in January, you get a barrage of emails. The Federal Government passed the new Luxury Tax in September. Your trusted clients need answers.

From: Department of Finance Canada

News release:

July $14,2022-$ Ottawa, Ontario $-$ Department of Finance Canada

Today, the Government of Canada announced clarifications to the implementation of the Luxury Tax, which was included in Bill C$-19($An Act to implement certain provisions of the budget tabled in Parliament on April $7,2022$ and other measures$),$ which received Royal Assent on June $23,2022.$

First, an amendment made to Bill C$-19$ during the legislative process authorizes the Governor in Council to set the coming into force date of the Luxury Tax as it applies to aircraft. The Deputy Prime Minister and Minister of Finance has accordingly recommended to the Governor in Council a coming into force date of September $1,2022,$ for all subject items, including aircraft.

As of Thursday, the tax will apply to cars and personal aircraft with sale prices of over $$100,000$ and boats for personal use with price tags of more than $$250,000.$

The one$-$time sales tax will be either $20$ per cent of the value of the vehicle above that threshold, or $10$ per cent of the total value, whatever is lower.

REQUIRED: Review the following emails, do the calculations and provide an Answer$/$Analysis to your client on the tax to pay, or why there is not tax. Reference the ITA on Luxury Tax $($on the CRA Website$)$ hint Google: CRA & Luxury Tax. Make sure to use professional format.

Email #$1$ from: Ms$.$ Taylor

I want to buy the latest Mercedes AMG Sports. The price is $$125,000$ how much luxury tax do I have to pay? She has already order the new vehicle from the Dealer

What if I get the Mercedes dealership to invoice me for $$99,000$ and I go back and pay another $$26,000$ in $$upgrades and options$,$ can I avoid the Luxury tax?

Ms$.$ Taylor is downsizing her Gulf Lear Jet, she is getting too much bad press on emissions. She want to now buy a new Turbo Prop Plane that has a Hybrid Engine. The cost of the new plane is $$750,000.$ Ms$.$ Tailor would like you to calculate any Luxury tax $($if any?$)$ on the new Turbo Prop Plane.

Ms$.$ Taylor also confides in you that if Wealth Taxes keep on going up she is going to leave Canada for a more favourable Tax country.

Email #$2$ from: Morty

Morty owns George Funeral Homes. He has ordered $3$ new Funeral Hearses to be delivered in February. Each Hearse with all the options costs $$150,000.$ How much Luxury Tax must I pay for all the Hearses?

Email #$3$ from: Celine

Hi$,$ I see that the CRA has a new luxury tax, I want to by a vintage car for my collection. In it$$s a $1972$ Dodge Mako for $$200,000$ do I have to pay luxury tax, if so$,$ how much luxury tax?

You also advise Celine that since her Vintage Car collection is now worth more than $$1$ million she should consider setting up a Trust and transferring her vehicle assets to the Trust to avoid the inheritance tax for her $3$ Sons. $$ This is just some customer service advice, no charge.

Excel:

As an extra service you create an Excel Calculation for Ms$.$ Gail to calculate the Luxury Tax $($submit Excel file$)$ on her new $(1)$ Mercedes and the $(2)$ Turbo Prop Plane.

You use the Excel Template to work out all the above calculations, you only have to submit $1$&$2$

You can copy the above and paste into your Excel.

REQUIRED for the Emails

Answers for:

$1.$ Taylor Mercedes $+$ Excel $+$ Analysis

$2.$ Taylor Turbo Prop Plane $+$ Excel $+$ Analysis

$3.$ Morty$$s new Hearses $+$ Analysis

$4.$ Celine$$s Vintage Dodge Mako $+$ Analysis