Please help with the following as a memo using the info below from question 2 and problem 12.
ITA: 1 problem on January 10, 2015, con started your new job as controller for Bordessa Corporation, a Canadian- 212(1 trolled private common with a December 31 year end. On your first day, the president and owner- 108(1. conger of the company fias asked you to follow up on some personal and corporate tax concerns that he has . ) The company is the exclusive Canadian manufacturer and distributor of menswear designed by famous U.S. design mo pays the designer a royalty equal to 10% of sales each quarter. Royalty a Parents are due one month after each quarter end (i.e., on April 30, July 31, October 31, and paytary 31). The company , financial statements show a 2018 royalty expense of $60,000. The financial Jarements also show the amount of royalties payable at the company's December 31, 2018 year end to be $20,000 (the comparable nug number for December 31, 2017 is $10,000). According to the company's be s cheque register, however, only $45,000 has been paid to the menswear designer and only $5,000 has been paid to the CRA. T sident wants to know how much the company should remit when it hases its January 31, 2019 payment to make up for unpaid royalties and withholding taxes it owes in respect of 2018. (2) The company accrued a $100,000 bonus payable to the President on its financial statements. ITA This bonus was declared by way of a director's resolution at the company's Board of Directors' last Thig meeting. The president understands that his bonus must be paid within 180 days after the year and in order for it to be deductible in 2018 and you have verified that this is correct. This is the first ime the company has accrued such a bonus and the president wants to know the deadline for the "emittance of payroll deductions on the bonus. You do a quick review of payroll remittances for 2017 and 2018 and find that they amounted to about $120,000 in each year. (3) The president tells you that he filed his 2017, 2016, and 2015 tax returns yesterday (January 9, 2019) after receiving a demand to file these returns in December 2018. He is expecting a net refund of $5,490 (see the schedule below). He wants to know whether he will be assessed any penalties for late filing and what the amount of the penalties will be. He tells you that his wife is a self-employed medical doctor. Balance due (Refund $) 2015 (20,500) 2016 . . 10,000 2017 5,010 Net refund expected (5,490) (4) During 2018, the president of the company inherited U.S. stock from a distant relative who lived in the U.S. The value of the stock at the date of the relative's death was C$120,000. The president has asked you if he has to report this on his 2018 tax return. The stock is held in safekeeping at a stockbroker's office in Toronto. Report your findings to the president. Problem 12 In early March, you were preparing your client list with respect to the personal tax return prepara- jan season. When you came across Mr. Ricky's name you remembered that Mrs. Ricky had called you guarding her husband's death. Mr. Ricky had passed away March 1, 2019, at age 62. Mrs. Ricky is the executrix.492 Introduction to Federal Income Taxation Mr. Ricky owned and operated a Canadian-controlled private corporation, Shining Ltd. Mr. Ricky's 100 shares had an adjusted cost base and paid-up capital of $55,000. The fair market value of the shares at the date of death was $5,750,000. Mr. Ricky earned $12,000 per month in salary, which was paid by direct deposit on the last day of the month. A non-periodic bonus of $50,00 50,000 had been declared on February 15, 2019, but had not yet not eligible for EI. been paid at the time of his death. CPP of $2,594 has been, or will be, withheld on this income. He is In addition to his shares, Mr. Ricky owned bonds with accrued interest of $917 in 2019 to the date of his death. Further, Mr. Ricky had owned two rental properties. Net rental income before capital cost allowance was $4,000 for each of the months of January and February 2019. Other Information: (1) All assets of Shining Lid. have been used in the active business of the corporation. (2) The shares of Shining Lid. have been owned by Mr. Ricky since 2000. (3) Mr. Ricky had earned income in 2018 of $95,000. He contributed to his RRSP the maximum amount allowed as a deduction in 2018 but did not make the 2019 contribution. His RRSP was worth $295,000 at the time of his death. Mrs. Ricky is the designated beneficiary of his RRSP. (4) His 2018 personal tax return was prepared but not filed at the time of his death. (5) Mr. Ricky had not used any of his capital gains exemption. (6) All of Mr. Ricky's assets have been left to his wife, except for the two rental properties that are bequeathed to his 20-year-old daughter. . (7) The rental properties had the following details: Unit #1 Unit #2 Land Building Land Building Fair market value . . $100,000 $100,000 $120,000 $80,000 Capital cost 90,000 72,000 9 at One, 110,000 83,000 UCC . . . 50,000 52,000Question 1 {15 marks} Prior to Mr. Ricky's decease (the same taxpayer from the rst question we did in the course]. assume he inquired about setting up a tmst in which to leave his Shining Ltd. shares to his wife, should he predecease her. He would you to write him a memo explaining the tax consequences to him and to his wife if he were to leave the shares to his wife in a trust. per the terms of his will. He would like his daughter to ultimater receive the shares once his wife is deceased. but he would like his wife to receive any income from the shares during her lifetime. Mr. Ricky knows very little. if anything, about income taxes, and wishes to optimize the income tax consequences for him and his wife
