properties as well as an interest in her professional partnership. The executor of her estate is her long$-$

time partner Ms$.$ J$.$

You have agreed to advise the executor as follows:

$($A$)$ Explain the tax consequences to Ms$.$ C at the time of her death related to the properties she

owned at that time.

$($B$)$ Explain the tax treatment of the estate arising on Ms$.$ C$\text{'}$s death.

$($C$)$ Explain the tax consequences of the distribution of properties from Ms$.$ C$\text{'}$s estate to her

children.Problem $5$

Part A

For each of the following trusts settled by Mrs$.$ A explain:

The tax consequences of the transfer of property by Mrs$.$ A to the trust;

The rate of tax payable by the trust;

The tax consequences of the transfer of property from the trust to the beneficiary

$($a$)$ On June $1,2023,$ Mrs$.$ A settled a painting on her daughters, B and C$,$ in trust for her

grandchildren. The painting has a cost to Mrs$.$ A of $$500$ and a fair market value of $$7,000.$

$($b$)$ Mrs$.$ A provides in her will that her shares of ABC Co$.$ are to be held in trust for her

grandchildren. These shares have a cost to Mrs$.$ A of $$10,000$ and a fair market value of $$35,000.$

Part B

Mr$.$ B died on March $15,2023.$ Mr$.$ B$\text{'}$s will provides that the residue of his estate is to be transferred

to a trust for the benefit of his wife, Mrs$.$ B$,$ a resident of Canada. The will provides that the income of

the trust is to be paid to Mrs$.$ B$.$ The will also allows the executors to pay out capital for the benefit of

Mrs$.$ B$.$ On Mrs$.$ B$\text{'}$s death, the trust's assets are to be distributed to the Bs$\text{'}$ children. Mr$.$ B$\text{'}$s assets

include shares of XYZ Inc., a public company, which were purchased about $25$ years ago for $$1,000$ and

have a fair market value at his death of $$100,000.$

You have agreed to advise the executor as follows:

$($A$)$ Explain the tax consequences to Mr$.$ B arising out of the transfer of the ABC Inc. shares to the

trust for Mrs$.$ B$.$

$($B$)$ Explain the tax consequences to the trust of holding the shares and earning dividend income.

$($C$)$ Explain the tax consequences if the shares are transferred to Mrs$.$ B$.$

$($D$)$ Explain the tax consequences if the shares are still held by the trust at the time Mrs$.$ B dies.

$($E$)$ Explain how your answer to $($A$)$ would be different if Mr$.$ B$\text{'}$s will provided the trustees with

the power to encroach on capital for the benefit of the Bs$\text{'}$ children.

Part $C$

Ms$.$ C$,$ a lawyer, died on June $1,2023.$ Ms$.$ C was divorced at the time of her death. Under the terms

of her will, her estate is to be distributed equally to her $2$ adult children. At the time of death, Ms$.$ C

owned investments in publicly traded securities$,$ RRSPs$,$ a house and cottage$,$ artwork and personal