Question 3: 4 marks

Your client owns shares of ABC Co. that have a FMV of $35,000 and an ACB of $24,000. They wish to transfer the shares to theirspouse. Their investment advisor predicts that the value of the shares will grow to $58,000 in the next two years.

Required

For each of the following scenarios, discuss the tax implications to your client and their spouse.

Scenario 1: Client sells their shares to their spouse for cash of $35,000 and does not elect out of ITA 73(1).

Scenario 2: Client sells their shares to their spouse for cash of $35,000 and elects out of ITA 73(1).