use the following information from problem 12 to help answer the above answer.

Question 2 (15 marks) Prior to Mr. Ricky's decease (the same taxpayer from the first question we did in the course), assume he inquired about setting up a trust 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 ultimately 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. Probl ITA 15 2120) 10801 he has On January 10, 2019, you started your new job as controller for Bordessa Corporation, a Canadian- controlled private corporation with a December 31 year end. On your first day, the president and owner- manager of the company has asked you to follow up on some personal and corporate tax concerns that paments are due one month after each quarter end i.e., on April 30, July 31, October 31, and famous U.S. designer and pays the designer a royalty equal to 10% of sales each quarter. Royalty (1) The company is the exclusive Canadian manufacturer and distributor of menswear designed by statements also show the amount of royalties payable at the company's December 31, 2018 year end to January 31). The company's financial statements show a 2018 royalty expense of $60,000. The financial 2018 cheque register, however, only $45,000 has been paid to the menswear designer and only $5,000 De $20,000 (the comparable number for December 31, 2017 is $10,000). According to the company's makes its January 31, 2019 payment to make up for unpaid royalties and withholding taxes it owes in has been paid to the CRA. The president wants know how much the company should remit when it respect of 2018 (2) The $to : ITA: This bonus was declared by way of a director's resolution at the company's Board of Directors' last 2018 meeting. The president understands that his bonus must be paid within 180 days after the year end in order for it to be deductible in 2018 and you have verified that this is correct. This is the first remittance 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 5,010 2017 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 1 In early March, you were preparing your client list with respect to the personal tax return prepara- tion season. When you came across Mr. Ricky's name you remembered that Mrs. Ricky had called you regarding her husband's death. Mr. Ricky had passed away March 1, 2019, at age 62. Mrs. Ricky is the executrix. Introduction to Federal Income Taxation 492 100 shares had an adjusted cost base and paid-up capital of $55,000. The fair market value of the shares Mr. Ricky owned and operated a Canadian-controlled private corporation, Shining Ltd. Mr. Ricky's at the date of death was $5,750,000. been paid at the time of his death. CPP of $2,594 has been, or will be, withheld on this income. He is the month. A non-periodic bonus of $50,000 had been declared on February 15, 2019, but had not yet Mr. Ricky earned $12,000 per month in salary, which was paid by direct deposit on the last day of In addition to his shares, Mr. Ricky owned bonds with accrued interest of $917 in 2019 to the date of his death. Further, Mr. Ricky had owned two rental properties. Net rental income before capital cost not eligible for EI for each of the months of January and . allowance was Other Information: (1) All assets of Shining Ltd. have been used in the active business of the corporation. 2) The shares of Shining Ltd. have been owned by Mr. Ricky since 2000. (3) Mr. Ricky had earned income si nuo did fo$ 95,000He 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 90,000 $100,000 72,000 50,000 $120,000 110,000 Capital cost $80,000 83,000 52,000 UCC ..... Question 2 (15 marks) Prior to Mr. Ricky's decease (the same taxpayer from the first question we did in the course), assume he inquired about setting up a trust 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 ultimately 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. Probl ITA 15 2120) 10801 he has On January 10, 2019, you started your new job as controller for Bordessa Corporation, a Canadian- controlled private corporation with a December 31 year end. On your first day, the president and owner- manager of the company has asked you to follow up on some personal and corporate tax concerns that paments are due one month after each quarter end i.e., on April 30, July 31, October 31, and famous U.S. designer and pays the designer a royalty equal to 10% of sales each quarter. Royalty (1) The company is the exclusive Canadian manufacturer and distributor of menswear designed by statements also show the amount of royalties payable at the company's December 31, 2018 year end to January 31). The company's financial statements show a 2018 royalty expense of $60,000. The financial 2018 cheque register, however, only $45,000 has been paid to the menswear designer and only $5,000 De $20,000 (the comparable number for December 31, 2017 is $10,000). According to the company's makes its January 31, 2019 payment to make up for unpaid royalties and withholding taxes it owes in has been paid to the CRA. The president wants know how much the company should remit when it respect of 2018 (2) The $to : ITA: This bonus was declared by way of a director's resolution at the company's Board of Directors' last 2018 meeting. The president understands that his bonus must be paid within 180 days after the year end in order for it to be deductible in 2018 and you have verified that this is correct. This is the first remittance 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 5,010 2017 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 1 In early March, you were preparing your client list with respect to the personal tax return prepara- tion season. When you came across Mr. Ricky's name you remembered that Mrs. Ricky had called you regarding her husband's death. Mr. Ricky had passed away March 1, 2019, at age 62. Mrs. Ricky is the executrix. Introduction to Federal Income Taxation 492 100 shares had an adjusted cost base and paid-up capital of $55,000. The fair market value of the shares Mr. Ricky owned and operated a Canadian-controlled private corporation, Shining Ltd. Mr. Ricky's at the date of death was $5,750,000. been paid at the time of his death. CPP of $2,594 has been, or will be, withheld on this income. He is the month. A non-periodic bonus of $50,000 had been declared on February 15, 2019, but had not yet Mr. Ricky earned $12,000 per month in salary, which was paid by direct deposit on the last day of In addition to his shares, Mr. Ricky owned bonds with accrued interest of $917 in 2019 to the date of his death. Further, Mr. Ricky had owned two rental properties. Net rental income before capital cost not eligible for EI for each of the months of January and . allowance was Other Information: (1) All assets of Shining Ltd. have been used in the active business of the corporation. 2) The shares of Shining Ltd. have been owned by Mr. Ricky since 2000. (3) Mr. Ricky had earned income si nuo did fo$ 95,000He 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 90,000 $100,000 72,000 50,000 $120,000 110,000 Capital cost $80,000 83,000 52,000 UCC