Mort Deadwood Douglas Conway (101034088)

Plan)

Calculation of taxable income for 20x1 for Mort’s estate

Filing requirements

Steps in managing the estate

Solution)

Net Partnership income of $20,000

Trust Income 2,000

(File the associated T3 Income Tax return and include the $2,000 amount on his T4)

Eligible Dividend

Dividend Received 3,000

Gross Up at 38% 1,140
Grossed up Dividend 4,140
Income Tax at 15% (621)
Dividend Received 2,379
FDTC 6/11 of gross up 621,82
Dividend Received 3,000.82

Bank account cash will be transferred at ACB to Ms. Jane Dead Wood at $16,000.

Family Residence will be transferred at ACB to Ms. Jane Deadwood at $300,000.

The RRSP will be transferred to Ms. Jane Deadwood and taxed as income on Jane’s return at FMV on
receipt of $470,000. Since she is the sole beneficiary of the RRSP, if you transfer the money into another
RRSP or RRIF, you will be able to claim a deduction of the refund of RRSP transferred.

The GICs will be transferred at FMV and have no capital gain

The shares of BigCorp Inc. a Canadian Corporation will be transferred to you at an ACB of 40,000. If Big
Corp. are shares of a qualifies small business corporation you can elect to transfer them to you at higher
than the ACB to create a capital gain in an amount that will use up any unused lifetime capital gains
exemption Mort has available or any unused loss carry forwards expiring in the final return. The
corporation must be a CCPC and are be owned by Mort for at least 24 months preceding the disposition
and through the 24 month period, more than 50% of the FMV of the corporation’s assets must be used
in active business carried on primarily in Canada.

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The shares of BioTech Inc. will be transferred at an ACB of $320,000 to you unless the shares of Big Corp.
do not qualify as qualified small business corporation shares. If the shares are not qsbc shares Mort will
be required to pay a taxable capital gain of 125,000 on the shares of Big Corp which can be offset by the
allowable capital loss of 150,000.

The negative balance in the credit card account indicates a credit balance of $3,000 to be used towards
other purchases. This will be transferred to you at cost.

The cottage since it is transferred to Mort’s Daughter and his son in law, Mort will have to pay taxes on
the capital gain of $50,000. $25,000 on Mort’s return and and Calamity and Luc will have property
acquired at $125,000 each.

The paintings and Sculptures are considered LPP and are a deemed disposition at FMV on Mort return of
33,000-13,000 20,000 capital gain and $10,000 taxable capital gain.

There will be no taxes on the transfer of the family automobile to Laurie as the FMV is lower than its
costs and you are not allowed to take capital losses on depreciable assets.

The testamentary trust setup for the grandchildren, Alex and Laurie with an approximate value of
$150,000 each will need to have all income reported on their T1’s and a filing for the trust T3 income.

The $50,000 given to Alex for his education by Mort, given that he invested it in term deposits to earn
interest income should be kept in an RESP. This allows for the interest to be accrued tax free until the
time Alex enters university in 2 years. Since Laurie will be back in school in 2 months, she can keep the
money for her sole proprietorship business.

Estimation of Taxable Income for 20x1 Mort’s estate

Net Partnership Income 20,000

Trust Income 2,000
Eligible Dividend grossed up 4,140
Big Corp. Taxable Capital gain wLCGE/deduction 0 No LCGE deduction 125,000
Bio Tech inc. (150,000) (150,000)
Taxable capital gain on cottage 25,000
Taxable capital gains on paintings and sculptures 10,000

Estimation of Taxable Income 61,140 No LCGE deduction 61,140

Calamity will need to file the return April 30 th 20x2 for Mort and will need to file the Trust income tax
return 90 days after the trust’s year end. In managing the estate, it is important to gather the will
documents and distribute the assets in accordance with Mort’s intentions on his will to the beneficiaries.

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