Question 4 (30 minutes) [Chapter 2]

Tamara Quist is a 57-year-old Canadian citizen, and the only daughter of Bob and Linda Quist.
Tamara is the president and sole owner of all 100 common shares of Quist Tires (“QT”), a
successful retailer of Michelin Tires located in north Toronto. Tamara’s father, Bob, incorporated
QT in Canada about 22 years ago. Tamara took over the business upon finishing university about
14 years ago.

Tamara lives in a downtown Toronto condominium. She owns a portfolio of stock investments of
companies listed on both the TSX and NASDAQ. She also has a self-directed registered
retirement savings plan (RRSP).

In January of 2021, Tamara went to the Cayman Islands for a vacation and met the man of her
dreams, Frank Smeltzer. Frank, a U.S. citizen, had lived in the Cayman’s since 2018 when he
moved there from the United States. Frank is the sole shareholder and president of a small U.S.
incorporated entity, Smeltzer Jewels (SJ). SJ distributes Colombian-purchased emeralds to U.S.
jewellers. Frank’s company has two employees living in New Jersey (a sales agent and a
purchasing manager). The corporation is considered a resident of the United States for U.S. tax
purposes. Tamara and Frank were married on the beach in the Cayman Islands on January 10,
2021.

Since January 15, 2021, Frank has been living with Tamara in her Toronto condominium. He had
never been to Canada prior to the move. Frank set up an office in the second bedroom of the
condominium and began to contribute towards the mortgage. He continued to manage SJ’s
business from this office, travelling to the United States and Colombia on a frequent basis and
discussing operational issues with SJ’s employees on a daily basis. He obtained a separate phone
line and a P.O. box for the office. When in the United States, Frank stays in an apartment rented
by the company in Manhattan.

Frank kept his fully furnished beachfront home and his BMW in the Cayman’s. When he moved
to Canada, he considered selling the property. It was listed for a short time before he decided to
keep it. Frank has a Cayman Island bank account, share investments, and a driver’s license. In
Canada, he has a chequing account and a health club membership. Frank’s activities for 2021
were as follows:

Activity Location Days

(including weekends)
Work from Cayman home office Cayman Islands 10 (pre-January 15)
Work from Cayman home office Cayman Islands 3 (post-January 15)
Work from home office Canada 247
Vacation Canada 24
Business trips United States 38
Vacation United States 5
Business trips Colombia 20
Vacation Cayman Islands 9

Tamara and Frank sold the condominium and furniture and moved to the Cayman Islands
permanently on February 18, 2022. Tamara continued to manage QT from the home in the
Cayman’s and received employment income from the company after the move. She visited the
company and her parents in Canada once a month and expects to spend a total of 95 days in
Canada in 2022. The directors of the company held their 2022 annual meeting in the Caymans in
early May. Tamara kept a car at her parents and retained her Canadian driver’s license. She
closed her bank account when she left Canada and opened a new one in the Cayman Islands, but
kept her RRSP and stock investments.

Required:

(a) Discuss Frank’s Canadian residency status for tax purposes for 2021. Identify each
degree of residence that could apply to him for the year and its tax consequences. State a
conclusion once you have assessed all of the facts considered.
(14 minutes)

(b) Discuss SJ’s Canadian residency status for tax purposes for 2021 and its tax
consequences.
(4 minutes)

(c) Discuss Tamara’s Canadian residency status for tax purposes for 2022. Identify each
degree of residence that could apply to her for the year and its tax consequences. State a
conclusion once you have assessed all of the facts considered.
(8 minutes)

(d) Discuss QT’s Canadian residency status for tax purposes for 2022 and its tax
consequences.
(4 minutes)