Assessment: RRC Part II Sample Examination (Version:1)

1. Anthony and Rhonda are married and have recently retired. It has always been their goal
to purchase a boat; they estimate the transaction will cost $50,000. Anthony is in a 29%
federal tax bracket; Rhonda is in a 15% federal tax bracket. Anthony has an RRSP valued
at $875,000 and $140,000 invested in non-registered GICs. Rhonda is the annuitant under
a spousal RRSP valued at $460,000; she also has $85,000 invested in Canada Savings
Bonds (CSBs). From the perspective of minimizing taxes during their retirement, what pool
of assets should Anthony and Rhonda draw from FIRST to purchase the boat?
A. Rhonda's spousal RRSP
B. Rhonda's CSBs
C. Anthony's RRSP
D. Anthony's non-registered GICs
2. Based on her first-hand view of the difficulties associated with settling her friend's estate
who died intestate and until she has time to meet with a lawyer to draft a more formal
document, Caroline decides to jot down her final wishes in her own words on a scrap piece
of paper. Unaware of whether or not there are additional requirements, Caroline signs and
dates the paper and files it away with the rest of her personal documents. What type of
will has Caroline drafted?
A. English form
B. holograph
C. notarial
D. international
3. What statement accurately describes the features and benefits characteristic of ALL forms
of estate freezes?
A. It enables an individual to retain control of the asset to be frozen while passing on the
tax liability to the intended beneficiaries.
B. It enables an individual to lock-in his or her tax liability on an asset as of the date the
freeze is implemented.
C. It enables an individual to shelter the capital gains realized on the asset that is frozen
up to the lifetime capital gains exemption limit.
D. It enables an individual to choose the value at which the property is to be frozen up
to its fair market value.
4. Prakesh earned a nominal rate of return of 6.5% on his GIC. If Prakesh is in a 36%
combined marginal tax bracket and the rate of inflation is 2%, what after-tax, real return
did Prakesh earn?
A. 2.12%
B. 3.74%
C. 4.16%
D. 4.41%
5. Perdita died in January of this year. Her net income for the one month she worked this
year was $8,000; her net income from last year was $96,000. Prior to her death, this
year, she made a charitable donation of common shares of Spindrift Enterprises—a
publicly traded company—to the Heart and Stroke Foundation. She acquired the shares at
a cost of $30,000; at the time of the donation, the fair market value of the shares was
$62,500. What statement is correct?
A. On Perdita's final tax return, her representative can claim a maximum charitable
donation amount of $6,000. Since she is dead, the unclaimed portion of her
charitable donation cannot be used.
B. On Perdita's final tax return, her representative must report 50% of the $32,500
capital gain triggered by Perdita's gift of her Spindrift shares to a registered charity.
C. On the first $200 of Perdita's charitable donation, a tax credit equal to the highest
federal tax bracket can be claimed; on the remaining donation amount, a tax credit
equal to the lowest federal tax bracket can be claimed.
D. On Perdita's final tax return, her representative can claim a charitable donation
amount of $8,000. For Perdita's tax return for last year, her representative can file an
adjustment with the CRA and claim a charitable donation tax credit of $54,500.
6. Questions 6 to 10 are based on the "Phoebe and Joseph" Case Study.

Phoebe and Joseph were married for 12 years before Phoebe filed for divorce late last year
after learning of Joseph's involvement in an extra-marital affair. Joseph has since moved
out of the house, leaving Phoebe to care for their three children: Chandler, aged 11; Ross,
aged 9; and Marie, aged 7. After the divorce, Phoebe expects to share joint custody of the
children with Joseph although, the children will live full-time with Phoebe. Joseph earns
an annual salary of $60,000. Phoebe runs a part-time, home-based business that
generates a net income of approximately $9,000 per year. After the divorce is finalized,
Phoebe plans to continue working out of the home so she can devote her time and energy
to raising the children. Phoebe has concerns about how she is going to cope financially,
especially since Marie has severe cerebral palsy and requires $500 per month in medical
care. Phoebe would also like to send Chandler to a private school so that he can remain
with his best friend however, tuition costs amount to $12,000 per year. Extracts from the
Federal Child Support Guidelines for the province in which Phoebe and Joseph live are as
follows:

Monthly Award for:

Income 1 Child 2 Children 3 Children 4 Children

$9,000.00 $55 $64 $74 $83
$15,000.00 $104 $205 $250 $284
$51,000.00 $409 $671 $881 $1,053
$60,000.00 $477 $776 $1,016 $1,213
$66,000.00 $516 $839 $1,097 $1,308
$69,000.00 $536 $870 $1,137 $1,355

If the incomes for Phoebe and Joseph remain the same, what amount of basic child
support should Phoebe expect the court to award?
A. $ 776
B. $ 881
C. $1,016
D. $1,451
7. Over and above the basic child support payment, what monthly amount, if any, can
Phoebe expect to receive to account for special expenses incurred by Marie and Chandler?
A. $0—Phoebe should not expect additional payments because she has the capacity to
work.
B. $ 435
C. $ 870
D. $1,304
8. In addition to child support, Phoebe is seeking spousal support from Joseph. What factor
will the court of competent jurisdiction NOT take into consideration as part of determining
the appropriate spousal amount to be awarded to Phoebe?

A. Joseph's extra marital affair

B. property Phoebe received as part of the divorce settlement
C. Phoebe's role as primary caregiver to the children after the divorce
D. Phoebe's role as primary caregiver to the children during the marriage
9. Assume Phoebe is granted a fixed monthly spousal support award. During the course of
the year, in addition to paying the court-ordered spousal support amount, Joseph also
gives Phoebe $2,200 to purchase a new washer and dryer. A basic washer and dryer
would have only cost $800 however, Phoebe demanded that Joseph purchase a model with
the most advanced features. Joseph also gave Phoebe $700 to cover unexpected repairs
to Phoebe's automobile. What payments made by Joseph meet the definition of
an allowance for purposes of the inclusion / deduction rule?
A. the spousal support payments only
B. the spousal support payments and the payment for the automobile repairs only
C. the spousal support payments, the payment for the washer and dryer but, based only
on purchasing a basic model and the payment for the automobile repairs
D. the spousal support payments, the payment for the washer and dryer and the
payment for the automobile repairs
10. Assume the court of competent jurisdiction orders Joseph to pay Phoebe both child
support and spousal support. What statement regarding the tax treatment of these
support payments is true?
A. Joseph can deduct the child support payments from his income but, he cannot deduct
the spousal support payments.
B. Phoebe must include the child support payments in her income for the year.
C. Joseph can deduct both the child support payments and the spousal support
payments from his income for the year.
D. Phoebe must include the spousal support payments in her income for the year.
11. Last month, Brad and Angelina got married. However, while cleaning Brad's office in their
new home, Angelina came across some papers indicating Brad married a woman named
Jennifer five years ago. Angelina did not find anything to suggest that marriage was ever
terminated. What recourse is available to Angelina based on her discovery?
A. Angelina can obtain a divorce after completing a one-year separation from Brad.
B. Angelina can obtain a divorce immediately given that Brad has committed adultery.
C. Angelina can obtain an annulment because a material fact that existed at the time of
Brad and Angelina's marriage ceremony invalidates Brad and Angelina's marriage.
D. Angelina can obtain an annulment because Brad and Angelina have a voidable
marriage.
12. Marissa and Annette have been same-sex partners for the past five years however,
Marissa’s family still does not accept their daughter's relationship. As part of her estate
plan, Marissa has indicated she would like the majority of her assets to pass to Annette
however, she is also concerned that her family may challenge her bequests. What strategy
is MOST LIKELY to be contested successfully by Marissa's family following the death of
Marissa?
A. Marissa registers her property in joint tenancy with Annette.
B. Marissa transfers her property to Annette via her will.
C. Marissa transfers her property to an inter vivos trust naming Annette as the
beneficiary.
D. Marissa names Annette as the direct beneficiary of her registered assets.
13. Christiano suffers from an illness that will eventually leave him incapable of making his
own decisions. In preparation for that time, he wants to empower his wife to make
personal care and health care decisions on his behalf but, he also wants to provide
instructions as to how he wants those decisions made. What document should Christiano
draft to meet his objective?
A. a power of attorney for personal care containing an instructional directive
B. a proxy directive
C. a power of attorney for property containing a heroic measures clause
D. a regular will
14. Manny died on March 17th of this year as a result of a kitchen fire at the restaurant he
owned. What statement is true?
A. The balance due date for any outstanding taxes owed by Manny will be six months
following March 17th.
B. The terminal period for Manny would be from March 18th to December 31st of this
year.
C. The filing due date for Manny's final income tax return is June 15th of next year.
D. Income for the terminal period of the deceased is reported on a T3 income tax return.
15. Markus is a high net worth individual and it is expected that his assets will continue to
appreciate significantly in value. In light of his divorce six years ago, he would like all of
his assets to ultimately be distributed only to his three adult children none of whom are
dependent on their father. In addition, he would like to minimize his tax liability going
forward. What strategy would NOT help Markus achieve his objective?
A. gifting his growth assets to his children immediately
B. transferring his growth assets to an inter vivos trust
C. establishing a holding company and transferring his growth assets into the holding
company in exchange for fixed value, voting, preferred shares
D. designating his children as the beneficiary of all of his assets either directly or
through his will
16. At the time of her death, Laura owned a fully furnished condominium, a car and a boat in
California. She also kept $10,000 U.S. on deposit at a U.S. bank. Laura vacationed in
California for three months of the year however, she never had any intention of living
there permanently. With her bank in Canada, Laura also maintained a U.S. dollar savings
account and an investment account that contained a combination of Canadian and U.S.
stocks. What assets would be considered situs assets as part of determining Laura's
taxable U.S. estate?
A. Since Laura is a Canadian resident and never had intentions of living in the U.S.
permanently, she does not have to pay any U.S. estate taxes.
B. the condominium and the U.S. cash on deposit only
C. the condominium, the car, the boat and the U.S. cash on deposit
D. the condominium, the car, the boat and the U.S. stocks in her trading account held in
Canada
17. Phillipe’s first wife died two years ago; the couple had two children who are now adults:
Marc and Sophie. This year, Phillipe remarried to Annie however, Marc and Sophie strongly
disapprove of their father's choice in partners because Annie is 20 years younger than
Phillipe and because Marc and Sophie feel Annie is only interested in their father's
money. Phillipe and Annie live in the house in which Marc and Sophie grew up; it is
currently registered in Phillipe’s name only. Phillipe and Annie intend to live in the house
for the next several years. In the event of his death, Phillipe wants Annie to be able to
continue to live in the house for as long as she wants, but ultimately, he wants the home
to pass to Marc and Sophie. How can Phillipe ensure his objectives will be met?
A. Phillipe should retain sole ownership of the house. In his will, he should grant Annie a
life interest in the house and name Marc and Sophie as the remaindermen.
B. Phillipe should retain sole ownership of the house. In his will, he should grant Annie a
capital interest in the property and give Marc and Sophie a life interest.
C. Phillipe should reregister ownership of the house such that it includes Annie as a joint
tenant. Phillipe should then ask Annie to ensure she bequeaths the house to Marc and
Sophie in her will.
D. Phillipe should gift the house to Marc and Sophie immediately on condition that
Phillipe and Annie can remain in the house. Phillipe should then ask his children to
ensure they allow Annie to continue living there after his death.
18. Questions 18 to 23 are based on the "Michael and Leah Miller" Case Study.

Leah Miller separated from her husband, Michael, in January of last year. They were
married for 20 years and together, they had three children.

Personal Assets

Following the death of her grandmother several years ago, Leah received an inheritance of
$500,000. Leah used $300,000 to purchase a house which she used as her principal
residence. She lived in the property for five years prior to marrying Michael. When Michael
and Leah got married, the couple moved into Leah's home. During their time together,
Leah paid all of the expenses related to the property including the $150,000 mortgage
which she discharged a few years ago. During the marriage, they talked on several
occasions about changing the ownership of the property from sole ownership to joint
tenancy however, they never actually got around to registering Michael on the title of the
property. The value of the house at the time of their separation was $585,000. With the
remaining $200,000 Leah received from her grandmother, Leah was careful to deposit this
sum in a brand-new investment account registered in her name only. The money has been
invested in various vehicles however, the principal and growth has always remained in the
same investment account. The current value of the assets in this account is $360,000. The
funds have never been commingled with the other assets owned by Michael and Leah.
Leah would like to see this money eventually pass onto her children. During their
marriage, Michael purchased a condominium in which he has 100% ownership. The
property was used exclusively for rental purposes.

Family Support and Division of Property

Leah and Michael’s separation was amicable and they prepared their own separation
agreement in accordance with the Family Law Act of their province. They signed the
separation agreement without involving the courts. Leah expects their divorce to be
finalized at the end of this year. Michael and Leah live in a province that has adopted a
deferred community of property regime. Michael's condominium would be considered part
of the community property of the couple. Also, in their province, the matrimonial home is
considered a family asset. On July 1st of last year, Michael transferred the following
investment to Leah, in accordance with their separation agreement: 1,000 shares in the
Big Money Fund. Michael purchased the shares at an adjusted cost base (ACB) of $10,000;
the fair market value (FMV) of the investment at the time it was transferred to Leah was
$32,000. Also part of the court ordered separation agreement, Michael transferred
$50,000 from his RRSP to Leah. Michael did not file any special elections pertaining to
these transfers with his income tax return.
 Estate Planning

Following her separation from Michael, Leah changed the beneficiary designation on her
RRSP to her children. Neither Leah nor Michael has prepared a will. In the province in
which Leah and Michael reside, intestacy legislation prescribes a preferential share of
$200,000 to the surviving spouse. Of the remaining amount, the surviving spouse is
entitled to 50% as a distributive share; similarly, the children of the deceased are also
entitled to 50% of the estate as a distributive share in equal shares per stirpes.

When Michael and Leah's divorce is finalized, what is MOST LIKELY to happen with
respect to the rental property owned by Michael?
A. Leah will be entitled to 50% of the value of the property.
B. It will be exempt from division with Leah because Michael has 100% ownership in the
property.
C. Leah will be entitled to a 50% ownership interest in the property.
D. The divorce will not have any impact on the ownership of the property because a
spouse in a legal marriage cannot own property independently of the other spouse.
Property purchased during the marriage by either spouse is automatically owned by
both spouses.
19. When Michael and Leah's divorce is finalized, what is MOST LIKELY to happen with
respect to the home owned by Leah?
A. It will not be subject to division because it was purchased prior to Michael and Leah's
marriage.
B. It will not be subject to division because it was purchased using exempt property (i.e.
proceeds from an inheritance).
C. It will be subject to division because the property was the matrimonial home of the
couple.
D. It will not be subject to division because Michael did not make any financial
contributions towards the property.
20. When Michael and Leah's divorce is finalized, what is MOST LIKELY to happen with
respect to the $360,000 in the investment account registered in Leah's name?
A. It will be exempt from division with Michael because Leah has 100% ownership of the
account.
B. Michael will be entitled to 50% of the value of the account.
C. The $250,000 principal amount will not be subject to division however, the
investment income that has accrued while Michael has been married to Leah will be
subject to division.
D. It will not be subject to division because it represents the proceeds of exempt
property (i.e. proceeds from an inheritance) that has been kept separate from
Michael and Leah's community property.
21. How much must Michael report on his income tax return for last year as a result of
transferring his shares of Big Money Fund to Leah?
A. $0
B. $11,000
C. $22,000
D. $32,000
22. What statement is true with regards to the transfer of $50,000 from Michael's RRSP to
Leah?
A. Michael will have to report $50,000 as part of his taxable total income on his income
tax return for last year.
B. Michael will not incur a tax liability as a result of the transfer.
C. Provided Leah has sufficient RRSP contribution room, she will be able to transfer the
$50,000 into her own RRSP.
D. Leah will be able to claim an RRSP deduction of $50,000 on her income tax return
following the direct transfer of funds from Michael to her RRSP.
23. Assume in ten years Leah dies. If at that time all of the factors presented in the case study
are still applicable except that her divorce from Michael has now been finalized, what
statement with respect to Leah's estate is true?
A. Michael is entitled to receive 100% of the proceeds of Leah's estate.
B. Michael is entitled to receive a preferential share and one distributive share from
Leah's estate.
C. Michael is entitled to receive 50% of the proceeds of Leah's estate.
D. Michael is not entitled to receive any part of Leah's estate.
24. William and Beatrice are married. William is 80 years old; Beatrice is 76 years old.
Although both individuals are in good health and are currently fully capable of handling
their affairs, they would like to make provisions for their finances in the specific event they
both become incapacitated due to a mental or physical condition. The couple has
considerable wealth—some assets are held at a bank however, most of their assets are
held at various investment firms. The couple has a 44-year-old son named Charles. The
relationship between William, Beatrice and Charles is strained due to the financial
difficulties Charles has encountered and the numerous occasions he has borrowed money
from William and Beatrice without ever repaying his parents in full. This being said,
Charles is the only relative William and Beatrice have and they do want to keep control of
their finances within the family. What option with respect to a power of attorney
would BEST suit the needs of William and Beatrice?
A. an enduring power of attorney for property where the scope of authority for Charles
contains specific restrictions
B. a bank power of attorney
C. a contingent, continuing power of attorney for property where the scope of authority
for Charles contains specific restrictions
D. a springing power of attorney for personal care
25. Mae-Ling died recently. At the time of her death, Mae-Ling had the following assets:
$85,000 in a bank account, an RRSP valued at $575,000 under which Mae-Ling's brother
is designated as beneficiary, $400,000 in a non-registered stock portfolio, a principal
residence valued at $650,000 on which there is an outstanding mortgage of $100,000 and
a cottage valued at $290,000 located in a different province than the province in which
Mae-Ling resided at the time of her death. In a TYPICAL situation, on what amount of
assets owned by Mae-Ling would probate fees be applied in the province in which she
resided?
A. $1,035,000
B. $1,050,000
C. $1,240,000
D. $2,000,000
26. What statement regarding the tax issues of a testamentary trust is true?
A. Income earned and retained in the trust is taxable at the highest provincial and
federal tax rate immediately upon the testamentary trust coming into existence.
B. A T1 General income tax return must be filed for the trust each year.
C. Income earned on the trust property must be reported within the trust but, can be
taxed in the hands of the trust or in the hands of the beneficiary.
D. The potential attribution of investment income makes a testamentary trust less
appealing as a tax planning vehicle.
27. Under what scenario would a formal trust be LEAST required in order to meet a particular
objective?
A. a parent who does not feel his or her children are responsible enough to manage a
significant inheritance
B. an individual who wants to ensure his or her spouse receives the proceeds of the
individual's RRSP directly
C. an individual who fears that he or she may no longer be capable of managing their
own affairs but, who does not want to simply give away control of their assets to
another individual
D. an individual who wants to ensure his or her dependents are adequately provided for
in the event of the premature death of the caregiver
28. Gertrude is a financial planner who is meeting with her clients Sergei and Annika, a retired
married couple. In a general discussion about estate planning, Gertrude met with
resistance when she suggested that the couple draft a will. What statement should
Gertrude NOT make if Gertrude seeks to change Sergei and Annika's position on this
issue?
A. Sergei and Annika will be able to choose how their assets are to be distributed after
death rather than having that decision made according to provincial legislation.
B. The existence of a will should expedite the distribution of Sergei and Annika's estate
assets and should reduce the strain on their survivors.
C. An intestacy is usually more costly to settle.
D. The existence of a valid will means Sergei and Annika will avoid paying taxes on
assets that form part of their respective estates.
29. Peng died intestate. Whom are the courts MOST LIKELY to approach FIRST to assume
the responsibility of administrator of Peng's estate?
A. Peng's 28-year-old son
B. Peng's mother
C. Peng's brother
D. Peng's surviving spouse
30. Harrison is the trustee of his sister's estate. Due to the complexity of her situation, it is
anticipated the estate will likely not be settled for a considerable period of time so,
Harrison would like to invest the $250,000 it holds in cash in something more productive.
The will drafted by Harrison's sister did not address the issue of trustee powers. Moreover,
the province in which Harrison and his sister reside defers to the legal list detailed in the
provincial trustee legislation rather than the prudent investor principle. In what vehicle
would Harrison MOST LIKELY be able to invest the cash?
A. derivatives
B. a money market mutual fund
C. a Government of Canada bond
D. an equity mutual fund
31. Questions 31 to 40 are based on the "Javier and Celeste Sanchez" Case Study.

Family Situation and Employment

Javier and Celeste Sanchez have been married for 40 years. Javier is 68 years old; Celeste
is 65 years old. For 35 years, Javier has owned and operated Barchetta Inc. a successful
business that supplies parts to major automobile manufacturers. Javier is the sole
shareholder in the business and barring a medical issue, he will likely continue working for
the foreseeable future. During their time together, Celeste has done the bookkeeping for
the business in addition to pursuing her own career as a full-time social worker. Given the
long hours Javier dedicates to the business, especially in the early years of their marriage,
Celeste was left with the responsibility of raising the couple's children and maintaining
their home. Celeste is now retired. Javier and Celeste had two children: Manuel and
Elizabeth. Unfortunately, Elizabeth died last year in an automobile accident at the age of
34. Elizabeth was the mother of a 6-year-old daughter named Maria. Since the death of
Elizabeth, Maria has been living with Javier and Celeste and is entirely dependent on her
grandparents for her well-being.

Personal Assets

The principal residence owned by Javier and Celeste is registered as a joint tenancy and
has a current market value of $550,000. Javier also owns a cottage; although it is used by
the entire family, it is registered in Javier's name only. The property was purchased
several years ago for $50,000; it is currently valued at $245,000. Javier has a non-
registered investment account which contains a variety of mutual funds. The ACB of his
investment portfolio is $260,000; the fair market value is $495,000. Celeste also has a
non-registered investment portfolio; its ACB is $185,000 and its fair market value is
$325,000. Javier has an RRSP valued at $140,000. Celeste has an RRSP valued at
$65,000. She is also the annuitant under a spousal RRSP valued at $120,000. Even
though all of the RRSPs were opened over 25 years ago, none had a designated
beneficiary until last week when Javier read an article on the benefits of named
beneficiaries. He immediately went to his bank and completed a form to designate Maria
as the beneficiary of his RRSP. The RRSPs under which Celeste is the annuitant were not
amended.

Several years ago, Javier and Manuel purchased a townhouse as tenants-in-common for
rental purposes. The purchase price was $210,000; the property is currently worth
$370,000. Elizabeth owned several pieces of jewellery with a combined value of $80,000.
It was always her intention to pass these items to her daughter Maria, when Maria became
an adult. Following the death of Elizabeth, Javier and Celeste decided to store the
jewellery in a safety deposit box until they could figure out how best to transfer the
heirloom to Maria.

Estate Planning and Insurance

The intestacy legislation for the province in which Javier and Celeste reside prescribes a
preferential share of $200,000. The remaining amount is to be distributed as follows: 50%
going to the surviving spouse and the other 50% going to the children of the deceased in
equal shares per stirpes. Four years ago, Javier had a will drafted. In it, he indicated that
the proceeds of his RRSP and his cottage are to be distributed to Celeste upon his death.
However, he also indicated that his shares in Barchetta Inc.—which comprise the majority
of Javier and Celeste's net worth—and all of his other assets are to be allocated to Selma:
a woman unknown to Celeste and with whom Javier has had an extramarital relationship
for several years. In his will, Javier also bequeathed his 50% interest in his principal
residence to Selma. Javier would like his 50% interest in the townhouse he purchased with
Manuel to pass to his son however, there is nothing mentioned in Javier's will with respect
to this property. Even though Celeste has considerable assets in her name, she is
uncomfortable facing her mortality and has resisted recommendations to prepare a will.
Javier owns a $1 million universal life insurance policy under which he is the life insured
and Selma is the designated beneficiary.
 Assuming it is only upon his death that Celeste learns about how Javier has chosen to
distribute his assets, what recourse does Celeste have?
A. Celeste does not have any recourse. The will is an absolute document and the courts
must honour its contents to protect Javier's testamentary freedoms.
B. Celeste can apply to the courts under provincial relief legislation to change the
allocation of assets indicated in the will based on the dependency of Celeste and
Maria on Javier.
C. The only way Celeste can prevent Selma from receiving Javier's assets is if Celeste
can prove that Javier was not of sound and disposing mind at the time he drafted his
will.
D. Celeste can apply to the courts under provincial relief legislation to prevent Selma
from receiving Javier's personal assets. However, because the business was owned by
Javier only, Celeste will not have a claim on his shares in the company.
32. Based strictly on how his affairs are currently structured and ignoring intervention by the
courts, which of Javier's proposed bequests is MOST LIKELY to succeed?
A. the bequest of half of his principal residence to Selma
B. Javier's wish to pass his interest in the rental property to Manuel
C. the bequest of his RRSP to Celeste
D. the bequest of the life insurance death benefit to Selma
33. Based strictly on how his affairs are currently structured and ignoring intervention by the
courts, upon the death of Javier, what will be the tax implications with respect to the
townhouse he owns as tenants-in-common with Manuel?
A. There will be no immediate tax implications as Javier's interest in the property will
rollover at its ACB to Manuel. At that point, Manuel will automatically have 100%
ownership of the property.
B. Manuel will inherit 100% ownership of the property under the rights of survivorship.
Manuel will be taxed on the growth up to the date of Javier's death.
C. Javier's interest in the property will form part of his estate. The growth in the
property, in proportion to his ownership interest, will be subject to taxation on his
final income tax return. Javier's interest in the property will pass to Selma.
D. Provided Celeste replaces Javier as one of the tenants to the property immediately
upon Javier's death, there will be no tax implications due to the tax deferred spousal
rollover provisions.
34. If Javier were to die today, what statement pertaining to the taxation of his assets is true?
A. The proceeds of Javier's RRSP will not be subject to taxation on his final income tax
return.
B. The growth on his Barchetta Inc. shares will rollover to Celeste without any tax
implications.
C. The assets in his non-registered investment account will be taxable to Selma when
she ultimately receives the funds.
D. The growth on Javier's ownership interest in his principal residence owned with
Celeste must be reported on Javier's final income tax return.
35. If Javier were to die today, what would be the resulting tax liability on his cottage?
A. $0
B. $ 97,500
C. $195,000
D. $245,000
36. If Celeste were to die today, what amount would the courts likely award to Javier based on
the assets owned solely by Celeste?
A. $200,000
B. $295,000
C. $355,000
D. $510,000
37. If Celeste were to die today, what statement is true?
A. As the surviving spouse of Celeste, all of Celeste's assets would flow to Javier.
B. Javier and Manuel would each receive an equal share of Celeste's assets.
C. Javier and Manuel would each receive a share of Celeste's assets. The share that
would have been allocated to Elizabeth will flow to Manuel.
D. Javier, Manuel and Maria are each entitled to receive a share of Celeste's assets.
38. What strategy could Celeste implement so as to MINIMIZE the probate fees that will be
charged to her estate upon her death?
A. reregister her non-registered investment account as a joint account with Javier as
tenants-in-common
B. designate Maria as the beneficiary of her individual RRSP
C. indicate in her will that Manuel is to receive the proceeds of her spousal RRSP
D. establish a personal trust, which names Maria as the beneficiary, to receive the
proceeds of her non-registered investment account upon the death of Celeste
39. To honour the wishes of Elizabeth, Javier and Celeste want to ensure Maria receives the
jewellery owned by her mother. However, they also want to be certain that this only
happens at a time when Maria is responsible enough to receive such a valuable gift and
when Maria can truly appreciate the circumstances surrounding the gift. Until that time, it
was the wish of Elizabeth that no one else be able to use or have access to the heirloom.
What strategy should Javier and Celeste pursue?
A. gift the jewellery to Maria immediately
B. establish a trust naming Celeste as the life tenant and Maria as the remainderman
C. establish a trust naming Maria as the capital beneficiary establish a trust naming
Javier as the trustee and giving Maria a discretionary interest in the jewellery
D. establish a trust naming Javier as the trustee and giving Maria a discretionary interest
in the jewellery
40. Assume in the year Javier dies, he realizes a $70,000 net capital loss. What option will be
available with respect to this net capital loss?
A. It can be used to reduce any source of investment income Javier may have in any or
all of the three years preceding his death by a cumulative amount of $70,000.
B. It can be used to reduce Javier's taxable income in the year of death potentially by as
much as $70,000.
C. It can only be used to offset other investment income earned in the year of death or
the year preceding his death to a cumulative amount of $70,000.
D. Since it can no longer be carried forward, no benefit can be derived from a net capital
loss arising in the year of death.