question archive Bella originally paid $30,000 for common shares in Twilight Inc
Bella originally paid $30,000 for common shares in Twilight Inc
Subject:LawPrice: Bought3
Bella originally paid $30,000 for common shares in Twilight Inc. (a public company), which pays an annual dividend of $2,000. Bella is considering transferring these shares to either her husband Edward, or her 3 year-old daughter, Renesmee. At the time of consideration of the transfer, the shares are worth $50,000.
a) What are the income tax consequences if Bella gifts the shares to Edward
i. With the automatic rollover?
ii. If they opt out of the rollover?
b) What are the income tax consequences if Bella sells the shares to Edward for $30,000
i. With the automatic rollover?
ii. If they opt out of the rollover?
c) What are the income tax consequences if Bella gifts the shares to Renesmee?
Consider the following in your response:
• What are the Proceeds of Disposition for Bella? Will she have a capital gain/loss immediately?
• What is the ACB for Edward?
• Will double taxation occur?
• Will attribution of the dividend occur subsequent to the transfer? Why or why not?
• Will attribution of the capital gain occur (when the shares are finally sold to a third party)? Why or why not?
