Estate Freeze, Exhibit Additional information • Andy currently owns all of the shares of, Taxation

Estate Freeze, Taxation

Assignment Help:

Exhibit
Additional information
• Andy currently owns all of the shares of Grand Inc., a CCPC with 1,000 common shares issued and outstanding. Grand Inc. operates an active business in Canada and is a small business corporation with a December 31st year-end. Andy’s shares of Grand Inc. are qualified small business corporation (QSBC) shares
• Grand Inc. was incorporated in 1985 by Andy’s aunt, Mary. In 1985 Mary subscribed for 1,000 common shares of Grand Inc. and paid $3,000, in aggregate, into the company to buy the shares. In 1999 Mary retired and sold all her 1,000 common shares to Andy for $220,000, in aggregate, which was their fair market value (FMV) at the time
• Some friends of Andy’s have done estate freezes themselves and suggested that Andy do something similar. Andy thinks the value of Grand Inc. will increase over the next several years and after discussions with his friends Andy wants to do the following estate freeze in the near future:
1) Grand Inc. will undergo a reorganization of capital, where Andy’s 1,000 common shares will be given up in return for 500 new non-voting preferred shares. Andy does not want to use subsection 85(1) of the Act when doing this reorganization of capital;
2) Andy’s adult children, who are very mature and business savvy, will subscribe for 100 new common shares of Grand Inc. Hence, the children will have voting control of Grand Inc. which Andy is fine with;
3) Andy will sell his 500 non-voting preferred shares of Grand Inc. to Tsai Family Holding Company in return for $800,000 in cash. Tsai Family Holding Company is 50% owned by Andy and 50% owned by Andy’s children and it has lots of cash and liquid assets. Since Andy has never used his capital gains exemption before
Andy’s friends believe he can get the $800,000 tax-free. Grand Inc.’s most recent (December 31, 2013) balance sheet shows the following information (and these figures have remained stable for the past 24 months):
ACB (original
cost) UCC FMV
Active business assets (excluding goodwill) $700,000 $500,000 $600,000
Cumulative eligible capital (goodwill) $20,000 $10,000 $300,000
Long-term portfolio investments $40,000 n/a $60,000
$960,000

draft a report describing and calculating the federal income tax consequences to Andy from the proposed estate freeze. You should give Income Tax Act (ITA) section, subsection and paragraph (where applicable) references in order to support your answer.

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages

Estate Freeze, Taxation

Related Discussions:- Estate Freeze

Filing Out Tax Return Project, Using tax software, file out federal and cal...

Calculate nominal interest rate, You have been offered a unique investment ...

Return of invesment.., return of invesment..

Compute income tax liability, Dan and Cheryl are married, file a joint retu...

Taxable Income, John and Ellen Brite are married and file a joint return. J...

Case study, Price for 2000 words

Tds, Dawn's new car has a FMV of $20,000 and it weighs 3,000 pounds. The co...

Compute taxable income, Kline Company, an accrual basis calendar year corpo...

Income tax fundamental 2014, gregory and lulu clifden tax problem pg D6 to ...

Tax rates, Taxable income Tax on this income ...

Write Your Message!

Featured Services

Online Tutoring

Project Development

Exam Preparation

Course Help

Assignment Help

Popular Subjects

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT