Solution pr.5,6,7,8, and 11

Solution pr.5,6,7,8, and 11 - Solution to Assignment...

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Solution to Assignment Problem Three - 5 Mr. Leduc would be considered a part year resident and would only be assessed for Canadian income taxes on worldwide income during the portion of the year prior to his ceasing to be a resident of Canada. IT-221R3 points out that in using the part year rules, a person ceases to be a Canadian resident as of the latest of three dates: 1. The date on which he/she departs from Canada. 2. The date on which his/her spouse and/or dependent children depart from Canada. 3. The date on which residency is established in the country of destination. While Mr. Leduc departed from Canada on February 12th, he will be considered a Canadian resident until his family’s departure on June 20th. The fact that his family remained in Canada would lead to this conclusion. While not essential to this conclusion, the fact that he did not sell his Canadian residence until that date would provide additional support. His Canadian salary from January 1 to February 11 would be subject to Canadian taxes. In addition, his U.S. salary for the period February 12th through June 20th will be subject, first to U.S. taxes, and then subsequently to Canadian taxes. In calculating his Canadian taxes payable, he will receive a credit for the U.S. taxes which he has paid on this income. However, because Canadian tax rates at a given income level are usually higher than those which prevail in the U.S., it is likely that he will be required to pay some Canadian income taxes in addition to the U.S. taxes. NOT COVERED IN TEXT Paragraph 15 of IT-221R3 provides an exception to the “later of dates” where an individual is re-establishing residence. If we apply the IT exception, then residency would cease February 12 and not June 20. In our opinion, the IT exception refers to re-establishing residence as the primary motivation and not to work relocations. As a result, the answer would remain as stated above.
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Solution to Assignment Problem Three - 6 Mr. Morris would fall under the part year resident rules and would only be assessed for Canadian taxes on worldwide income during the portion of the year prior to his ceasing to be a resident of Canada. By selling his house, disposing of other personal property, and resigning from various social and professional clubs, Mr. Morris appears to have done most of the things that would be required to establish that he had made a clean break from Canada as of April 1. However, IT-221R3 (Consolidated) points out that in using the part year rules, a person ceases to be a Canadian resident as of the latest of three dates: 1. The date on which he/she departs from Canada. 2.
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Solution pr.5,6,7,8, and 11 - Solution to Assignment...

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