ACTG 4720 Lecture 1 Notes

ACTG 4720 Lecture 1 Notes - ACTG 4720 Lecture 1 Non-Arms...

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ACTG 4720 Lecture 1 Non-Arm’s Length Transfers (Review) Who does not deal at arm’s length? Related persons (by blood, marriage or control for corporations) are deemed to not act at arm’s length Beneficiaries of a trust are deemed not to be at arm’s length with the trust Special Rules – ITA 69(1) Non-arm’s length parties likely do not act in accordance with “market forces” or FMV ITA has special rules to prevent elimination of reduction of tax by selling at above or below FMV Transferor – deemed to receive FMV proceeds if the actual proceeds are less (applies to gifts also) Transferee – deemed to have an ACB equal to the FMV unless paid less than the FMV for it Conclusion: the “nice” person gets screwed! Transactions at above or below the FMV will result in double taxation Gifts and FMV transactions do not trigger double tax Spouses For spouses, the special “spousal rollover” rule under 73(1) overrides the general rules under 69(1) o Spouses automatically deal at cost for all transactions with each other as per 73(1) , unless they elect out of it o If they elect out of 73(1) , then 69(1) rules may apply Attribution Rules (Review) Overview
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