Lecture 5 slides

Lecture 5 slides - Lecture 5 NonArm's Length Transactions,...

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By Seema Agarwal Lecture 5 Non-Arm’s Length Transactions,  Departure from Canada, Death of a Taxpayer
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By Seema Agarwal Topics Non-Arm’s Length Transactions (ITA 73  and 69) Income Attribution Rules (ITA 74.1, 74.2,  56(4.1), 120.4) Departure from Canada (ITA 128.1) Death of a Taxpayer (ITA 70)
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By Seema Agarwal Non Arm’s Length (NAL) Transfers • Special rules for transfers (gifts/sales) b/n persons who  are not at arms length so that income splitting can’t be  taken advantage of • eg. Father buys property for $400; 2 yrs later he sells  property with FMV of $1,000 to his son for $400 (so  father has no capital gain)  • then son sells property for FMV of $1,000… son has a  capital gain of $600 and pays tax at his low tax bracket • The NAL transfer rules prevent this from happening! • See example at 7-73
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By Seema Agarwal Non-Arm’s Length Transfers Definition of non-arms length: Related persons = blood, marriage, adoption Blood: child, parents, grand parents, brothers,  sisters, NOT aunts, uncles, nieces, nephews,  cousins Marriage: spouse and in-laws (brother-in-law,  daughter-in-law)
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By Seema Agarwal NAL Transfers and Gifts Determine POD for transferor (to get CG at  time of transfer) Determine ACB for transferee (to get  future CG)
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By Seema Agarwal Non-arms length transfers Sec 69 Rules (Figure 7-1) Transfer Price POD for  transferor ACB for  transferee FMV or gift FMV FMV Above or below  FMV Greater of i.) actual  transfer price  ii.) FMV Lesser of i.) actual  transfer price   ii.) FMV
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By Seema Agarwal General Rules – NAL transfers s. 69   One-sided adjustment   results in  double tax Transfer Price  (TP) POD for  transferor ACB for  transferee TP is < or >  FMV > of TP and  FMV < of TP and  FMV
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By Seema Agarwal Non-Arm’s Length Transfers Examples  To avoid double taxation transfer property  at FMV or gift the property (gives the same  result) Ex 7-8 (pg 291) Ex 7-9 (pg 292) Self study problem 7-3 (pg 324)
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Lecture 5 slides - Lecture 5 NonArm's Length Transactions,...

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