4561 Lecture 10 Overheads Feb 5 09

4561 Lecture 10 Overheads Feb 5 09 - Problem 1 Emigration...

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Problem 1 - Emigration Case Study Residency Status Consider whether Brad will still be resident based on residential ties - family (wife staying in Canada for non-winter months) - dwellings (left in Canada) - other personal property ties (investments) - social ties (no info) - permission for indefinite stay - few ties in Caymans (renting apt) Consider ways to cut residential ties - rent or sell house - change address, etc - minimize visits to Canada - wife spends entire year in Caymans - establish ties in Caymans (give e.g. – join club, purchase home, etc.) Conclude on residency status If non-resident when leave - deemed disposition at FMV - exception for Can RE - i.e., house, cottage - exception for RRSP - post security to defer tax to actual disposition - Part XIII w/h tax on dividends, interest, rental, RRSP withdrawals, etc. - Part I tax on employment income (e.g. stock option benefits when realized), business income/loss (i.e. restaurant mall business or rental income), TCG on TCP (future sales of house, vacant land, CCPC) - Public company shares not TCP since own <25% - can unwind if return in 5 years or less - must report assets > $25K $40,000 Moving allowance - taxable in Canada - no deduction for moving expenses when you move offshore - tax planning: ask for $40,000 reimbursement, receive reimbursement from Cayman Islands Stock options (granted to buy 1,000 shares in 200 0 , exercise price $20, stock trading at $10 at grant date and currently at $25) - discussion of tax treatment - taxable in Canada under Part I when non-resident - no deferral of public company taxable benefit if non-resident when exercise (see subsection 7(10)) - 110(1)(d) deduction for ½ the benefit Principal residences - both/either eligible for PRE - House ($1.0 million - $600K ACB(199 3 ) = $400K CG/13 years = $30,769 per year - Cottage (FMV $260K- $220K ACB (200 1) = $40K CG/5 years = $8,000 per year - House has the largest gain per year and is more likely to sell this first - one plus rule leaves year for cottage
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Deemed Disposition Asset Cost FMV CG/ CL 20% Partnership $ 85K $120K $35K+ (need to know losses) Automobile $ 60K $ 30K No(PUP) Paintings $ 68K $ 180K $112K* Pub shares $480K $ 710K $230K - ½ CG included in income (TCG) *could be reduced using $1,000 rule if there are several objects of art (not sets) RRSP planning - make max RRSP contribution before departure to decrease taxable income - consider any unused RRSP deduction room in determining RRSP contribution - consider making spousal RRSP contribution - w/h tax on RRSP withdrawal when non-resident 2 2
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Problem 2 - Personal Tax Planning Cas e Ways to save for children’s education retirement on a tax effective basis. Here are some ideas: Education - RESP – explain how it works and advantages (CESG) - Buy mutual funds – explain how it works (no attribution) - Transfer of education, tuition and textbook credits (18 year old) - limited to $5,000 per year - If 18 year old has RRSP, consider Life Long Learning Plan withdrawal Retirement - make max RRSP contribution to decrease taxable income for both
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This note was uploaded on 08/10/2010 for the course LAPS 4561 taught by Professor Frankovic during the Summer '10 term at York University.

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4561 Lecture 10 Overheads Feb 5 09 - Problem 1 Emigration...

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