Solution%20to%20Assignment%20Problem%20Ch20

Case b ms gloria salinas would not be considered a

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Case B Ms. Gloria Salinas would not be considered a Canadian resident. As a result, none of her income would be subject to Canadian taxes. ITA 250(1)(c)(i) indicates that an ambassador of Canada will be deemed to be a Canadian resident only if she was resident in Canada immediately prior to her appointment to the position. Case C Roberto Salinas would not be considered a Canadian resident. As a result, none of his income (if any) would be subject to Canadian taxes. While ITA 250(1)(f) indicates that a child of an ambassador who is a deemed resident under ITA 250(1)(c)(i) is also a deemed resident, Roberto’s mother is not such a deemed resident. Therefore, Roberto would not be considered a Canadian resident. Case D Kole Ltd. would be considered resident in Canada for the full year and would be taxed on its worldwide income for the year. This conclusion is based on ITA 250(4)(c), which indicates that a corporation is resident in Canada if it was incorporated in Canada prior to April 27, 1965 and carried on business, or was resident in Canada, in any year ending after April 26, 1965. The fact that the corporation had ceased doing business in Canada after 2005 does not alter this conclusion. Case E Forman Inc. would be considered resident in Canada for the full year and would be taxed on its worldwide income for the year. This conclusion is based on the fact that, while the Company was not incorporated in Canada, the mind and management of the Company appears to be resident in Canada.
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Solution to Assignment Problem Twenty - 4 Part A The most important tax consequence of Holly becoming a non-resident is that she will have a deemed disposition at fair market value of all property, except Canadian real estate and RRSPs. The following assets would be deemed to be disposed of: Capital Cost Or Fair Market Adjusted Property Value Cost Base Capital Gain Land Rover 4x4 truck (Note) $ 15,000 $ 20,000 $ Nil Shares in public companies 40,000 30,000 10,000 Shares in IOU Ranch Ltd, CCPC 40,000 25,000 15,000 Total Capital Gain $25,000 Note No loss can be deducted on personal use property. The taxable portion of this gain would be $12,500 [(1/2)($25,000)] and would have to be included in her income in the year of the departure. The following potential income would be deferred until the time of departure: Capital Cost Or Fair Market Adjusted Deferred Property Value Cost Base Income Home in Cochrane, Alberta $500,000 $200,000 $300,000 Percentage ownership 50% 50% 50% Holly’s share $250,000 $100,000 $150,000 Cottage on Lake Manitou 165,000 145,000 20,000 Capital Gains $170,000 RRSP 55,000 Nil 55,000
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Total Income $225,000 With respect to the capital gains on the home and cottage, they are taxable Canadian property and any gain on a subsequent disposition will be subject to tax, even though Holly is no longer a Canadian resident. The RRSP will not be subject to tax until the funds are withdrawn. Part B Some factors that could influence Holly’s residence status include: Whether Holly’s husband and sons are moving to Brazil with her. If yes, there is a greater chance that Holly will be considered to be a non-resident of Canada.
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