Barry has paid the full amounts required by the settlement, in 2018, his payments total only $14,000.
How will these payments be dealt with in the tax returns filed by Barry and Mandy?
Exam Exercise Nine -
9 (Annuity Payments)
On January 1 of the current year, Ms. Lorraine Brock uses $10,000 of her savings to acquire a fixed term
annuity.
The term of the annuity is three years, the annual payments are $4,020, the payments are
received on December 31 of each year, and the rate inherent in the annuity is 10 percent.
What is the
effect of the $4,020 annual payment on Ms. Brock’s Net Income For Tax Purposes.
499
Canadian Tax Principles 2018/19 Edition – Test Item File Problems
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TIF Problem One - 1
Exam Exercise Nine -
10 (Annuity Payments)
On January 1, 2018, 1al Miner uses $2,673 of his savings to pay for an annuity that will return $1,000 at
the end of each year in 2018, 2019, and 2020.
The effective rate of interest in this annuity is 6 percent.
What is the effect of the $1,000 payment on Mr. Miner’s 2018 Net Income For Tax Purposes?
500
Canadian Tax Principles 2018/19 Edition – Test Item File Problems
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lOMoARcPSD|4453594
TIF Problem One - 1
Exam Exercise Nine - 11 (Canada Education Savings Grants)
Marco was born in 2017.
As his mother is very keen on tax planning, she establishes an RE1P for
Marco by contributing $1,000 to the plan in 2017.
Marco’s grandmother contributes an additional $400
to the plan on the same day.
In 2018, Marco’s mother contributes $2,200 to the plan, while the grandmother contributes an additional
$1,900.
Marco’s family has never had family income of more than $40,000.
Determine the amount of
the CE1Gs that would be added to Marco’s RE1P in 2017 and 2018.
Exam Exercise Nine - 12 (Inadequate Consideration)
Ms. Veronica Lox owns securities with an adjusted cost base of $150,000 and a fair market value of
$175,000.
1he sells these securities to her father for $130,000.
He immediately sells them to an arm’s
length party for $175,000.
Determine the tax consequences for Ms. Lox and her father.
Exam Exercise Nine - 13 (Inadequate Consideration)
Ms. Veronica Lox owns securities with an adjusted cost base of $150,000 and a fair market value of
$175,000.
1he sells these securities to her father for $210,000.
He immediately sells them to an arm’s
length party for $175,000.
Determine the tax consequences for Ms. Lox and her father.
Exam Exercise Nine - 14 (Inter Vivos Transfers To A Common-Law Partner)
Marilyn Fox owns a large piece of land that she acquired several years ago for $85,000.
For several
years, she has been using the property to run a high security parking lot operation.
On January 1, 2018,
she gives the property to her common-law partner Ellen Degen.
At this time, the fair market value of
the land is $170,000.
Marilyn does not elect out of ITA 73(1).
During 2018, Ellen continues the parking lot operation, which produces a net business income of
$8,500.
On January 1, 2019, Ellen sells the parking lot for $190,000.
