Reference no: EM133104706

Question - Max and jack lived in a province that does not recognize same-sex couples as spouses for the purpose of its matrimonial property or intestacy legislation.

Unfortunately, one icy morning jack was driving when he lost the control of his car and died on impact. Other than his mother, his estranged sister, Angela and his son, Andy, who was now 14, Jack had no surviving relatives. Prior to his death Jack had never prepared a will. Also, he had never told his mother or Angela about the true nature of his relationship with Max.

At the time of his death, Jack's business interest was worth $825,000, quite an accomplishment considering he started the business with only $2,000. Jack contributed $40,000 to RRSPs which were worth $68,000 at the time of his death, and Max was named beneficiary of these RRSPs. Jack also owned a $200,000 term life insurance policy on his own life, which named Max as the beneficiary. At the time of his death, the total value of the rural property was $450,000. Jack and Max originally bought the property for $200,000. Jack also had other personal assets, including a car, boat and skidoo, valued at about $100,000.

Jack lived in a province, where the probate fees are:

1- On the first $50,000 of the value of the estate being administered, $5.00 per thousand dollars or part thereof;

2- On the portion of the value of the estate being administered that exceeds $50,000, $15.00 per thousand dollars or part thereof.

Assuming that Jack never used the personal lifetime capital gains exemption or the exemption for qualified small business, by how much will his taxable income increase as a result of the transfer of his business interest?

1-$36,500

2-$61,500

3-$82,000

4-$411,500