Reference no: EM132834054
Problem 1: Ming and Li are married. They have a son, William, who celebrated his seventeenth birthday in August of this year. Under what circumstance will income attribution rules apply?
i. Ming sells a Government of Canada bond to Li and in return, he receives $87,000 from Li-this was the fair market value (FMV) of the asset at the time. The adjusted cost base (ACB) of the bond is $75,000. Following the transaction, Ming files an ITA Section 69 election with his income tax return.
ii. Earlier this year, Li transferred 500 non-dividend paying common shares of Big Money Corporation to William. At the time of the transfer, the ACB of the shares was $10,000 and the FMV of the shares was $26,350. Today, William disposed of his 500 shares for proceeds of $22,100.
iii. Assume earlier this year, problems in their relationship cause Ming and Li to separate. They have been living apart for the past four months. Today, Ming lends Li $50,000 which Li uses to invest in dividend-paying preferred shares. Li will not sell the shares until after her divorce from Ming has been finalized.
iv. Next September, Li intends to give William a gift of $5,000. Upon receiving the money, William will use it to buy a compound Canada Savings Bond.
Option 1: all of the transactions will give rise to income attribution
Option 2: i and iii only
Option 3: iii and iv only
Option 4: none of the transactions will give rise to income attribution
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