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Question #9In 2018, Charlotte Ramp gives shares to her spouse Michael Ramp
Question #9In 2018, Charlotte Ramp gives shares to her spouse Michael Ramp. The shares have an adjusted cost base of$23,000 and, at the time of the gift, they have a fair market value of $35,000. Charlotte elects out of ITA 73(1) inher return of income.During 2019, the shares pay eligible dividends of $1,800. Prior to the end of 2019, Michael sells the shares for$42,000. What are the tax consequences to Charlotte and Michael in each of the years 2018 and 2019? If there areno tax consequences for either individual in a given year, you should clearly state this fact in your answer
Expert Solution
The tax consequences for Charlotte and Michael for each of the two years are as follows:? 2018 for Charlotte - Electing out of ITA 73(1) will require Charlotte to record a taxable capital gain of $6,000[(1/2)($35,000 - $23,000)].? 2018 for Michael - none.? 2019 for Charlotte - Since Michael did not pay the fair market value, taxable dividends of $2,484 [(138%)($1,800)] will be attributed to Charlotte. In addition, a taxable capital gain of $3,500 [(1/2)($42,000 - $35,000)]will be attributed to her.? 2019 for Michael - none
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