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Homework answers / question archive / Question #9In 2018, Charlotte Ramp gives shares to her spouse Michael Ramp

Question #9In 2018, Charlotte Ramp gives shares to her spouse Michael Ramp

Finance

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

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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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