Taxation

• What's the primary purpose of an estate freeze? (ch 17)

  To freeze all or part of the value of growing assets at their current FMV and allow the future growth in these assets to accrue to the next generation of family members
• What are the secondary objectives of an estate freeze? (ch 17)

  - Defer any immediate tax cost on the freeze transaction and establish the amount of the tax liability on death

  - Maintain control over the assets that have been frozen

  - Split income with low-rate family members

  - Multiply the future use of the capital gains exemption by family members holding common shares in the operating company either directly or through a family trust

  - Use up the GSBC share capital gains exemption on shares being frozen, if possible
• What are the 3 principal methods of freezing the value of growth assets are: (ch 17)

  - Holdco freeze

  - Internal freeze

  - Reverse or asset freeze between corporations
• What is a rollover? (ch 17)

  A rollover allows for a partial or compete deferral of the recognition of income/gains on the transfer of property from one person to another.
• A limited partner can fully deduct losses allocated to that partner by the partnership. True or false (ch 19)

  False. The amount of losses a limited partner can deduct in computing income in respect of losses allocated by the limited partnership is limited. The losses can only be deducted to the extend of the limited partner's "at risk amount"2 multiple choice options
• What is a trust? (ch 19)


  A relationship whereby a person ( trustee) is bound to deal with property ( trust property) over which he/she has control for the benefit of persons (beneficiaries) any of whom may enforce the obligation according to thte terms of the trust document.
• When is a trust created? (ch 19)

  It is a trust that is created as a result of the death of an individual
• What is an intervivos trust (ch 19)

  a trust that is created during the lifetime of an individual. It may also be made for tax purposes where a person other than the deceased has contributed property to a testamentary trust.
• What is a discretionary trust?


  A trust where the trustee is given the power of choice.
• You cannot claim a loss on the building and a gain on the land. A terminal loss from the land must be reallocated to net out the gain on the land. The terminal loss cannot be claimed if there is a large gain on the building. The gain is reduced up to the terminal loss that is claimed. This terminal loss allocation is applicable when there is one legal title property (depreciable and non-depreciable- like land and building)