Section 85 Rollover

[Griet van Vliet]

"<I'm not sure the board is willing to agree to this, but their counteroffer is 100,000 in preferred shares and the same 50,000 in NSC>"

This would result in a gift of 50,000. What changes is not the NSC's ACB, but the treatment of the shares. ACB of the preferred shares is still

ACB C/S 1,000
Less: NSC ACB (50,000)
Less: Gift value (50,000)
ACB P/S Nil

POD old C/S is now the lesser of the FMV of old C/S or NSC + gift, 100,000. The PUC reduction is still bringing the PUC to nil, here... but the deemed POD will be different at the capital gain step.

POD 100,000
Less: Deemed dividend (49,000)
RPOD 51,000
Less: ACB C/S (1,000)
CG 50,000, of which 25,000 is taxable

"You're getting screwed over in more ways than one if you accept the counter-offer"

 

[Griet van Vliet]

"<And I created a trust for the benefit of my son. The terms of the trust deed specifies that my son is to receive 60% of the income and capital of the trust until he turns 27>"

"It's an inter-vivos trust, so it it pays the highest tax rate federally, but perhaps your tribe has a different treatment for the trust's tribal tax brackets"

For the current year, the tax return's amounts on the tax returns are the following:

Rental income | Trust 40,000 | Son 60,000
Investment income | Trust 16,000 | Son 24,000
Taxable capital gains | Trust 20,000 | Son 30,000
Ineligible dividends | Trust 24,000 | Son 36,000
Gross up | Trust 3,840 | Son 5,760

Net and taxable income | Trust 103,840 | Son 155,760