Question

Question 4 (attribution rule)

Martha purchased 10,000 common shares in 2010 of SENEDGE INC, a CCPC at $12 per share. Martha gifts her husband 5000 shares and her 14 year old daughter 5000 common shares in 2012, when the common share FMV was $13. Near the end of Dec 2015, SENEDGE INC gave out dividends $1 for each share. The husband and daughter both sell all their shares in 2016 at $16 Determine the taxable income to each individual for each case, write nil if zero

A) Common shares gifted

B) Dividends received 2015

C) Shares sold at 2016

A) Martha Husband Daug hter

B)

C)

Answer 1

A) Common Shares Gifted
Gift received from relative is exempt from tax at the time when it is received. In the hands of person who is gifting, sale consideration would be nil, as nothing is received by him/her for gift. So no gain will arise in his/her hands
	Martha	Husband	Daughter
So Taxable Income in 2012 when common shares gifted in the hands of	NIL	NIL	NIL
B)	Dividends Received 2015
Dividend received from company is taxfree in the hands of Shareholders
	Martha	Husband	Daughter
No. Of Shares held	NIL	5000	5000
Dividend/share		1	1
Amount of Dividend	NIL	5000	5000
Taxable Income in 2015	NIL	NIL	NIL
C)	Shares sold at 2016
In case, asset received in gift is sold, Purchased value and Date of Acquisition of Actual/Previous owner will be considered for calculation of Taxable Income.
If Shares are hold for more than 12 months, Capital gain would be long term capital gain and if it is less than 12 months, capital gain would be short term capital gain.
	Martha	Husband	Daughter	Remarks
Date of Acquisition of Shares will be of Actual/Previous Owner i.e. Of Martha	2010	2010	2010
Date os sale of Shares		2016	2016
Nature oF Capital Gain		Long term Capital Gain	Long term Capital Gain	As the shares are hold for more than 12 Months
	Martha	Husband	Daughter	Remarks
Costs of Acquisition of Shares will be of Actual/Previous Owner i.e. Of Martha
No. Of shares	10000	5000	5000
costs/share	12	12	12
Costs of Acquisition of shares	120000	60000	60000
	Martha	Husband	Daughter	Remarks
Calculation of Taxable Income
Sales Consideration		80000	80000
Cost of Acquisition		60000	60000	Calculated above
Taxable Income	NIL	20000	20000