(answered) In early March you were preparing your client

list with
In early March, you were preparing your client list with respect to the personal tax return
preparation season. When you came across Mr. Ricky's name you realized that Mrs. Ricky had
called you regarding her husband's death. Mr. Ricky had passed away March 1, 2012, at age
62.Mr. Ricky owned and
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your-client-list-with
In early March, you were preparing your client list with respect to the personal tax return
preparation season. When you came across Mr. Ricky's name you realized that Mrs. Ricky had
called you regarding her husband's death. Mr. Ricky had passed away March 1, 2012, at age
62.Mr. Ricky owned and operated a Canadian-controlled private corporation, Shining Ltd.,
involved in reconditioning cars. Mr. Ricky's 100 shares had an adjusted cost base and paid-up
capital of $55,000. The fair market value of the shares at the date of death was $750,000.
Seventy-five per cent of the shares were left to his wife and the rest of the shares were left to
his 25-year-old son.Mr. Ricky earned $15,000 per month in salary. A non-periodic bonus of
$35,000 had been declared on February 15, 2012, but had not yet been paid at the time of his
death. His accumulated vacation pay of $10,000 and his February salary was due on the last
day of the month, but was paid on March 10, 2012.In addition to his shares, Mr. Ricky owned
bonds which earned $5,500 of interest income in 2011 and accrued $917 of interest in 2012 to
the date of his death. He owned another bond on which there was $500 in uncashed bond
interest due on January 4, 2012, the anniversary date of that bond. Further, Mr. Ricky had
owned two rental properties. Net rental income after capital cost allowance from January 1,
2011 to December 31, 2011 was $45,000 and net rental income before capital allowance was
$4,000 for each of the months of January and February 2012.Other Information:(1) All assets of
Shining Ltd. have been used in the active business of the corporation.(2) The shares of Shining
Ltd. have been owned by Mr. Ricky since 1995.(3) Mr. Ricky had earned income in 2010 and
2011 of $95,000. He contributed to his RRSP the maximum amount allowed as a deduction in
2011. His RRSP was worth $295,000 at the time of his death. Mrs. Ricky is the designated
beneficiary of his RRSP.(4) Mr. Ricky had a savings/chequing account which earned $2,500
interest in 2011 and $150 during January and February 2012.(5) Mr. Ricky had utilized
$350,000 of his capital gains exemption.(6) All of Mr. Ricky's other assets have been left to his
wife, except for the two rental properties which are bequeathed to his 20-year-old daughter.(7)
The rental properties had a fair market value of $100,000 each. Both properties had the
following details:REQUIREDPrepare a letter, in draft form for partner review, to Mrs. Ricky
explaining the tax implications and the filing requirements in respect of Mr. Ricky's death.
Calculate taxable income for 2012.View Solution:
In early March you were preparing your client list with
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