The Mini Case Study Narrative: Case Solution
In the spring of 2020, just prior to her business trip to Faro, Portugal; Marley completed a properly executed enduring power of attorney for property, in which she appointed her brother Jose as her attorney. While in Portugal, Marley became critically ill and was flown home in grave health. Upon returning home, Marley verbally told her close friend Paige (in absolute confidence when nobody was around), that in the event she succumbs to her illness; Paige is to receive Marley’s entire art collection, which has an adjusted cost base (ACB) of $410,000 and a fair market value (FMV) of $710,000.
Prior to her trip, Marley had initiated discussions about a will and her lawyer, Orin, had prepared a draft will, but it was yet to be signed. Marley did not have any prior wills written.
Marley is an employee of an international firm of educators, and is a single lady who has never been married and has no children. Jose is Marley’s only sibling, and their parents are deceased. The siblings both live in the province of Alberta.
Upon their parents’ death several years ago (January of the year 2016), a family cottage passed from Marley’s parents to her and Jose, which they now own 50/50 as joint tenants, with the right of survivor ship (JTWROS). The total adjusted cost base (ACB) for the cottage at the time they inherited it was $250,000 while the current fair market value (FMV) is $330,000. Both Marley and José reside in their family cottage for a minimum of 30 days each year.
Marley has sole ownership of a two bedroom condominium in downtown Calgary. She bought the condo in the January of the year 2016.
She has always occupied this condominium as her principle residence. It has an adjusted cost base (ACB) of $399,000 and a fair market value (FMV) of $465,000.
Marley has a fair market value (FMV) of $100,000 in her RRSP (with her estate named as the beneficiary). The adjusted cost base (ACB) for her RRSP investments is $30,000. Marley also has $40,000 in her TFSA (with no named beneficiary or successor holder).
Assume that now is December 31st, 2020.
Please answer the following ten multiple choice questions (by circling the correct answer on this document and placing the correct letter answer in the space provided on page 1 of this document) about the above mini case study. You will receive 4 marks for each correct answer for questions 1 to 9 and 2 marks for the correct answer to Question # 10. There are 62additional marks awarded for explaining the rationale behind your answer;
Given that Marley is gravely ill and in the Foothills Hospital, which of the following activities will Jose typically have the automatic authority to undertake on Marley’s behalf?
- Pay Marley’s bills during her sickness.
- Re-negotiate Marley’s car lease that is about to expire.
- Make decisions regarding Marley’s health care.
- Go to Orin’s office and sign the will on Marley’s behalf.
- Re-invest Marley’s maturing term deposit.
- 1 and 3 only
- 3 and 5 only
- 2 and 4 only
- 1, 2 and 5 only
- 1, 2, 3, 4 and 5
If Marley succumbs to her illness and dies, what role would Jose automatically assume relative to Marley’s estate?
- Administrator of Marley’s estate
- Executor of Marley’s estate
- Trustee of Marley’s estate
- Executrix of Marley’s estate
If Marley succumbs to her illness and dies, which of the following statements is/are true with regard to Marley’s estate?
- Paige believes that because she is a beneficiary of the estate, the provincial court will appoint her Marley’s estate administrator.
- The preferential share portion of the distribution of Marley’s estate will be paid to Jose.
- Because Marley had partially completed a will, she is considered to have an estate that is only partially intestate.
- Prior to the court appointment of an administrator for Marley’s estate, no one, not even José, has the power to transact on behalf of the estate.
- a) and d) are true.
If Marley dies on December 31, 2020, what are the due dates for Marley’s final income tax return and for payment of the balance of taxes owing on her final return.
- Both items are due on April 30, 2021
- Both items are due on June 30, 2021
- The balance of taxes owing are due on April 30, 2021, while the final return is due on June 30, 2021.
- The final income tax return is due on April 30, 2021 while the balance of taxes owing is due June 30, 2021.
- Both the final income tax return and the taxes owing are due on June 15, 2021.
With regards to the family cottage and Marley’s condominium, which of the following statements is/are true, if Marley succumbs to her illness and dies?
- Marley’s estate representative (administrator) has the opportunity to decide whether it is more tax effective to apply the principal residence exemption to Marley’s portion of the family cottage or to her condominium.
- The family cottage will automatically pass to Jose outside of Marley’s estate.
- The ownership structure of the family cottage makes it exempt from any capital gains tax at the time of Marley’s death.
- Marley’s condominium will automatically pass to José, outside of Marley’s estate, because Jose is Marley’s nearest living relative.
- 2 only
- 1 and 2 only
- 1 and 3 only
- 3 and 4 only
- 2 and 4 only
Assume that Marley survives her illness and fully recovers. However, on her way home from the Foothills Hospital, a car strikes Marley and she dies instantly. How will the art collection be distributed?
- Paige will automatically receive the art collection.
- Paige must sue Marley’s estate in order to attempt to enforce her right to the art collection because she believes that Marley made the gift a condition of her death.
- Under the laws of the Province of Alberta, the art collection will be disbursed as an asset of Marley’s estate under the provincial jurisdiction of an intestate estate.
- The art collection will automatically be placed under trusteeship and the court appointed administrator will arbitrarily decide on how it will be disbursed.
- Under the laws of the Province of Alberta, Marley’s brother José will receive the art collection.
- 1 only
- 3 only
- 2 and 4 only
- 3 and 5 only
- 2, 3 and 5 only………………..
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