Question 2 (40 Minutes) (Chapter 2)

Question 2 (40 minutes) [Chapter 2]
Murray Glow, your client, was born and raised in Canada. After obtaining his MBA in 2001, he
began working as a consultant. In July 2010, Just-Do-It Limited (JDIL), of which he was a major
shareholder, entered into a contract with a Canadian Crown corporation to furnish consulting
advice in Portugal. Services were to commence July 15, 2010, and end January 14, 2012. A daily
rate of fees was set, but total billings were not to exceed a specified maximum. The contract also
provided for moving, travel, and living expenses for Murray and his dependants up to a specified
maximum.
All fees and expenses were paid to JDIL in Toronto. Murray continued to be a shareholder,
director, and officer of the corporation, and he remained very interested in its activities. JDIL
paid Murray and was instructed to deposit these payments in Murray's Canadian bank account,
which he continued to maintain for this purpose and for the operation of the rental property that
he owned. He felt that the Canadian bank account was necessary because of foreign exchange
difficulties that he might otherwise encounter. He instructed JDIL not to withhold any income
taxes on these payments, because he intended to give up his Canadian residence status to
establish an international consulting business abroad upon termination of the Portuguese contract.
Since Murray had little time before leaving for Portugal, he quickly rented, on a month-to-month
basis, the unit that he had been occupying in a duplex that he owned. He intended to sell the
property when the market would provide him with a reasonable profit. He arranged to have JDIL
manage the renting of this property for a fee which he paid to the corporation.
Murray stored his major furnishings and winter clothing in Canada. His smaller household and
personal effects were shipped to Portugal. He sold his car, cancelled his auto insurance and a
gasoline company credit card, and obtained an international driver's licence. He retained credit
cards such as American Express, Visa, and MasterCard, as well as his retirement accounts. Under
the contract, he was also required to maintain his provincial health insurance coverage.
When Murray left Canada for Portugal, he was accompanied by his friend, Martha, who had been
a part of his life for over a year before their departure. Martha had obtained leave from her
university program of studies for the fall 2010 term. The couple took up residence in a hotel suite
that was converted into an apartment in Lisbon, Portugal. No conventional living quarters were
available, because of the housing market. During his stay in Portugal, Murray obtained a
Portuguese driver's licence and maintained two bank accounts and two cars. He joined sports,
dining, and social clubs in Lisbon. He was provided with an office by the Portuguese government
and he carried business cards which identified him as a consultant with that government. He
actively promoted the consulting business of JDIL in Portugal in the hope of establishing the
business abroad, but he did not generate sufficient business to stay in Portugal beyond the period
of the existing contract. He did not seek to extend his visa or pay any form of tax on his income
in Portugal.
Martha returned to Canada for the winter 2011 term and returned to Portugal for the summer of
2011, but returned to Canada in September 2011 to begin a new program.
By December 2011, Murray had billed the limit under the contract. He vacated his apartment,
sold his cars, packed up his possessions (including some artwork, textiles, and other souvenirs
that he had acquired), and returned to Canada.
Required:
Evaluate thoroughly and in detail the facts to determine if Murray:
(a) maintained full-time resident status throughout the period in question, or

(b) ceased to be a resident of Canada in July 2010, thereby establishing part-year resident status
in that year and non-resident status immediately thereafter until December 2011.
Advise Murray on how to file his 2010 tax return. Present your answer by discussing briefly the
tax consequences of the options outlined above as they apply to this fact situation. Provide your
advice, in conclusion, after weighing the relevance of the facts you have considered.

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Question 2 (40 minutes) [Chapter 2]

Evaluate thoroughly and in detail the facts to determine if Murray:

(a) maintained full-time resident status throughout the period in question, or

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