bert corporation and Amy corporation is Canadian residents subject to Canadian taxation laws

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

2. Relationships                                                                                            

·  Sheldon and Bert Corp at Arm's length before exchange of shares.

·  Sheldon is related to Amy, and Sheldon to Amy ltd is affiliated, will be affiliated to Bert’s corp. after exchange                                                                                            

·  Bert Corporation will be affiliated with Sheldon and Amy ltd                                  

·  Amy is related to Sheldon                                                                                          

·  Amy is affiliated with Amy ltd, and will be affiliated with Bert's corporation                                                                                                                                                         

3. Profile of stakeholders                                                                                         

· Bert Corporation and Amy corporation is Canadian residents subject to Canadian taxation laws.                                                                                    

· Sheldon, a professor of geology, is Canadian resident also subject to Canadian taxation laws.                                                                                         

                                                                                               

4. Understand the decision maker and his objectives                                                                  

· Sheldon would like to know the tax implications of the offer from Bert's corporation - about selling Amy ltd to Bert corp , in exchange of common share of Bert corporation                                                                                      

                                                           

5. Identify Past events and create a timeline                                                        

·  Past -Sheldon bought Amy ltd shares from stranger in 2011 for $100,000                          

·  Past -Raj and Howard helped Sheldon get the initial deal with Amy ltd                              

· Sheldon had interests in many businesses.                                                   

·  Present - Bert corporation is interested to buy out Amy Ltd from Sheldon and he is considering the option                                                 

 

Identify the Issues                                                    

what are tax implications for Sheldon for selling Amy ltd?                                                  

is Amy ltd small business corporation?                                                         

Can Sheldon use capital share deduction?                                                    

                                                           

Analyze the Issues                                                    

Sheldon did not receive any non-share consideration, and as Sheldon and Bert corp. were at arm’s length before the sell and buy of Amy ltd, Sheldon will not control or own more than half of FMV of Bert corp. so S.85.1 would be applied                                                                                                                  

Quantitative and Qualitative analysis                                                        

If sheldon doesn’t include his gain from exchange of shares in his current tax return - below calculations will be his tax results.                                                       

                                                           

Proceeds for AMY share (matching to ACB)              100,000                                  

ACB of AMY share                                                      -100,000                                 

Total Capital gain                                                                   $0                               

                                                           

 

ACB of Bert corp. shares received by Sheldon = to ACB of amy ltd shares ($100,000)                                                        

Attachments:

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