IAF 420 Tax Law

Question 1 The following assets are to be transferred under section 85 for consideration including common shares plus boot as indicated below:FMVACBUCCBoot receivedLand75,00060,000-70,000Equipment50,00065,00040,00045,000For each of the assets transferred, specify the elected amount and related tax consequences.Question 2–10 marks The following transactions pertain to independent Canadian-controlled private corporations and their  shareholders.  Each transaction  described  below  is  separate  and  distinct  from  the  other transactions.(a)Ethan  Ltd.  issued  150  preferred  shares  with  a  PUC  equal  to  $100  for  each  share  for $11,000 cash and other assets with a fair market value of $3,000.(4 marks)(b)Maya  Ltd. redeemed  its  preferred  shares,  which  have  a  PUC  of  $11,000  in  total,  for $15,000. The shareholder, who owns all of these shares, paid $10,000 for them.(6 marks)Required:For each of the above transactions, describe the effect:(i)on the income of the shareholder (using the 17% gross-up and tax credit),(ii)on the PUC of the shares to the corporation after the transaction, and(iii)on the ACB of the shares to the shareholder after the transaction.
Question 3–6 marks Sabres Limited, a Canadian-controlled private corporation whose fiscal year end is December 31, provides you with the following data concerning its tax accounts and capital transactions for 2016. The balance in its capital dividend account was nil on January 1, 2017. Mr. Tsakiris, aCanadian resident, is the sole shareholder.Sabres Limited is considering winding up the corporation and wishes to determine the impact of the sale of all its capital assets on its tax surplus accounts. The following capital assets are recorded in the books of account:AssetsCostUCCEstimated ProceedsEstimated selling costsInvestments60,000-22,000500Land40,000-200,00010,000Building70,00045,000125,0006,000Equipment35,000Nil8,000400Customer Lists (Class 14.1) See Note 140,00016,00060,000-Notes(1)The balance in Class 14.1 reflects the purchase of the customer lists in 2007 for $40,000 less the tax write-offs for 2007 to 2016 inclusive(2)In addition to the above assets, there is $35,000 of goodwill which will also be soldRequired:You have been asked to determine the effect on the capital dividend account balance immediately after the above transactions