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Exam 14: Multiple Corporations and Their Reorganization

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Exam 1: Taxation-Its Role in Decision Making10 Questionsadd course
Exam 2: Fundamentals of Tax Planning10 Questionsadd course
Exam 3: Liability for Tax, Income Determination, and Administration of the Income Tax System10 Questionsadd course
Exam 4: Income From Employment6 Questionsadd course
Exam 5: Income From Business10 Questionsadd course
Exam 6: The Acquisition, Use, and Disposal of Depreciable Property10 Questionsadd course
Exam 7: Income From Property10 Questionsadd course
Exam 8: Gains and Losses on the Disposition of Capital Property-Capital Gains10 Questionsadd course
Exam 9: Other Income, Other Deductions, and Special Rules for Completing Net Income for Tax Purposes10 Questionsadd course
Exam 10: Individuals: Determination of Taxable Income and Taxes Payable10 Questionsadd course
Exam 11: Corporations-An Introduction10 Questionsadd course
Exam 12: Organization, Capital Structures, and Income Distributions of Corporations10 Questionsadd course
Exam 13: The Canadian-Controlled Private Corporation8 Questionsadd course
Exam 14: Multiple Corporations and Their Reorganization7 Questionsadd course
Exam 15: Partnerships8 Questionsadd course
Exam 16: Limited Partnerships and Joint Ventures8 Questionsadd course
Exam 17: Trusts8 Questionsadd course
Exam 18: Business Acquisitions and Divestitures-Assets Versus Shares8 Questionsadd course
Exam 19: Business Acquisitions and Divestitures-Tax-Deferred Sales8 Questionsadd course
Exam 20: Domestic and International Business Expansion8 Questionsadd course
Exam 21: Tax Aspects of Corporate Financing8 Questionsadd course
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Tom and Bob are equal shareholders of a profitable operating company.The company is growing and dividend payouts are increasing.The two men have heard that 'holding corporations' might suit their needs.Which of the following would apply?

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B

Stan is the sole shareholder of Hardware Ltd.Hardware purchased all of the shares of Tools Inc.in 20X6 for $500,000.Tools incurred a non-capital loss of $25,000 in the year ended December 31,20X5.Stan has decided to initiate a wind-up of Tools Inc.into Hardware Ltd.on June 23,20X9.Due to the seasonal nature of his sales,Stan would like to maintain the April 30th year end that he has used since beginning his business. Stan's accountant has prepared the following anticipated balance sheet for Tools Inc.as of June 22,20X9.The fair market value of the assets on both June 22,20X9 and the date of acquisition in 20X6 are presented in the following table:

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Tools paid dividends of $8,000 to Hardware in 20X9. Required: Answer the following questions (filling in the charts where provided): 1)Immediately following the windup,Hardware will report the above assets at what values? 2)Calculate the value of the bump available on the ACB for the non-depreciable capital property. 3)Identify the assets which may use the bump,and the amount of the bump available for each asset identified.Identify any unusable bump amount. 1) 2) 3)The bump available to the public shares is $45,000 ($70,000 - $25,000). The bump available to the land is $175,000 ($300,000 - $125,000). The bump cannot be allocated to the depreciable assets. $294,000 - 45,000 - 175,000 = $74,000 of the bump in unusable. Tools paid dividends of $8,000 to Hardware in 20X9.
Required:
Answer the following questions (filling in the charts where provided):
1)Immediately following the windup,Hardware will report the above assets at what values? Tools paid dividends of $8,000 to Hardware in 20X9. Required: Answer the following questions (filling in the charts where provided): 1)Immediately following the windup,Hardware will report the above assets at what values? 2)Calculate the value of the bump available on the ACB for the non-depreciable capital property. 3)Identify the assets which may use the bump,and the amount of the bump available for each asset identified.Identify any unusable bump amount. 1) 2) 3)The bump available to the public shares is $45,000 ($70,000 - $25,000). The bump available to the land is $175,000 ($300,000 - $125,000). The bump cannot be allocated to the depreciable assets. $294,000 - 45,000 - 175,000 = $74,000 of the bump in unusable. 2)Calculate the value of the "bump" available on the ACB for the non-depreciable capital property.
3)Identify the assets which may use the bump,and the amount of the bump available for each asset identified.Identify any unusable bump amount.
1) Tools paid dividends of $8,000 to Hardware in 20X9. Required: Answer the following questions (filling in the charts where provided): 1)Immediately following the windup,Hardware will report the above assets at what values? 2)Calculate the value of the bump available on the ACB for the non-depreciable capital property. 3)Identify the assets which may use the bump,and the amount of the bump available for each asset identified.Identify any unusable bump amount. 1) 2) 3)The bump available to the public shares is $45,000 ($70,000 - $25,000). The bump available to the land is $175,000 ($300,000 - $125,000). The bump cannot be allocated to the depreciable assets. $294,000 - 45,000 - 175,000 = $74,000 of the bump in unusable. 2) Tools paid dividends of $8,000 to Hardware in 20X9. Required: Answer the following questions (filling in the charts where provided): 1)Immediately following the windup,Hardware will report the above assets at what values? 2)Calculate the value of the bump available on the ACB for the non-depreciable capital property. 3)Identify the assets which may use the bump,and the amount of the bump available for each asset identified.Identify any unusable bump amount. 1) 2) 3)The bump available to the public shares is $45,000 ($70,000 - $25,000). The bump available to the land is $175,000 ($300,000 - $125,000). The bump cannot be allocated to the depreciable assets. $294,000 - 45,000 - 175,000 = $74,000 of the bump in unusable. 3)The bump available to the public shares is $45,000 ($70,000 - $25,000).
The bump available to the land is $175,000 ($300,000 - $125,000).
The bump cannot be allocated to the depreciable assets.
$294,000 - 45,000 - 175,000 = $74,000 of the bump in unusable.

Jack Grey is the sole shareholder of Grey's Garden tools.He owns one class of common shares which have a value of $200,000.Jack is approaching retirement age and would like his two key employees to take over his company some day.At this point in time,the employees do not have enough excess cash to buy Jack's shares.Which of the following statements is true with regard to a corporate reorganization that would allow the employees to take over the ownership?

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Hold Co.is a Canadian controlled private corporation that acquired 100% of the shares of Small Co.in 20X5.Hold Co.paid $50,000 for the shares.Big Co.,an arm's length corporation,is now interested in purchasing Hold Co.'s investment in Small Co.Small Co.'s shares are currently worth $500,000 and the retained earnings of the company are $200,000.In order to reduce the fair market value of the shares,Small Co.will pay a dividend of $450,000 to Hold Co.,and then sell the shares for $50,000. Required: Presuming Subsection 55(2)applies,how much is the capital gain that Hold Co.will have to realize on this sale? (Ignore Part IV tax.)

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Question 4

The shareholders of Parent Co.and Sub Co.wish to combine the business activities of the two companies through a business combination.Both companies have assets that have appreciated in value above their capital cost.Parent Co.owns 85% of the shares of Sub Co. Required: Suggest a business combination (amalgamation or wind-up)that would defer the tax consequences associated with the increased value of the assets,and explain why you did not choose the other option.

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Question 5

Which of the following is one of the conditions necessary for an amalgamation to result in a tax-free combination?

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Question 6

Mr.Chan has created a holding company between himself and his corporation.This will permit which of the following?

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Question 7
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