Solutions to Assignment Problem 18-8,9

Solutions to Assignment Problem 18-8,9 - Solution to...

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Solution to Assignment Problem 18-8 Part A: Ms. Chadwick is the owner of all 22,500 common shares of Norton Ltd., with a FMV of $2,465,000 and an ACB/PUC of $225,000 She has heart trouble. She wants to sell her shares and offset the capital gains with the $500,000 lifetime capital gains exemption. Ms. Chadwick intends to use S.85 roll over her shares to Borque Inc., owned by her spouse, Mr. Borque, for a transfer value of $725,000 She will receive an interest-bearing note for $725,000 and preferred shares with FMV and PUC of $1,740,000 Since these corporations are connected, the provisions of ITA 84.1 apply: Consider that Ms. Chadwick had invested (ACB & PUC) $225,000 but removes as boot $725,000 during the transfer This effectively leaves nothing further that Ms. Chadwick can remove “tax-free”, but she still has $1,740,000 in FMV/PUC of Borque Inc. preferred shares = a PUC reduction for her Borque shares Calculate the PUC Reduction: Increase in Legally Stated Capital of Borque $1,740,000 Less the Excess of: Greater of PUC and ACB of Norton shares ($225,000) Over the FMV of the Boot 725,000 ) NIL PUC Reduction Required $1,740,000 PUC after Reduction ($1,740,000 - $1,740,000) = Nil
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This note was uploaded on 04/17/2008 for the course MGMT 4444 taught by Professor Pred during the Spring '08 term at University of Ottawa.

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Solutions to Assignment Problem 18-8,9 - Solution to...

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