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prob12-2_Assoc_Rules

# prob12-2_Assoc_Rules - associated Page 3 of 5 Problem...

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Problem 12-2 (Text: Ch. 12) For each of the following situations, determine whether or not the corporations are associated, and provide references to the Income Tax Act to support your conclusions. (Assume each corporation has a December 31 year-end.) (a) A Co. 55% B Co. 60% C Co. (b) Mr. A 51% 60% A Co. B Co. (c) Mr. A Mr. B Mr. A Mr. B 50% 50% 50% 50% X Co. Y Co. Mr. A is not related to Mr. B Page 1 of 5

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Problem 12-2 (Cont.) (d) Mr. A Mr. B Mr. A Mr. B 60% 40% 50% 50% M Co. N Co. Mr. A is not related to Mr. B (e) A Co. B Co. C Co. A Co. B Co. 1/3 1/3 1/3 50% 50% D Co. E Co. (f) Mr. A Mr. A Mr. A’s son (age 29) 100% 25% 75% A Co. B Co. Page 2 of 5
Problem 12-2 (Cont.) (g) Mr. A Mrs. A Son of A (age 29) 50% 50% 50% 50% A Co. B Co. (h) Mr A. Mr. A Mrs. A (age 29) 60% 100% 25% 15% A Co. A Holdco 26% B Co. (i) Are A Co. and B Co. associated? (ii) If the 26% shareholdings in B Co. were held in A Co., would A Co. and B Co. be

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Unformatted text preview: associated? Page 3 of 5 Problem 12-2 (Cont.) (i) A X Y Z B (brother (a tax-(wife (son of (son of A) of X) payer) of X) X and Y) 76% 24% 100% 25% 50% 25% 100% 50% 50% 100% A Ltd. X Ltd. Y Ltd. Z Ltd. ZB Ltd. B Ltd. (j) Ruth Alice Fay Kelly 20% 50% 50% 20% 30% 30% RA Inc. FK Inc. Ruth is Fay’s mother and Alice is Kelly’s mother. Ruth and Alice are sisters. Fay is 17 and Kelly is 22. Page 4 of 5 Problem 12-2 (Cont.) (k) Bill 100% 100% B Ltd. C Ltd. Rose Ellen 100% 40% 60% voting common common preferred K Ltd. Rose and Ellen are Bill’s children and are over 18 years of age. K Ltd.’s preferred shares have a value of \$2 million and the common shares have a value of \$150,000. Page 5 of 5...
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