Dad and Son (age 25) both own 100% of the common shares of their respective corporations: Dadco Ltd. and Sonco Ltd. Dad owns 100% of the preferred shares of Sonco Ltd. The preferred shares are voting, bear a dividend rate of 8%, and are redeemable at $100,000. At the time the preferred shares were issued, the prescribed rate was 10% and the fair market value was $100,000.

REQUIRED

Determine whether Dadco Ltd. and Sonco Ltd. are associated under subsection 256(1). Substantiate your conclusions by reference to the related provisions of the Act and the conditions contained therein.