1. 1. Which of the following carry forward amounts would be lost and could not be carried forward to be used under any circumstances when an acquisition of control takes place?

1. 1. an allowable business investment loss
2. 2. a non-capital loss
3. 3. charitable donations
4. 4. a net capital loss

1. a. All of the items would be lost in an acquisition of control.
2. b. items 1, 3 and 4
3. c. items 3 and 4
4. d. items 2, 3 and 4

1. 2. Mr. Letters is the sole owner of AAA Ltd. and BBB Inc. He also owns 18 percent of CCC Ltd., which is not an associated company. All of the corporations are Canadian controlled private corporations. Each of the three corporations has at least $550,000 of active business income earned in Canada.

What is the total amount of income eligible for the small business deduction when the incomes of all three corporations are considered?

1. a. Nil
2. b. $500,000
3. c. $1,000,000
4. d. $1,500,000

1. 3. Cool Tech Inc. is a CCPC with 2018 SR&ED expenditures of $525,000. The company has had no taxable income for the current or any of the three preceding years. The company had Taxable Capital Employed in Canada of $9,900,000 for 2017. Determine the total investment tax credit for the year and the refundable portion.

1. a. Total investment tax credit: $183,750; Refundable portion: $183,750.
2. b. Total investment tax credit: $183,750; Refundable portion: $91,875.
3. c. Total investment tax credit: $82,500; Refundable portion: $82,500.
4. d. Total investment tax credit: $82,500; Refundable portion: $73,500.

1. 4. ITA Ltd. has one class of shares. The company issued 4,000 shares on January 1, 2017 at a price of $4.50 each. On December 15, 2017, the company issued an additional 10,000 shares at a price of $5.20 per share. On March 31, 2018, the company issued another 11,000 shares at a price of $6.60 per share. Bian Ying purchased 600 shares from the first share offering, and another 400 from the latest issue. The total PUC of her shares is equal to

1. a. $ 5,704.
2. b. $ 9,840.
3. c. $ 10,440.
4. d. $ 12,000.

1. 5. Betty Ney owns 60 percent of the shares of a Canadian controlled private corporation. The CCPC has declared a 10 percent, non-eligible stock dividend, which has resulted in a $30,000 increase in its paid-up capital. Which of the following amounts must be included in Bettys 2018 income as a result of the stock dividend?

1. a. $19,320.
2. b. $9,660.
3. c. $20,880
4. d. $25,000.

1. 6. Buyor Co. distributes shares of Buyee Co. to its sole shareholder as a dividend in kind. The shares had an adjusted cost base of $15,000 and had a fair market value of $45,000 at the time of the distribution. What is the tax effect on the corporation (first) and shareholder (second)?

1. a. The corporation will have no tax effect; the shareholder will be taxed on a dividend received of $45,000.
2. b. The corporation will deduct a dividend of $30,000; the shareholder will be taxed on a dividend received of $30,000.
3. c. The corporation will be taxed on a capital gain of $10,000; the shareholder will be taxed on a dividend received of $30,000.
4. d. The corporation will be taxed on a capital gain of $30,000; the shareholder will be taxed on a dividend received of $45,000.

1. 7. South Company redeemed 100 of its shares for $6,720 during the current fiscal year. These shares were held by Sid, who had purchased them from Liam for $3,500. The paid-up capital of these shares at the time of redemption was $1,250. What are the tax consequences of the redemption?

1. a. Sid will have a deemed dividend of $5,470 and a capital loss of $2,250.
2. b. Sid will have a deemed dividend of $5,470 and a capital gain of $2,250.
3. c. Sid will have a deemed dividend of $5,000 and a capital gain of $2,250.
4. d. Sid will have a deemed dividend of $3,500 and no capital gain or loss.

1. 8. Which of the following items could potentially be used after an acquisition of control?

1. a. unused charitable donations
2. b. net capital losses
3. c. allowable business investment losses
4. d. farm losses

1. 9. Tardex Inc. has only one class of shares. At the end of 2018, the company had 30,000 shares outstanding. The shares had been issued in 3 blocks of 10,000 each. The first block was issued at $8 per share, the second at $9.5 per share, and the third at $12.5 per share. Luke Forest acquired 200 shares of the first offering and an additional 300 shares of the second offering. The total PUC of Lukes shares is equal to

1. a. $4,300.
2. b. $4,665.
3. c. $4,250.
4. d. $5,000.

1. 10. With respect to dividends in kind, which of the following statements is correct?

1. a. A dividend in kind is not subject to the usual gross up and tax credit procedures.
2. b. A dividend in kind will not affect the income of the declaring corporation.
3. c. A dividend in kind can result in a capital gain for the declaring corporation.
4. d. A dividend in kind can never be designated as an eligible dividend.