Deemit Inc. is a Canadian controlled private corporation. However, it is not a qualified small business corporation. All of the shares of the Company are held by individuals resident in Canada. On December 31 of the current year, its condensed Balance Sheet is as follows:

Total Assets $790,000

Total Liabilities $110,000

Shareholders' Equity:

20,000 Preferred Shares $150,000

185,000 Common Shares 370,000

Retained Earnings 160,000 680,000

Total Equities $790,000

There are 20,000 Preferred Shares outstanding and they were issued at a price of $7.50 per share. The Paid Up Capital (PUC ) of these shares is equal to their carrying value of $150,000.

There are 185,000 Common Shares outstanding and they have been issued at various prices. The PUC of these shares is equal to their carrying value of $370,000.

Any taxable dividends paid or deemed to be paid by Deemit Inc. would be non-eligible.

Required:

Indicate the tax consequences to the relevant shareholders of the transaction(s) described in each of the following independent Cases. Tax consequences would include the increase or decrease in the individual shareholder's Taxable Income, any change in the adjusted cost base and/or PUC of any shares that are still in the hands of the individual shareholder after the described transaction(s), and any federal dividend tax credits that result from the described transaction(s).

Case A An individual owns 10,000 of the outstanding Preferred Shares. His adjusted cost base for the shares is $72,000. The Company redeems these shares, providing the individual with a payment of $78,000.

Case B In order to partially liquidate the Company, a dividend of $2.10 per share is declared on the Common Shares. This dividend is accompanied by a $370,000 reduction in the PUC of the Common Shares.

Case C A $50,000 loan from an individual who is not a shareholder of the Company, is settled by the issuance of 8,000 Preferred Shares with a PUC of $60,000. The Preferred Shares received by this individual are immediately sold at their fair market value of $60,000.