Emma recently graduated from university with a business degree and is looking to start her own consulting business. Through her alumni network, she got in contact with Juna, who is looking to sell her consulting business, which is currently incorporated as Musse Inc.
Musse Inc., which was incorporated in 2018, has been underperforming due to poor management. Since Emma is the top graduate of her program, however, she is confident she can turn the business around. Emma purchased Musse Inc. from Juna on May 1st, 2022, and has become the sole owner and CEO of the company.
Between January 1st to April 30th of 2022, the corporation's financial performance is as follows:
Business Income (Loss)	$ (7,500.00)
Property Income (Loss)	$ (3,000.00)
Capital Gains	$ (14,000.00)
Prior to 2022, the corporation has accumulated $24,000 of non-capital loss carryforwards, all of which were from business activities, and $15,000 of net capital loss carryforwards.
The corporation has the following assets on their balance sheet on April 30th 2022:
Asset	Tax Cost	FMV
Accounts Receivable	$9,000.00	$8,000.00
Investments (Stocks)	$80,000.00	$150,000.00
Land	$100,000.00	$88,000.00
Building	$180,000.00	(ACB)	$120,000.00
$100,000.00	(UCC)
After acquiring the company, Emma managed to turn the business around. From May 1st to December 31st 2022, the corporation earned $21,000 of business income. In addition, on December 10th 2022, Emma sold the company's land for $128,000. Emma decided to reward herself by withdrawing the following amounts from Musse Inc.:
- $6,000 as salary
- $8,000 as non-eligible dividends
- $10,000 as two separate interest-free loans of $5,000 each. Both loans were taken out on September 1st 2022. The prescribed rate in Q3 2022 and Q4 2022 is 2% and 3% respectively. Emma used one loan to help her with a downpayment for a condominium that she plans to occupy personally, and the other loan to help purchase a vehicle for personal use. Similar loans are offered to several other consultants in the business. Both loans have repayment schedules specifying a 3-year repayment plan beginning in 2024.
The corporation will file a tax return for the period between May 1st to December 31st 2022.
Required:
a) Calculate the company's taxable income for the pre-acquisition period in 2022, showing detailed calculations and any updated tax costs. Calculate the loss carryforward balances (capital and non-capital) that Musse Inc. has available immediately prior to the acquisition, and identify any losses which will expire. Assume in your calculations that Musse Inc. will not make any elections with respect to capital gains.
b) Can Musse Inc. take advantage of any elections during acquisition to minimize expiring losses? If so, please identify the appropriate asset(s) with justification and calculate the optimal election to be made. You do not need to redo part a) for any of these changes.
c) Calculate Musse Inc.'s taxable income for the post-acquisition period between May 1st to December 31st 2022. If you claim any Division C deductions, please justify its ability to be used post-acquisition with reference to the appropriate conditions.
d) Calculate Emma's Division B income on her personal tax return for the 2022 tax year.