Fern Stoves Limited (Fern) is a Canadian-controlled private corporation (CCPC) with a December 31 year-end. The company is a Canadian distributor of corn-fuelled stoves operating from its head office in Milverton, Ontario.

Today is December 25, 2022 and Tony Fern, the sole shareholder and president of the company, has requested a meeting with you to discuss various tax issues related to the companys December 31, 2022 taxation year-end. At the meeting he provided you with the following information.

1. Tony is considering accruing a $150,000 bonus payable to himself in the December 31, 2022 financial statements for Fern.

2. Tony received a $90,000 1% loan, dated July 1, 2022 to enable him to purchase a new home for his own occupancy. Other senior employees of Fern are eligible for, and have received, loans on similar terms. The loan was repayable over 10 years in equal instalments of principal payable on the anniversary date, but with interest payable monthly.

Ignore leap years.

Required:

• Provide Mr. Fern with a detailed summary of the tax consequences to him and Fern of the above transactions for the year ending December 31, 2022, with calculations where necessary.
• Assume that the prescribed interest rate for the first quarter of 2022 was 2%, for the second quarter it was 1%, for the third quarter it was 2%, and for the fourth quarter it was 3%.