Frank Francis is the only shareholder of Being Frank Ltd. (“the Company”), a Canadian controlled private corporation. The Company was formed in 2006, with an investment in common shares of $168,000. No additional shares have been issued since that time. The Company has a taxation year that ends on December 31.

As he is now over 65 years of age and eager to start living the care-free life of a retiree, Frank is planning to sell his business in any manner that he can. He is considering an offer that he has received from Melissa.

She has indicated that she would only buy the assets of the Company, not the shares. She is willing to pay a price that will include an agreed-upon price for the goodwill. She has offered a purchase price, effective January 1, 2020, of $ 3,582,350 that reflects a fair market value for the business. She insists that from the sale proceeds, the Company must discharge all of its current and other liabilities. She has agreed to file a joint ITA 22 election with respect to the Accounts Receivables. Once the business assets are sold, it is Frank’s intention to wind up the company.

You are provided with the following statement of information about the Company’s assets:

Being Frank Ltd.
Statement of Assets
As at January 1, 2020
	Accounting Net Book Value	Tax Value	Fair Market Value	Purchase Price
Cash	$ 37,600	$ 37,600	$ 37,600	N/A
Accounts Receivable	312,500	312,500	278,900	278,900
Inventories	623,400	623,400	676,250	678,250
Land	326,000	326,000	403,000	403,000
Building (Note One)	427,300	396,400	1,265,000	1,265,000
Equipment (Note Two)	326,500	285,400	297,600	297,600
Goodwill	Nil	Nil	624,000	624,000
Totals	$2,053,300	$1,981,300	$3,582,350	$3,582,350

Note One. The brick and mortar original cost of this building $983,200.

Note Two. The Equipment had an original cost of $623,500.

At the same time that the Statement of Assets was prepared, a Statement of Equities was also drawn up as at January 1, 2020. This statement contained the following information regarding accounting and tax values:

	Accounting Book Value	Tax Value
Current Liabilities	$ 426,250	$ 426,250
Loan from Shareholder	186,400	186,400
Future Income Tax Liability	363,200	N/A
Common Stock - No Par	168,000	168,000
Capital Dividend Account	N/A	94,550
Retained Earnings	909,450	N/A
Other Income Retained	N/A	1,106,100
Totals	$2,053,300	$1,981,300

In addition to the information included in the preceding statements, the following information about the Company is available:

1. On December 31, 2019, the Company has no RDTOH balance. There was no Adjusted Aggregate Investment Income earned in 2019.
2. Being Frank Ltd. is subject to the following tax combined federal and provincial income tax rates:
   • Active business income eligible for Small Business Deduction-15%
   • Active business income not eligible for the Small Business Deduction- 35%
   • Investment income- 50 2/3%
3. Frank’s personal all-inclusive income tax rate is 45% (this rate includes all dividend tax credits)

Required:

Part A. If Frank accepts Melissa’s offer, effective on January 1, 2020, in a concise schedule format, determine the total after-tax cash amount that would be in the Company’s bank account and available to Frank pursuant to a wind-up of the Company. This after-tax cash available schedule must include the impact of:

• all the proceeds received from the sale of all the corporate assets;
• the payment of all corporate and other debts;
• the payment of all corporate income taxes; and
• the receipt of any tax account refunds (15 marks)

Part B. After the sale of the assets, and in regard to the final wind up of the Company, assume that all the appropriate elections or designations will be made to minimize personal income taxes. What will be the final after-tax amount that will be available to Frank pursuant to the total wind up of the Company? (5 marks)