hi, I wish to get some help with my ADMS 4562 Corporate Tax assignment (York University) which is due on April 5, 2017.

Attached here are the question for the assignment. I look forward to hear from you guys.

Thank you.

CY

0 ADMS 4562 (Corporate Tax) Winter 2017 Assignment 2 Worth: 10% Due: by Wednesday, April 5, 2017 at 5:00pm Hand in to Atkinson room 527 (Attention: Jason Fleming) Please use this coversheet. The assignment question is after the coversheet. Section (M,N,O) Last Name First Name Student # You must attach this coversheet to your solution Your assignment solution can be prepared individually or in groups of up to five students. You must identify group members on this coversheet. Please list names alphabetically by last name. You can form a group with students in any section. Each group must work independently from other groups. Assignments can be submitted (prior to the deadline) in class or to Atkinson room 527 [Atkinson 282 is under construction, so our main office is now Atkinson room 527 (on the 5 th floor)]. Follow the directions otherwise you will lose marks. Late assignments will not be accepted and will receive a 0. Note: you cannot apply for a Deferred Standing Agreement (DSA) for a missed assignment; i.e., if you do not hand in assignment 2 by the deadline you will get a 0. 1 Your answers, including calculations and appendices, must: not exceed 7 pages (maximum). Note: the coversheet does not count in the page limit but all other pages do count. You should number your pages; be double spaced; be Times New Roman (or an equivalent sized) font; have 12 point font (minimum); have normal margins (i.e., margins of at least one inch on the top, bottom and each side); be written in sentences for your qualitative discussion(s); and have \"Portrait\" as the page layout (and not \"Landscape\"). Marks will be deducted if any of the above instructions are not followed Note: you can ignore any tax changes announced in the March 22, 2017 federal budget. It is now April 2017 and Jennifer, a client of your accounting firm, has just finished meeting with Mr. Holmes a partner at your firm. Jennifer owns all the shares of J Inc. and additional information about Jennifer and J Inc. is provided in Exhibit I. J Inc. owns all of the shares of two subsidiaries: Subsidiary A Inc. and Subsidiary B Inc. Additional information about these two subsidiaries is provided in Exhibit I. Jennifer wants to know the income tax consequences if J Inc.: (a) exercises its conversion option with respect to its Subsidiary A Inc. shares in 2017; or (b) has Subsidiary A Inc. undertake a reorganization of capital in 2017. Mr. Holmes wants you, CPA, to draft a memo to him which he will then discuss with the client. Mr. Holmes reminds you to calculate the ACB and PUC of J Inc.'s new Subsidiary A Inc. shares. Give section, subsection and paragraph (where applicable) references from the Income Tax Act to support your answer. With respect to Subsidiary B Inc., which has had some financial difficulty, Mr. Holmes wants you to discuss the income tax consequences, if any, related to Subsidiary B Inc.'s non-payment of debt payable. Mr. Holmes says you do not need to look into the possibility of amalgamating or winding up Subsidiary B Inc. since he will look into this issue. You do not have to provide ITA references for this question. Mr. Holmes also has another client, Mrs. Godfrey who is considering starting up a new Canadian business. Mrs. Godfrey will own 100% of this new business and it is expected to earn $100,000 2 of Canadian active business income each year. Mrs. Godfrey wants to know if there will be any income tax savings or cost in 2017 from earning $100,000 of Canadian active business income personally versus earning it in a new Canadian corporation (CanCo.) See Exhibit II for additional details. Mr. Holmes wants you to answer this question and he will then discuss the issue with the client. Mr. Holmes says you should assume that CanCo. will pay all after-tax cash out to Mrs. Godfrey as a dividend in 2017. Show all relevant calculations and round to the nearest dollar. You can ignore the basic personal tax credit. You do not need to give ITA references but you must consider federal and provincial income taxes (provincial tax rates are given in the Exhibit) and you need to show all your calculations. Note: you will lose 1 mark for each incorrect item included in your analysis of income tax savings or cost. Mr. Holmes also wants you to look into one more issue for him, relating to another client Mr. Simpson. You prepare Mr. Simpson's tax returns and handle other tax compliance and tax planning matters. Mr. Simpson owns all the shares of M Inc., a CCPC, and he is a risk taker. Mr. Simpson told Mr. Holmes: \"I realize that what I'm about to propose is risky but I'm willing to take the risk. Also, if you say no I may take my business to another accounting firm. I've personally invested $3M with an offshore bank and I don't want to report any of this foreign income on my Canadian tax return. I also don't want to fill out any foreign reporting forms. I'm aware that there's a chance I'll be audited and there could be trouble, but I'm fine with this risk. If you help with this, in addition to my regular fees, I'll also pay your firm 30% of any tax savings that I get with regards to this foreign income. This way we can both benefit from the extra cash.\" Mr. Holmes wants your advice with respect to Mr. Simpson. What specifically should be done in this situation and why? You do not need to do any calculations or give ITA references for this issue. Exhibit I J Inc. and Subsidiary A and B 3 J Inc. was incorporated in Canada in 1985 by the initial shareholder. The initial shareholder subscribed for 100 common shares of J Inc. and paid $5,000 in aggregate into the company to buy the shares. J Inc. has no other shares issued Jennifer purchased all the J Inc. shares from the initial shareholder for $95,000, in aggregate, in 1998. Jennifer and the initial shareholder deal at arm's length J Inc. is a qualified small business corporation (QSBC); however, Jenny has already used up all of her QSBC capital gains exemption room (on a 2017 sale of shares of another small business corporation) Jenny is divorced and she does not have any children J Inc. and Jenny are not active traders of securities and they have no specialized knowledge about stocks or bonds J Inc. currently owns 10,000 common shares of Subsidiary A Inc. (Subsidiary A Inc. has no other shares issued) o The Subsidiary A Inc. shares have an ACB of $340,000, in aggregate, and a PUC of $10 in aggregate. These 10,000 common shares are convertible, at the option of the shareholder, into 10,000 voting redeemable and retractable preferred shares. The preferred shares will have a redemption/retraction price equal to their fair market value (FMV) at the time of conversion J Inc. also owns 100 common shares of Subsidiary B Inc. The Subsidiary B Inc. shares have an ACB and PUC of $100 in aggregate Both subsidiaries are CCPCs that operate active businesses exclusively in Canada. Subsidiary A Inc. has a December 31st year-end and Subsidiary B Inc. has a June 30th year-end The current FMV of Subsidiary A Inc. is $2M and the current FMV of Subsidiary B Inc. is $1M J Inc. wants preferred shares of Subsidiary A Inc. and hence it is considering exercising its conversion option in 2017. If J Inc. does not exercise its conversion option, then Subsidiary A Inc. will undertake a reorganization of capital in 2017. As part of the reorganization, J Inc. will give up all of its 10,000 common shares and receive 10,000 voting preferred shares. The preferred shares will be redeemable and retractable for their FMV at the time of the reorganization 4 After J Inc. exercises its conversion option or after Subsidiary A Inc. undertakes a reorganization of capital, J Inc. will subscribe for 1,000 new common shares of Subsidiary A Inc. J Inc. will pay $1,000, in aggregate, for these new common shares J Inc. and Subsidiary A Inc. do not want to file a s. 85(1) election Subsidiary B Inc. has incurred losses for the past several years and in its June 30, 2017 year-end, Subsidiary B Inc. expects to break even (i.e., to earn taxable income of nil). As of its year ended June 30, 2016 Subsidiary B Inc. had non-capital loss carryforwards of $75,000 and net-capital loss carryforwards of $10,000 On December 1, 2016 Subsidiary B Inc. defaulted on its debt payable to Big Bank Co. Big Bank Co. deals at arm's length with all companies mentioned above. This loan was used to fund equipment purchases and working capital. Big Bank Co. decided to cancel all of the $100,000 of debt owing to it from Subsidiary B Inc. and a debt settlement agreement was signed on December 15, 2016 Subsidiary B Inc.'s assets all have an adjusted cost base and undepreciated capital cost of nil; except for equipment which has an ACB of $285,000 and a UCC of $3,000 Assume the prescribed interest rate for all periods is 1% Exhibit II Mrs. Godfrey 5 Mrs. Godfrey already earns more than $250,000 per year in income before considering the $100,000 of additional business income that she may also earn If Mrs. Godfrey incorporates a new Canadian corporation, CanCo., she will be the soleshareholder and the company will have a December 31st year-end. You can assume that the corporation will be incorporated on January 1, 2017. CanCo. will have taxable capital of less than $10M and it will not be associated with any other companies Mrs. Godfrey lives in a province with the following provincial tax rates: o Top marginal personal tax rate on income over $100,000 21% o Personal tax rate on income equal to and below $100,000 12% o Dividend tax credit on taxable amount of eligible dividends 10% o Dividend tax credit on taxable amount of non-eligible dividends 4.3% o The dividend gross-up equals the federal dividend gross-up o Corporate tax rate on active business income equal to and below $500,000 4.5% o Corporate tax rate on all other income 11% Mrs. Godfrey is not an active trader of securities and she does not have any specialized knowledge about stocks or bonds