Problem 10 It is February 2019 and, as the auditor for Skies Limited, you have discovered several items In your 2018 year-end audit that require further consideration. Skies Limited is a manufacturer located in Stratford, Ontario. Mr. Scott Is an 80%% shareholder and president of the company which has a December $1 fiscal year end. His son Joe, who is vice-president, owns the other 2016 of the shares. They both live in Stratford Harry is the VP-Sales. He is neither related to Mr. Scott nor is he a shareholder. A significant portion of his income is made up of commissions. Shareholder Loans The records showed that the corporation has made several loans to Mr. Scott and his son, Joe, who is also an employee of the corporation. Each of the following was evidenced by a separate promissory note, duly signed and approved by the Board of Directors: (@) A $180,000 non-Interest bearing loan to Joe to finance the purchase of previously unissued, fully-paid shares from the corporation at their fair market value. The note is dated August 1, 2018 and the loan is repayable in $18,100 annual instalments. (b) A $270,000 1% Joan to Mr. Scott to finance the purchase a new home, a few blocks from his old home. The note is dated June 1, 2018 and the loan is repayable over 15 years in equal instalments of principal payable on the anniversary date; interest is payable monthly. (C) A $24,000 09% loan to Harry to finance the purchase a car to be used in his employment. The note is dated June 1, 2018; it requires principal to be paid annually, on May 31st, over five years. Any Interest required to be paid on the loans at the indicated rates was paid in 2018. Assume the prescribed rates for 2018 are 20% for the first and second quarters, and 3% for the third and fourth quarters. Ltd. Mr. Scott would like to understand the tax implications of these loans to him, Joe, Harry, and Skies You know that you have to decide whether they received the loans by virtue of employment or shareholding. Mr. Scott told you that these are the only employees to receive a loan. For the next meeting you agree that you will: (A) Assess the situation. (B) Identify the issues. (C) Analyze the issues. (D) Advise/recommend