Question 3 John Titor is the owner manager of SERN Inc , an R D consulting firm He purchased all of his outstanding shares from his older sister, Christina, for $25,000 The paid up capital of these shares were $30,000, equal to the initial amount Christina invested into the corporation On January 1 st 2022, John decided to sell SERN Incs business to a third party through an asset sale The buyer will purchase all of SERN Incs assets at FMV, plus an additional $15,000 After the sale closes, John will redeem the companys shares for the remaining cash in the company, and wind up the company afterwards SERN Inc s balance sheet on January 1 st 2022 contains the following assets, and has $25,000 of liabilities Asset Tax Costs FMV Inventory $7,000 $10,000 Marketable Securities $25,000 $20,000 Land $80,000 $120,000 Building (Original Cost $60,000) $30,000 (UCC) $50,000 Furniture (Original Cost $12,000) $4,000 (UCC) $2,000 Total $202,000 The company has the following account balances as of January 1 st 2022 (prior to any proposed sales) Account Balance Capital dividend account $8,000 Non eligible RDTOH $3,000 GRIP balance $10,000 SERN Incs corporate tax rates are 12 for active business income, and 49 67 for aggregate investment income After retiring from the business, John got involved in a partnership with a group of friends He received a 10 stake in Reading Steiner LLP, which operates multiple bookstores across the country, in exchange for helping to manage the business After the first year of operations, John withdrew $16,000 from the partnership The partnerships net income for the year was $240,000, consisting of $150,000 of business income, $70,000 of capital gains, and $20,000 of non eligible dividends John has $28,000 of net capital loss carry forwards available to him for the 2022 tax year REQUIRED Calculate the total tax payable (federal and provincial combined) that John will incur on the transactions above, assuming a 45 marginal tax rate Assume that the dividend tax credit is equal to the gross up

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Question 3 John Titor is the owner-manager of SERN Inc., an R&D consulting firm. He purchased all of his outstanding shares from his older sister,

Question 3

John Titor is the owner-manager of SERN Inc., an R&D consulting firm. He purchased all of his outstanding shares from his older sister, Christina, for $25,000. The paid-up capital of these shares were $30,000, equal to the initial amount Christina invested into the corporation.

On January 1^st 2022, John decided to sell SERN Incs business to a third party through an asset sale. The buyer will purchase all of SERN Incs assets at FMV, plus an additional $15,000. After the sale closes, John will redeem the companys shares for the remaining cash in the company, and wind-up the company afterwards.

SERN Inc.s balance sheet on January 1^st 2022 contains the following assets, and has $25,000 of liabilities:

Asset	Tax Costs	FMV
Inventory	$7,000	$10,000
Marketable Securities	$25,000	$20,000
Land	$80,000	$120,000
Building (Original Cost: $60,000)	$30,000 (UCC)	$50,000
Furniture (Original Cost: $12,000)	$4,000 (UCC)	$2,000
Total:		$202,000

The company has the following account balances as of January 1^st 2022 (prior to any proposed sales):

Account	Balance
Capital dividend account	$8,000
Non-eligible RDTOH	$3,000
GRIP balance	$10,000

SERN Incs corporate tax rates are 12% for active business income, and 49.67% for aggregate investment income.

After retiring from the business, John got involved in a partnership with a group of friends. He received a 10% stake in Reading Steiner LLP, which operates multiple bookstores across the country, in exchange for helping to manage the business. After the first year of operations, John withdrew $16,000 from the partnership. The partnerships net income for the year was $240,000, consisting of $150,000 of business income, $70,000 of capital gains, and $20,000 of non-eligible dividends.

John has $28,000 of net capital loss carry-forwards available to him for the 2022 tax year.

REQUIRED

Calculate the total tax payable (federal and provincial combined) that John will incur on the transactions above, assuming a 45% marginal tax rate. Assume that the dividend tax credit is equal to the gross-up.