Question 4 (25 Marks; 50 minutes) Stephanie Vivant has requested that you review her current financial position and her proposed plans and provide her with tax advice. In response to her request, you have gathered together the following information: Vivant Corporation Ltd. (VCL) is a Canadian-controlled private corporation that owns several retail clothing stores. Its common shares are owned 80% by Stephanie and 20% by one of her senior manager. Information relating to the shares is as follows: Manager Number of shares Paid-up capital Cost Stephanie 800 $8,000 200 $ 2,000 8,000 25,000 In the current year, VCL earned taxable income of $540,000 from the retail operations. It is expected that this level of profit will be maintained next year. VCL has $40,000 in its RDTOH account. VCL is planning to expand into the manufacturing business and is currently negotiating for the purchase of equipment that will be used to manufacture winter ski jackets. Because the ski jackets have a ready market in her retail stores, profits are expected to be at least $40,000 in the first year. The expansion will be funded by cash generated from the sale of a building. The building was sold last year and resulted in a capital gain of $200,000 to VCL. The funds are currently invested in short-term bank certificates. After a major dispute with the senior manager, it was agreed that early in the new-year, the manager would sell his shares for $120,000, leaving Stephanie with 100% of the company. The parties have not discussed how to structure the transaction. However, Stephanie has indicated to the manager that the full price will be paid in cash. Stephanie personally owns a commercial building that has generated rental revenue for several years. The current lease will end in the near future, and she has decided that rather than renew the lease, she will use the building to open a new retail location. The property was acquired a number of years ago for $100,000 ($80,000 for the building, $20,000 for the land). To date, she has claimed capital cost allowance totalling $30,000. A recent appraisal indicates that the land is worth $30,000 and the building $90,000. Stephanie wishes to transfer the land and building to VCL.