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Part $1$

Ms$.$ Madison Lawson owns $60\%$ of the outstanding shares of Lawson$\text{'}$s Luges$$ Ltd$.,$ a CCPC with an August $31$ taxation$$ year$-$end. Ms$.$ Lawson$\text{'}$s $$common$-$law partner, Jakob Bodnar$,$ owns the remaining shares of this company.

Lawson$\text{'}$s Luges has been extremely successful$$ and, as a$$ result, has accumulated over $ $3$ comma $250$ comma $000$ in cash that is not needed in the business. Because of$$ this, the company has a very generous policy with respect to making loans to employees

Loan policy

Under this$$ policy, any employee$($including both shareholders who are also$$ employees$)$ is entitled$$ to:

bullet A loan of up to $ $230$ comma $000$ to acquire a principal residence at an interest rate of $3\%.$ Loan to be repaid over a five$-$year period in equal annual instalments plus interest.

bullet An$$ interest$-$free loan of up to $ $22$ comma $000$ to purchase an automobile if used to carry out employment duties. This loan is to be repaid over a maximum of five years.

In $2023,$ Ms$.$ Lawson took advantage of the loan policy as follows.

bullet Principal Residence Loan On July$1,2023,$ Ms$.$ Lawson borrowed $ $230$ comma $000$ from the company. The loan will be repaid over a five$-$year period in equal instalments of $ $46$ comma $000$ plus interest on January $1$ of each year beginning January$1,2024.$

bullet Automobile Loan On September$1,2023,$ Ms$.$ Lawson borrowed $ $22$ comma $000$interest$-$free to purchase an automobile she will use in carrying out her employment duties. She is not sure when she will be able to repay this loan.

In addition to these loans that are available to all of the employees of Lawson$\text{'}$s Luges$$ Ltd$.,$ Ms$.$ Lawson receives several other loans that will be used for various personal expenditures.

bullet February$1,2023$: Ms$.$ Lawson borrows $ $36$ comma $000$ at $3\%$ interest. This loan will be repaid on December$1,2025.$

bullet July$1,2023$: Ms$.$ Lawson borrows $ $22$ comma $000$ on an$$ interest$-$free basis. This loan will be repaid on August$30,2024.$

bullet December$10,2023$: Ms$.$ Lawson borrows $ $39$ comma $000$ at $5\%$ interest. It will be repaid on July$1,2025.$

All repayments are made as scheduled. Assume the prescribed interest rate is $5\%$ for all years.

Describe the income tax consequences of Madison Lawson receiving the principal residence loan. Complete the below sentences.

As such loans are available to all$$ employees, Ms$.$ Lawson can claim that she has received the loan in

$$

a shareholder capacity.

an employee capacity.

a management capacity.

This means that the loan being included in her income as income from property for $2023$

$$

does not apply to ITA $15(2).$

applies to ITA $15(2).$

The rate on the loan is

$$

greater than the prescribed interest rate.

the same as the prescribed interest rate.

less than the prescribed interest rate.

There will be an interest benefit that will be included in her income as income from employment

$$

as long as the loan is outstanding.

in $2024$ only.

in $2023$ only.

in $2025$ only.

Part $2$

$$Now$,$ calculate the interest benefit for $2023.($Round your answer to the nearest whole$$ dollar.$)$

Loan principal

$\backslash$times

$($

Prescribed interest rate

$-$

Company interest rate

$)$

$\backslash$times

Fraction of year

$=$

Interest benefit, $2023$

$\backslash$times

$($

$-$

$)$

$\backslash$times

$=$

Part $3$

$$Now$,$ calculate the interest benefit for $2024.($Round your answer to the nearest whole$$ dollar.$)$

Loan balance, $2024$

$\backslash$times

$($

Prescribed interest rate

$-$

Company interest rate

$)$

$\backslash$times

Fraction of year

$=$

Interest benefit, $2024$

$\backslash$times

$($

$-$

$)$

$\backslash$times

$=$

Part $4$

$$Now$,$ calculate the interest benefit for $2025.($Round your answer to the nearest whole$$ dollar.$)$

Loan balance, $2025$

$\backslash$times

$($

Prescribed interest rate

$-$

Company interest rate

$)$

$\backslash$times

Fraction of year

$=$

Interest benefit, $2025$

$\backslash$times

$($

$-$

$)$

$\backslash$times

$=$

Part $5$

Describe the income tax consequences of Madison Lawson receiving the automotive loan. Complete the below sentences.

The motor vehicle exception

$$

applies.

does not apply.

This is because the repayment date is

$$

less than one year.

less than two years.

more than two years.

not known.

The$$ two$-$year limitation establishes the deadline of

$$

August $31,2023.$

December $31,2023.$

August $31,2024.$

December $31,2024.$

August $31,2025.$

December $31,2025.$

Amounts that are repaid will not be required to be included in income but will be subject to an interest benefit through ITA$80\mathrm{.}4(1)$ as employment income if repaid by

$$

August $31,2023.$

December $31,2023.$

August $31,2024.$

December $31,2024.$

August $31,2025.$

December $31,2025.$

Any amounts repaid after this date will be included in Madison$\text{'}$s income as income from property under ITA$15(2)$ in

$$

$2023.$

$2024.$

$2025.$

Subsequent repayments related to amounts included in her income are

$$

eligible for a deduction under ITA $20(1)($j$)$ in the year of repayment.

not eligible for a deduction under ITA $20(1)($j$)$ in the year of repayment.

Part $6$

Describe the income tax con