Rosanna owns 65% of the common shares of Rosanna’s Flowers Ltd. (RFL). Samantha owns 75% of the common shares of Riddled with Rain Investments Ltd. (RRIL). The other 25% of RRIL common shares are owned by unrelated persons. RRIL owns all of the common shares of Treading Water Ltd. (TWL). RRIL also owns the remaining 35% of the common shares of RFL. Rosanna is married to Samantha’s nephew, Sandro. The 35% ownership of RRIL in RFL was to provide RFL with some needed start-up financing. Samantha has no other involvement with RFL’s operations.

Required:

Explain, in detail, why the corporations involved in the preceding fact situation are associated or not associated. If they can be associated in more than one way, describe only one. Canadian Income Tax Law Section 256 (1)a.