Subpump Limited is an active business corporation owned $100\%$ by George Simpson, who has been attempting to sell the company

for several years and have recently received an offer from a serious buyer.

As of December $31,2023,$ the company's financial position was as follows.

Additional information

Relevant asset values are shown in the following chart. On December $31,2023,$ the company had a balance of $$9,000$ in its capital dividend account. The balances in the NERDTOH,

ERDTOH and GRIP accounts were $$0.$

Simpson acquired his shares of Subpump $10$ years ago for $$500,000.$

Simpson's shares of Subpump are qualifying small business corporation shares. Simpson has never used his capital gains

exemption.

The purchaser has stated two alternatives in his purchase offer:

A purchase of all assets at fair market value and an assumption of all liabilities. The balance will be paid in cash immediately.

A purchase of the shares for $$3,100,000$ in cash. A condition of sale is that no capital dividend shall be paid prior to the sale.

Under the terms of the asset sale, a section $22$ election will not be made.

Simpson is in a $50\%$ marginal tax bracket. The combined $($federal and provincial$)$ marginal tax rate is $35\%$ on eligible dividends and

$43\%$ on non$-$eligible dividends received $($net of the dividend tax credit$)$ and $50\%$ on other income. Subpump's tax rate is $27\%$ on

business income not subject to the small$-$business deduction and $13\%$ on earnings subject to the small$-$business deduction.

Investment income is subject to a $\frac{502}{3}\%$ tax rate, including a $\frac{102}{3}\%$ refundable tax.

Required:

Determine the after$-$tax proceeds that Simpson will retain after the share sale. Enter numbers as positive amounts unless otherwise

noted. You will now calculate the corporate tax implications of selling the assets. Start by completing the chart below. If a column is not impacted by the sale of a particular asset, enter $"$O$"$ in that cell. Enter negative amounts with a minus sign $(-).$ When computing NERDTOH, use $0\mathrm{.}3067$ when multiplying to represent $\frac{302}{3}\%$ and do not use more than $4$ decimal places when multiplying. Round all numbers to the nearest dollar.

$\backslash$table$[[$Asset description,Proceeds,$\backslash$table$[[$Active Business$],[$Income$]],\backslash$table$[[$Aggregate$],[$Investment$],[$Income$]],\backslash$table$[[$Capital Dividend$],[$Account $($CDA$)]],\backslash$table$[[$Non$-$eligible$],[$Refundable$],[$Dividend Tax on$],[$Hand $($NERDTOH$)]]],[$Opening balance$],[$Accounts receivable,$2,000,000,,,,],[$Inventory$,750,000,,,,],[$Land$,1,200,000,,,,],[$Building$,1,700,000,,,,],[$Equipment$,350,000,,,,],[$Goodwill$,500,000,,,,],[6,500,000,0,0,0,0]]$

Simpson informs you that there has been some changes to the tax values of the various assets. You update your previous calculations.

$\backslash$table$[[$The revised total active business income is$,$$$806,400],[$The revised total aggregate investment income is$,270,000],[$The balance in the capital dividend account is now,$279,000],[$The balance in the non$-$eligible refundable dividend tax on hand is now,$82,809]]$

The next step is to determine the amount of proceeds that will be available inside the company to redeem the shares. In the drop down$-$menu selections, select the appropriate description. Items may be used more than once or not at all. Next to the description, enter the appropriate number. Enter negative amounts with a minus sign $(-.$ If the amount is zero, enter $"0".$ Round each entry to the nearest dollar.

$$ Ignore the amount calculated in Required $3$ for the cash available to redeem the shares and assume that the amount was actually

$$4,000,000$

Determine the deemed dividend that would result if the shares of Subpump are redeemed.

In the drop down$-$menu selections, select the appropriate description. Items may be used more than once or not at all.

Next to the description, enter the appropriate number. Enter negative amounts with a minus sign $(-).$ If the amount is zero, enter $"0".$

Round each entry to the nearest dollar.

Taxable capital gain $($or allowable capital loss$)$ on redemption of shares

Ignore the amount calculated in Required $4$ for the deemed dividend and assume the deemed dividend was actually $$3,970,000$

The amounts from Required $3$ for active business income, aggregate investment income, CDA and NERDTOH are unchanged.

What would be the optimal mix of dividends to minimize Simpson's personal tax payable?

Enter positive numbers only. What would be the optimal mix of dividends to minimize Simpson's personal tax payable?