Subpump Limited is an active business corporation owned 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 the companys financial position was as follows.

Assets

Accounts receivable $

Inventory at cost

Land

Building at cost $

Accumulated capital cost allowance

Equipment at undepreciated capital cost

Goodwill at cost $

Accumulated capital cost allowance

$

Liabilities and Shareholders Equity

Current liabilities $

Shareholders equity:

Common shares $

Retained earnings

$

Additional information

Relevant asset values are shown in the following chart.

Fair market value UCC

Accounts Receivable NA

Inventory NA

Land NA

Building

Equipment

Goodwill

On December the company had a balance of $ in its capital dividend account. The balances in the NERDTOH, ERDTOH and GRIP accounts were $

Simpson acquired his shares of Subpump years ago for $

Simpsons shares of Subpump are not 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 $ 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 election will not be made.

Simpson is in a marginal tax bracket. The combined federal and provincial marginal tax rate is on eligible dividends and on noneligible dividends received net of the dividend tax credit and on other income. Subpumps tax rate is on business income not subject to the smallbusiness deduction and on earnings subject to the smallbusiness deduction. Investment income is subject to a tax rate, including a refundable tax.

Required:

Determine the aftertax 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 in that cell. Enter negative amounts with a minus sign

When computing NERDTOH, use when multiplying to represent and do not use more than decimal places when multiplying. Round all numbers to the nearest dollar.

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

The revised total active business income is $

The revised total aggregate investment income is

The balance in the capital dividend account is now

The balance in the noneligible refundable dividend tax on hand is now

The next step is to determine the amount of proceeds that will be available inside the company to redeem the shares.

In the drop downmenu 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 Round each entry to the nearest dollar.

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

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

In the drop downmenu 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 Round each entry to the nearest dollar.

Ignore the amount calculated in Required for the deemed dividend and assume the deemed dividend was actually $

The amounts from Required 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. If the amount should be zero, enter Round each entry to the nearest dollar.

The mix of dividends should add up to $

Ignore the dividend mix you determined in Required and assum