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, 2022, the companys financial position was as follows: Assets Accounts receivable $ 2,000,000 Inventory (at cost) 700,000 Land 1,000,000 Building (at cost) $ 1,500,000 Accumulated capital cost allowance (600,000 ) 900,000 Equipment (at undepreciated capital cost) 400,000 Goodwill (at cost) $ 300,000 Accumulated capital cost allowance (120,000 ) 180,000 $ 5,180,000 Liabilities and Shareholders Equity Current liabilities $ 2,380,000 Shareholders equity: Common shares $ 10,000 Retained earnings 2,790,000 2,800,000 $ 5,180,000 Additional information Relevant asset values are as follows: Fair market value UCC Accounts Receivable 1,750,000 N/A Inventory 750,000 N/A Land 1,200,000 N/A Building 1,700,000 900,000 Equipment 350,000 400,000 Goodwill 500,000 180,000 On December 31, 2022, the company had a balance of $11,000 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 $10,000. Simpsons 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 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. Subpumps 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 50 2/3% tax rate, including a 10 23% refundable tax. Required: 1. Determine the after-tax proceeds that Simpson will retain after the share sale. Enter numbers as positive amounts unless otherwise noted. 2. 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 0 in that cell. Enter negative amounts with a minus sign (). When computing NERDTOH, use 0.3067 when multiplying to represent 30% and do not use more than 4 decimal places when multiplying. Round all numbers to the nearest dollar. 3. 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 526,400 The revised total aggregate investment income is 270,000 The balance in the capital dividend account is now 281,000 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. 4. 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. 5. 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. If the amount should be zero, enter 0. Round each entry to the nearest dollar. The mix of dividends should add up to 3,970,000 6. Ignore the dividend mix you determined in Required 5 and assume that the actual dividends ended up being: Eligible dividends 200,000 Non-eligible dividends 3,520,000 Capital dividends 250,000 Total dividends paid 3,970,000 Assume the capital gain or loss calculated on the redemption of shares in Required 4 is zero. Determine the after-tax proceeds kept by Simpson. 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. Prev