Tax rates and general information:

Personal Tax CGE

Jan 35 yrs. old, Professor 50% $866,912

Dividend Gross up rates:

Eligible Dividends: 38%

Non-Eligible Dividends: 15%

Dividend Tax credit is assumed equal to the Gross up.

Corporations:

CCPC eligible for the Small Business Deduction: 13%

CCPC not eligible for the Small Business Deduction: 50.67%

Corporations not eligible for Small Business Deduction: 28%

Corporations classified as a Personal Service Business: 33%

Jan also wanted some advice as well. Since 2013, Jan has owned all 1,000 Class A shares issued by Dwell

Inc., a corporation in the business of manufacturing and selling Tissue in Canada. Jan also owns all the shares of

Tulip Inc., a corporation that is considered a specified investment business.

Dwell Inc has been profitable since its incorporation, and now has sizable investments in addition to its

business assets. Based on the market value of the assets, 56% of the assets were used in the business

throughout the corporation's fiscal period ended November 30, 2010, and the other 44% consisted of

investments. By January 2011 as a result of changes in the market, the proportion of assets used in the

business had declined to 45% and has remained at that percentage.

Jan would like to transfer the investments in public corporations to Tulip on a tax-deferred basis. She read extensively about tax-deferred rollovers covered in sections 85 and section 86. She has also read about the Capital Gains Deduction, QSBC shares and Small Business Corporations. The consideration paid by Tulip will be in notes and Class B shares redeemable at the holder's option for $1 each. The legal capital of each issued share will be $1. She feels the transfer should purify Dwell Inc so it's shares would qualify as QSBC shares.

The investments held by Dwell Inc are as follows:

Cost Fair Market Value

Shares of public corporations $ 155,000 $ 100,000

Property:

Land 50,000 125,000

Building (rental property) 285,000 600,000

The building is included in Class 1, which has an undepreciated capital cost of $215,000.

Do you agree with Jan's assessment of the transfer of assets tp Tulip would in fact purify the shares of Dwell Inc? If you do not agree with her assessment, then it would be appropriate to advise Jan of what steps she may need to purify Dwell's shares.