taxation 2

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Assignment Problem Fourteen - 3 (Associated Corporations) The following situations are independent of each other. All of the corporations involved are Canadian controlled private corporations and have only one class of shares. A Circle Ltd. owns 51 percent of the shares of Loop Ltd., which in turn owns 51 percent of the shares of Ring Ltd B. Gerald Stone owns 75 percent of the shares of Rock Ltd, and 85 percent of the shares of Boulder Ltd 716 Chapter 14 Assignment Problems C. The percentage share ownership of Jukebox Ltd. and Vending Ltd. are as follows: 8.0 Jukebox Vending Jewel Cunningham 35.0 45.0 Roger Takahashi 15.0 15.0 Kari Fisher 5.0 Ming Chen 45.0 Kelly Clerkson 32.0 Total 100.0 100.0 None of the individuals are related to each other. D. Rainer Gosling owns 100 percent of the shares of Fowl Ltd. Beatrice Owlet, Rainer's sister, owns 100 percent of the shares of Capon Ltd. Rainer , Beatrice, and their mother and father each own 25 percent of the shares of Pullet Ltd. E. Ryan McLain owns 62 percent of the shares of McLain Ltd, and 40 percent of the shares of Chatelaine Ltd. McLain Ltd. owns 18 percent of the shares of Chatelaine Ltd. F Melissa Andrews owns 75 percent of the shares of Andrews Ltd. and 25 percent of the share of Statler Ltd. Jeremy Statler, Melissa's brother, owns 75 percent of the shares of Statler Ltd. and 25 percent of the shares of Andrews Ltd. Required: For each of the preceding situations, indicate whether the corporations are associ- ated and explain your conclusion with reference to the Income Tax Act. In order to assist you in answering this question, we have provided you with the content of ITA 256/1). ITA 256(1) Associated corporations - For the purposes of this Act, one corporation is associated with another in a taxation year it, at any time in the year, (a) one of the corporations controlled, directly or indirectly in any manner whatever, the other (b) both of the corporations were controlled, directly or indirectly in any manner whatever, by the same person or group of persons: (c) each of the corporations was controlled, directly or indirectly in any manner whatever, by a person and the person who so controlled one of the corporations was related to the person who so controlled the other, and either of those persons owned, in respect of each corporation, not less than 25 percent of the issued shares of any class, other than a specified class, of the capital stock thereof; (d) one of the corporations was controlled, directly or indirectly in any manner whatever, by a person and that person was related to each member of a group of persons that so controlled the other corporation, and that person owned, in respect of the other Assignment Problem Fourteen - 3 (Associated Corporations) The following situations are independent of each other. All of the corporations involved are Canadian controlled private corporations and have only one class of shares. A Circle Ltd. owns 51 percent of the shares of Loop Ltd., which in turn owns 51 percent of the shares of Ring Ltd B. Gerald Stone owns 75 percent of the shares of Rock Ltd, and 85 percent of the shares of Boulder Ltd 716 Chapter 14 Assignment Problems C. The percentage share ownership of Jukebox Ltd. and Vending Ltd. are as follows: 8.0 Jukebox Vending Jewel Cunningham 35.0 45.0 Roger Takahashi 15.0 15.0 Kari Fisher 5.0 Ming Chen 45.0 Kelly Clerkson 32.0 Total 100.0 100.0 None of the individuals are related to each other. D. Rainer Gosling owns 100 percent of the shares of Fowl Ltd. Beatrice Owlet, Rainer's sister, owns 100 percent of the shares of Capon Ltd. Rainer , Beatrice, and their mother and father each own 25 percent of the shares of Pullet Ltd. E. Ryan McLain owns 62 percent of the shares of McLain Ltd, and 40 percent of the shares of Chatelaine Ltd. McLain Ltd. owns 18 percent of the shares of Chatelaine Ltd. F Melissa Andrews owns 75 percent of the shares of Andrews Ltd. and 25 percent of the share of Statler Ltd. Jeremy Statler, Melissa's brother, owns 75 percent of the shares of Statler Ltd. and 25 percent of the shares of Andrews Ltd. Required: For each of the preceding situations, indicate whether the corporations are associ- ated and explain your conclusion with reference to the Income Tax Act. In order to assist you in answering this question, we have provided you with the content of ITA 256/1). ITA 256(1) Associated corporations - For the purposes of this Act, one corporation is associated with another in a taxation year it, at any time in the year, (a) one of the corporations controlled, directly or indirectly in any manner whatever, the other (b) both of the corporations were controlled, directly or indirectly in any manner whatever, by the same person or group of persons: (c) each of the corporations was controlled, directly or indirectly in any manner whatever, by a person and the person who so controlled one of the corporations was related to the person who so controlled the other, and either of those persons owned, in respect of each corporation, not less than 25 percent of the issued shares of any class, other than a specified class, of the capital stock thereof; (d) one of the corporations was controlled, directly or indirectly in any manner whatever, by a person and that person was related to each member of a group of persons that so controlled the other corporation, and that person owned, in respect of the other