The following transactions pertain to independent Canadian-controlled private corporations and their shareholders. Each transaction described below is separate and distinct from the other transactions.

1. (a) Ethan Ltd. issued 150 preferred shares with a PUC equal to $100 for each share for $11,000 cash and other assets with a fair market value of $3,000. (4 marks)

2. (b) Maya Ltd. redeemed its preferred shares, which have a PUC of $11,000 in total, for $15,000. The shareholder, who owns all of these shares, paid $10,000 for them. (6 marks)

Required:

For each of the above transactions, describe the effect:

1. (i) on the income of the shareholder (using the 17% gross-up and tax credit),

2. (ii) on the PUC of the shares to the corporation after the transaction, and

3. (iii) on the ACB of the shares to the shareholder after the transaction.