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.

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

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

Required:

For each of the above transactions, describe the effect:

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

(ii) on the PUC (Paid-up capital)of the shares to the corporation after the transaction, and

(iii) on the ACB (Adjusted cost base)of the shares to the shareholder after the transaction.