THREE PROBLEMS (100 MARKS) Problem 1 (30 marks) Sardo Ltd. is a CCPC and is not associated with any other corporation. Its 2023 net income is $422,000 and is made up of the following components: Active Business Income $375,000 Taxable Dividends 15,000 Foreign Non-Business Income (100%) 32,000 The foreign jurisdiction withheld $3,200 in profits tax from the foreign non-business income. The Company is entitled to a foreign tax credit equal to the amount withheld. The TCEC was less than $10 million in 2022 and the AAII was less than $50,000 in 2022. The Company has a 2020 non-capital loss balance of $96,000 that it intends to claim in 2023. Determine Sardo's small business deduction (SBD) for the 2023 taxation year. Problem 2 (30 marks) Martex Inc. has 560,000 shares outstanding. Information on their issuance is as follows: Shares Issue Total Date Issued Price Proceeds January, 2022 400,000 $16.00 $6,400,000 June, 2023 160,000 18.00 2,880,000 Totals 560,000 $9,280,000 Joan Fox acquired 10,000 shares of the 2022 issue and 5,000 shares of the 2023 issue. Determine the ACB and PUC of Joan's shares. IAF420 ASSIGNMENT TERM 2237 4 / 4 Problem 3 (40 Marks) Darlene Saunders has carried on a business as a sole proprietor for over 10 years. The business has been very successful and has now reached a point where it is producing more income than she requires for her personal needs. Given this, she would like to incorporate the business to a new corporation, using the provisions of ITA 85(1). On January 5, 2023, the sale date, the tangible property of the business have total tax costs of $375,000. The combined FMV is $1,190,000 without goodwill. In addition, because of the success of the business, it is estimated that the business has goodwill the FMV of which is $320,000. At the transaction date, business liabilities are $115,000. The elected amount for the transfer will equal the tax costs of $375,000. The corporation will assume the $115,000 in business liabilities. In addition, Darlene will receive: A promissory note of $85,000. Preferred shares with a FMV of $100,000. Common shares with a FMV of $1,210,000. Any taxable dividends paid by the corporation will be non-eligible. Required: Determine the following: 1. The ACB of each type of consideration received by Darlene. 2. The PUC of each class of shares issued as consideration by the new corporation. 3. The income tax consequences to Darlene if the new preferred shares are redeemed at their FMV