X Ltd. had $40,000 available for distribution to its sole shareholder, Xavier, on winding-up.

The balances in the tax accounts of X Ltd. were as follows:

Share capital (paid-up capital)$2,000

Capital dividend account$8,000

Other surplus (LRIP taxed at low CCPC rate)$30,000

Xavier paid $1,000 for the shares of X Ltd. when he purchased them two years ago.

Which one of the following statements is true?

1)The winding-up can occur on a tax-deferred basis. Xavier will be able to defer the recognition of any income for tax purposes.

2)Xavier will have a capital gain of $39,000 on the winding-up of X Ltd.

3)Xavier will have dividend income of $30,000, which will be grossed-up to $34,500 for tax purposes. In addition, he will have a capital gain of $1,000.

4)Xavier will have dividend income of $30,000, which will be grossed-up to $34,500 for tax purposes. In addition, he will have a capital gain of $9,000.