Yogi owns 1,000 common shares of Bear Ltd., a corporation that he founded in 1978. The paid-up capital & ACB of the shares was $1,000.

Yogi grew tired of running the company and decided it was time to sell the family business. An arms length party came forward and was willing to pay $577,000 for Bear Ltd.s business assets (after which, the corporation would be wound up), or $515,000 for 100 percent of Bear Ltd.s common shares.

Yogi has utilized all of his capital gains deduction. If he accepts the offer to sell the assets, the accounts receivable would be transferred by way of a section 22 Election. Yogi is in the top federal tax bracket and has a combined marginal tax rate of 33% for ineligible dividends, 22% for eligible dividends and is taxed at 43% on other income.

For Bear Ltd., active business income eligible for the small business deduction is taxed at 15% and income in excess of the small business limit is taxed at 26%. Other income is taxed at 47%.

Additional information:

• The capital dividend account had an opening balance of $11,500.
• The RDTOH account had an opening balance of $6,000.
• Bear Ltd. has no Grip.
• The small business limit is $500,000 for the 2021 taxation year.

The balance sheet and pertinent tax data as at December 31, 2021, are outlined below.

Accounting

Book Value Tax Value FMV on Dec 31/21

Cash 275,000 275,000 275,000

Accounts receivable 15,000 15,000 11,000

Inventories 125,000 125,000 150,000

Buildings (cost $38,000) 25,000 21,000 75,000

Equipment (cost $55,000) 45,000 41,000 37,000

Land 22,000 22,000 29,000

Total assets 507,000 499,000 577,000

Account payable 46,000

Share capital 1,000

Retained earnings 460,000

Total liabilities and equity 507,000

REQUIRED:

1. Which offer should Yogi accept if he wants to maximize the net after tax funds received for Bear Ltd.? Show all calculations!