(D) A Problem 7 Free-Strikes Ltd., a Canadian public corporation, has offered Ms. Bast $2,525,000 for the assets, which started operations in 2009. Batterup Ltd. has been quite profitable in recent years. As a result, Ms. Bast owns all the common shares of Batterup Ltd., a Canadian-controlled private corporation. excluding cash, as at December 31, 2022. The offer price reflects unrecorded goodwill of $475,000. Bast wants to wind up the company after the sale of the assets. The pro forma balance sheet of Batterup Ltd. as at December 31, 2022, is as follows: Assets Cash TTA: 54, 83(2), 840 84021) 801) Cost UCG FMV $ 25,000 Accounts receivable (net) 87,500 75,000 Inventory. 222,500 155,000 Land 110,000 450,000 Building 350,000 $ 75,000 950,000 450,000 220,000 100,000 142,500 320,000 $1,387,500 $2,050,000 Equipment Marketable securities Liabilities Current liabilities Future income taxes. Shareholder's Equity Share capital (PUC) Retained earnings Total liabilities and equity Additional Information $ 540,000 50,000 100,000 697,500 $1,387,500 (1) Batterup Ltd. pays corporate tax at an overall combined rate of 13% on active business income sible for the small business deduction, 27% on active business income not eligible for the small is deduction, and an initial 40% rate for investment income, plus the 10% % additional refundable 2 on investment income. The corporation has a GRIP balance of zero. (2) The reserve for doubtful accounts at December 31, 2022 was $15,000. (3) Batterup Ltd. and Three-Strikes Ltd. elected under section 22. (4) The company has a capital dividend account balance of $40,000. You have agreed to do the Wowing for Ms. Bast: (A) Compute the amount available for distribution to the shareholder. (B) Determine the components of the distribution to the shareholder. (C) Compute the taxable capital gain or allowable capital loss on the disposition of Ms. Bast's shares on the winding-up. (Assume the adjusted cost base of Ms. Bast's common shares is $100,000.) (D) Explain the conditions for and advantages of using a section 22 election.

(D) A Problem 7 Free-Strikes Ltd., a Canadian public corporation, has offered Ms. Bast $2,525,000 for the assets, which started operations in 2009. Batterup Ltd. has been quite profitable in recent years. As a result, Ms. Bast owns all the common shares of Batterup Ltd., a Canadian-controlled private corporation. excluding cash, as at December 31, 2022. The offer price reflects unrecorded goodwill of $475,000. Bast wants to wind up the company after the sale of the assets. The pro forma balance sheet of Batterup Ltd. as at December 31, 2022, is as follows: Assets Cash TTA: 54, 83(2), 840 84021) 801) Cost UCG FMV $ 25,000 Accounts receivable (net) 87,500 75,000 Inventory. 222,500 155,000 Land 110,000 450,000 Building 350,000 $ 75,000 950,000 450,000 220,000 100,000 142,500 320,000 $1,387,500 $2,050,000 Equipment Marketable securities Liabilities Current liabilities Future income taxes. Shareholder's Equity Share capital (PUC) Retained earnings Total liabilities and equity Additional Information $ 540,000 50,000 100,000 697,500 $1,387,500 (1) Batterup Ltd. pays corporate tax at an overall combined rate of 13% on active business income sible for the small business deduction, 27% on active business income not eligible for the small is deduction, and an initial 40% rate for investment income, plus the 10% % additional refundable 2 on investment income. The corporation has a GRIP balance of zero. (2) The reserve for doubtful accounts at December 31, 2022 was $15,000. (3) Batterup Ltd. and Three-Strikes Ltd. elected under section 22. (4) The company has a capital dividend account balance of $40,000. You have agreed to do the Wowing for Ms. Bast: (A) Compute the amount available for distribution to the shareholder. (B) Determine the components of the distribution to the shareholder. (C) Compute the taxable capital gain or allowable capital loss on the disposition of Ms. Bast's shares on the winding-up. (Assume the adjusted cost base of Ms. Bast's common shares is $100,000.) (D) Explain the conditions for and advantages of using a section 22 election.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization

Section: Chapter Questions

Problem 62P

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