Sabres Limited, a Canadian- controlled private corporation whose fiscal year end is December 31, provides you with the following data concerning its tax accounts and capital transactions for 2016. The balance in its capital dividend account was nil on January 1, 2017. Mr. Tsakiris, a Canadian resident, is the sole shareholder. Sabres Limited is considering winding up the corporation and wishes to determine the impact of the sale of all its capital assets on its tax surplus accounts. The following capital assets are recorded in the books of account: Assets Cost UCC Estimated Proceeds Estimated selling costs Investments 60,000 - 22,000 500 Land 40,000 - 200,000 10,000 Building 70,000 45,000 125,000 6,000 Equipment 35,000 Nil 8,000 400 Customer Lists (Class 14.1) See Note 1 40,000 16,000 60,000 - Notes (1) The balance in Class 14.1 reflects the purchase of the customer lists in 2007 for $40,000 less the tax write-offs for 2007 to 2016 inclusive (2) In addition to the above assets, there is $35,000 of goodwill which will also be sold Required: You have been asked to determine the effect on the capital dividend account balance immediately after the above transactions
Sabres Limited, a Canadian- controlled private corporation whose fiscal year end is December
31, provides you with the following data concerning its tax accounts and capital transactions for
2016. The balance in its capital dividend account was nil on January 1, 2017. Mr. Tsakiris, a
Canadian resident, is the sole shareholder.
Sabres Limited is considering winding up the corporation and wishes to determine the impact of
the sale of all its capital assets on its tax surplus accounts. The following capital assets are
recorded in the books of account:
Assets Cost UCC Estimated
Proceeds
Estimated
selling costs
Investments 60,000 - 22,000 500
Land 40,000 - 200,000 10,000
Building 70,000 45,000 125,000 6,000
Equipment 35,000 Nil 8,000 400
Customer Lists
(Class 14.1) See
Note 1
40,000 16,000 60,000 -
Notes
(1) The balance in Class 14.1 reflects the purchase of the customer lists in 2007 for $40,000
less the tax write-offs for 2007 to 2016 inclusive
(2) In addition to the above assets, there is $35,000 of
Required: You have been asked to determine the effect on the capital dividend account
balance immediately after the above transactions.
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