On September 1, 20X6 Perfect Ltd., a steel recycling company, purchased 90% of the issued voting shares
Question:
Loser Ltd. incurred an additional loss of $75,000 in carrying on the sportswear distribution business for the period January 1, 20X6 through August 31, 20X6. No further capital losses were incurred.
On September 1, 20X6, Loser Ltd.€™s assets had the following values:
* Perfect Ltd. planned to sell the marketable securities as soon as possible after purchasing Loser Ltd.
The amalgamation of Loser Ltd. and Perfect Ltd. took place on September 1, 20X6. The corporation formed on amalgamation chose December 31 as its year end. Income for 20X6 and 20X7 was as follows:
* Income for the period September 1 through December 31, 20X6
Required:
1. Using the assumption that Loser Ltd. does NOT use any elections to minimize the unused net capital loss balance, calculate the amount of non-capital and net capital losses that would remain after the acquisition of the shares by Perfect Ltd. on September 1, 20X6.
2. If Loser Ltd. makes the election(s) necessary to utilize those losses which would expire at the acquisition of control, indicate the asset(s) on which the election should be made and the amount that should be elected.
3. Indicate the September 1, 20X6 adjusted cost base (ACB) and undepreciated capital cost (UCC), where applicable, for each of the assets listed, assuming the election(s) in part 2 above is made.
4. What conditions must be met in order to deduct the non-capital loss balance at September 1, 20X6 in a future taxation year? Are these conditions are met? Indicate the maximum amount of non-capital loss carry forward that can be used at December 31, 20X6 and December 31, 20X7 respectively. Give a brief explanation for your answer.
5. Assume the management of Perfect Ltd. decided that the sportswear distribution business would not be continued after September 1, 20X6. Discuss the tax implications for Loser Ltd.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Canadian Income Taxation Planning And Decision Making
ISBN: 9781259094330
17th Edition 2014-2015 Version
Authors: Joan Kitunen, William Buckwold