Ruth Delaney owns all of the common shares of Delaney Fast Food Services Ltd. In addition, she has several investments that generate reasonable annual cash returns, as follows:
Income
Corporate bonds €¦€¦€¦€¦€¦€¦€¦€¦€¦€¦.$ 5,000
Land and building €¦€¦€¦€¦€¦€¦€¦€¦€¦€¦10,000
Shares of public corporations €¦€¦€¦€¦8,000
The property has the following relevant values:

Delaney has expressed an interest in using a corporation to hold her investments and has sought your advice. She has suggested that the investments could be transferred to
Delaney Fast Food Services, which operates three restaurants.
Delaney€™s marginal tax rate is 45% (federal and provincial) on regular income, 28% on eligible dividends and 35% on non-eligible dividends. The provincial corporate tax rate in her province is 10%.To date she has not used any of her lifetime capital gain deduction.
Required:
1. Advise Delaney on the benefits, if any, of incorporating her investment income. Show sample calculations. Your answer should be specific with respect to (a) interest and rents, (b) capital gains, and (c) dividends.
2. Discuss the implications of Delaney€™s suggestion regarding transferring the investments to her active business corporation.
3. Assuming that she decides to incorporate the investments, outline a plan that will enable the investments to be transferred to the corporation without tax consequences.

Transcribed Image Text:

Fair market Cost UC Value $30,000 S-50,000 70,000 50,000 75,000 0105,000 40,000 UcC Land Building 95,000 Shares Corporate bonds 42,000