1) Salt Ltd. and Pepper Ltd. are associated corporations [ITA 256(1)(b)]. They are controlled by the same group, Sally and her friend. ITA 256(1.2) clarifies that a shareholder need own only one share to be included in the group; and that a corporation may be controlled by a person or group of persons notwithstanding that the corporation is also controlled by another person or group of persons.
2) B Ltd. and X Ltd. are associated corporations [ITA 256(1)(c)]. Bob controls B Ltd. and he is related to his father, who controls X Ltd. Although Bob does not own any shares of X Ltd. directly, he is deemed to own 28% of X Ltd. (70% x 40%) by the look-through rules in 256(1.2)(d). Thus, the 25% cross ownership requirement is met.
3) Since neither corporation is controlled by one person, the only possible provision under which A Ltd. and B Ltd. could be associated is 256(1)(e). Both corporations are owned by a related group and Glen owns 25% of the issued shares of a class of both corporations. But the two corporations are not associated. To be associated each of the members of each related group must be related to all of the members of the other related group. Since Glen’s son and his brother (nephew and uncle) are not related, the two corporations are not associated.
4) W Ltd. and S Ltd. are not associated. For the corporations to be associated, Wayne would have to own at least 25% of the issued shares of any class of S Ltd. (other than a specified class) or Stephen would have to own 25% of the issued shares of any class (other than a specified class) of W Ltd. The preferred shares of S Ltd. are shares of a specified class [ITA 256(1.1)], therefore, the 25% cross ownership test is not met.
In general terms, shares of a specified class are non-voting, preferred shares that have a fixed dividend rate and redemption amount. The dividend rate cannot exceed the prescribed interest rate at the issue date of the shares and the redemption amount cannot exceed the issue amount.