Bendana Corporation is a Canadian company that specializes in the construction of sports facilities. Although its head office is in Edmonton, final approval of all major construction projects is given by the executive officers of Bendana’s parent company, Holdings Limited.
Holdings Limited is incorporated in the United Kingdom, and all of its shares are owned by British residents. Holdings owns 100% of Bendana’s shares. The president of Bendana has called for a meeting next week to discuss the company’s expansion to the United States. The executives are considering two basic options for the American organization. One is to open an administrative office in Chicago. The office would bid on all American contracts and service those contracts by hiring American staff and leasing all equipment from American companies. Alternatively, Bendana has an opportunity to acquire the shares of a small construction company that already has an experienced staff and good basic equipment. The president is hopeful that the meeting will settle the issue so that a plan of action can be set in motion.
Whichever option is chosen, Carl Peters, a senior vice-president, will move to Chicago to head the American operation. Peters intends to leave Edmonton in October 20X0 and rent an apartment in Chicago. His wife and two children will follow in late December when the school break begins. A third child, Carla, will remain in Edmonton to complete her remaining two years at university. Carla will reside at their house near the university until she graduates, at which time the house will be put up for sale. The house is owned by Mrs. Peters. Carla intends to have two boarders staying at the house, who will pay rent monthly to Mrs. Peters.
Peters holds 10% of the shares of a Canadian private corporation. The majority shareholder of that corporation is his brother Jason. The company pays regular quarterly dividends. Peters has agreed to sell the shares to Jason early in 20X1.The sale will result in a small profit for Peter. Jason will pay 40% of the purchase price in cash and the balance over two years, with interest at 7%.
Bendana has recently been awarded a contract to build a soccer stadium in Regina. The company has asked the British parent company to send its soccer field expert to Regina to consult on the project. Feiffer Thompson will arrive in Regina on November 1, 20X0, and remain there until August 20X1, by which time the project will be substantially finished. She will be paid a salary by Bendana while she is in Canada. Feiffer’s husband will remain in the United Kingdom to manage her large investment portfolio, which was left to her by her late father, the Earl of Feiffdom.
Sally Watkins, Bendana’s financial expert, works out of the company’s Toronto office.
Watkins left last month for the Sudan, where she will arrange the financing for a large project of the Sudanese government. Basically, Watkins is on loan to that government. She is excited about taking a break from her normal duties and pleased to hear that the Sudan does not levy any income tax. She has kept her apartment in Toronto, as she plans to be away only until November 20X1.While she is away, her sister will occupy her apartment.
Required:
Describe briefly how each of the above activities will be affected by Canadian tax laws.