On September 1, 20X6 Perfect Ltd., a steel recycling company, purchased 90% of the issued voting shares of Loser Ltd., a distributor of sportswear, from an arm€™s length person. Loser Ltd. had incurred the following losses in prior years:

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.

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Year ended Dec 31X4 Dec 31X Non-capital losses (business) Net capital losses S40,000 S60,000 5,000 15,000 Cost S50,000 33,000 90,000 120,000 85,000 UCC N/A N/A N/A $83,000 34,000 Fair Market Value S300,000 45,000 200,000 180,000 20,000 Marketable securities* Inventorv an Building Equipment Income from Steel Income from Total $530,000 460,000 recycling Sportswear distribution 20X6 $500,000 S30,000 20X7 400.000 60,000