(1) Jennifer owns 100% of the common shares of Khalid Co, Ltd. (KCL), and Rodney owns 70%...
Question:
(1) Jennifer owns 100% of the common shares of Khalid Co, Ltd. (KCL), and Rodney owns 70% of the common shares of Yi Co. Ltd. (YCL). The other 30% of the common shares of YCL are owned by KCL. Rodney is married to Jennifer’s granddaughter.
(2) Stephanie and Monica are siblings who each own 50% of the common shares of Christopher Michael Enterprises Ltd. (CMEL). Tricia and Kristen each own 40% of the common shares of David Mfg. Ltd. (DML). The other 20% of the common shares of DML are owned 10% each by Stephanie and Monica. Tricia and Kristen are adult daughters of Stephanie and Monica, respectively. The parents, who have operated their financial advice business for many years, were providing needed outside funding of their daughters' manufacturing business through the parents’ 20% share ownership. The parents take no part in the management of their daughters’ business, since the parents have no expertise related to the business of DML.
(3) Kamen owns all of the common shares of Christopher James Retailing Ltd. (CJRL), and 75% of the common shares of Tomasaburo Investments Ltd. (TIL). The other 25% of TIL common shares are owned by unrelated persons. Also, TIL owns all of the common shares of Karen Mfg. Ltd. (KML). Geoff owns 65% of the common shares of Sherrie Wholesalers Ltd. (SWL). The other 35% of the common shares of SWL are owned by CJRL. Geoff is married to Kamen’s niece. The 35% ownership of CJRL in SWL was to provide SWL with some needed start-up financing.
Indicate whether the corporations in each of the three above situations are associated. Explain in your own words the reasoning behind your conclusion, based on the conditions for association contained in any provision of the legislation that you choose to apply. You are required to use section references from the Income Tax Act in your response.
Canadian Income Taxation planning and decision making
ISBN: 9781259094330
17th edition 2014-2015 version
Authors: Joan Kitunen, William Buckwold