ABC Incorporated is a Canadian-controlled private corporation ("CCPC") with a December 31year-end. The company is a Canadian distributor of large appliances operating from its head office in London, Ontario. Today is December 25, 2021 and Mr. Harris, the sole shareholder and president of the company, has requested a meeting with you to discuss various tax issues related to the company's December 31, 2021 taxation year-end. At the meeting he provided you with the following information.

1. Harris is considering accruing a $200,000 bonus payable to himself in the December 31, 2021 financial statements for ABC Incorporated. 4 marks
2. Harris holds 1,000 common shares of ABC that were issued to him for $10 per share on incorporation of the company. Mr. Harris's daughter, Belinda, the vice-president of the company, plans to purchase 200 of the 1,000 shares from her father on December 31, 2021. She will receive a $100,000 non-interest bearing loan, dated December 31, 2021, from ABC to cover the full purchase price of the shares. Under the loan agreement, Belinda is required to make principal repayments on the loan starting December 31, 2022 of $20,000 per year. Belinda plans to follow this repayment schedule. 12 Marks

Required:

Provide Mr. Harris with a detailed summary of the tax consequences to him, his daughter, and ABC for the above for the year ending December 31, 2021, with calculations where necessary.

Answer rating: 100% (QA)

ANSWER IS Tax Consequences for Mr Harris Accrued Bonus If ABC Incorporated accrues a 200000 bonus payable to Mr Harris in the December 31 2021 financi... View the full answer