Alisia Tait actively invests in small venture capital companies. Because of the high risk involved with these companies, she attempts to maintain a diversified group of holdings by periodically selling individual companies and reinvesting the proceeds in new companies. For the purposes of the deferral provisions for investments in small business corporations, all of Alisia’s transactions are qualifying dispositions. Other than the shares identified as Royal Bank shares below, all of the shares acquired are shares of small business corporations.

During the 2018 taxation year, she has the following transactions:

Hottone Ltd. In March 2018, the shares of this Company are sold for $6,200,000. The adjusted cost base of these shares was $4,800,000. The proceeds are invested as follows:

Funtrax Inc. Common Shares $1,200,000

Royal Bank Common Shares (A Public Company) 1,800,000

Plexzoomlax Inc. Common Shares 3,200,000

Zenplex Inc. During July 2018, the shares of this Company are sold for $3,400,000. The adjusted cost base of these shares was $2,700,000. All of the proceeds are invested in shares of Zertex Ltd. The acquisition involves paying $800,000 for the Company’s preferred shares and $2,600,000 for the Company’s common shares.

Damtechno Inc. During October 2018, the shares of this Company are sold for $4,600,000. The adjusted cost base of these shares was $4,200,000. All of the proceeds, plus an additional $200,000 in cash were used to acquire common shares of Mediadox Ltd. For $4,800,000.

Required: 

Determine the tax consequences for Ms. Tait of the three sales of shares and the adjusted cost base of each of her new investments, assuming she does not invest in any other eligible small business corporations during the 2018 taxation year.

Answer rating: 100% (QA)

Hottone Ltd Sale The sale of the Hottone shares will result in a c... View the full answer