CorpInc is a CCPC that benefits from the small business deduction (SBD) and pays non-eligible dividends only. In its first two years it issued shares to shareholder as follows:

Year 1:

• 1,500 common shares to ShX for $3,000
• 2,000 common shares to ShY for $6,000

Year 2:

• 5,000 preferred shares to ShX for $5,000
• 5,000 preferred shares to ShY for $5,000

In Year 3, a new shareholder, ShZ, purchased all of ShX's common shares for $8,000 and all of ShX's preferred shares for $4,000.

In Year 4, CorpInc redeemed all preferred shares at $4 per share.

What is the effect of the Year 4 redemption on ShZ's net income?

Answer rating: 100% (QA)

To determine the effect of the Year 4 redemption on ShZs net income we need to calculate the gai... View the full answer