Mr Anders is 55 years of age. He has been a businessman for most of his working

Fantastic news! We've Found the answer you've been seeking!

Question:

Mr Anders is 55 years of age. He has been a businessman for most of his working life. He isinvolved in two corporation: Metal Box Ltd. (MBL) which has been in operation for 28 years,and Green Pine Ltd. (GPL) which has been in operation for about five years.Metal Box Ltd.Metal Box Ltd. (MBL) is wholly owned by Mr Anders. The company manufactures officefurniture for special orders. It has an excellent reputation and has been very profitable. Ina typical year the company reduces its active business income to about $500,000 byaccruing large amounts as bonuses.
Because it has been very profitable, MBL has built up a large investment portfolio that earns both interest and dividend income. Each year, the company pays Mr Andersdividends and uses the dividend refund to reduce its income tax liability.Four months ago, MBL purchased 9% of the shares of an arm's-length, Canadian-controlled private corporation for $100,000. While it held the shares, MBL received$25,000 of dividends from the corporation. Recently, MBL disposed of these shares for$50,000.
At the end of MBL's 20X0 fiscal year, bonuses were declared for Mr. Anders anddeserving employees in recognition of their efforts in the business; however, Mr Anders'
bonus has not yet been paid. It is now the first month of the 20X2 fiscal year.On behalf of MBL, Mr Anders has investigated a company that is available foracquisition. The company manufactures stereo speakers; Mr. Anders builds stereospeakers as a hobby. The stereo speaker company has non-capital loss carry-forwards,investment tax credit carry-forwards and net capital loss carry-forwards from each of thelast three years. This company has been claiming maximum capital cost (CCA) andscientific research and experimental development (SR&ED) expenses for the sameperiod, and it has inventory that costs much less than its fair market value. The fairmarket value of its fixed assets is lower than the undepreciated capital cost of these assets Green Pine Ltd. (GPL) is owned 26% by Mr Anders, 37% by his son, and 37% by hisdaughter; both children are active in the business. GPL operates a nursery business.
Because it takes time for most of its varieties of trees, shrubs and flowers to develop, thecompany has had losses over the last five years and is expected to have losses for the nextthree years. Losses are decreasing each year, and it is fully expected that the company willdo quite well since it is building up a good reputation for its products.GPL purchased a large parcel of land when it first commenced operations - far more thanit presently requires. The market value is much greater than the costs, but GPL is reluctantto sell any part of it because it is a very good land that could all be used in the futureoperations of the company.In addition, GPL has a big warehouse which is not needed now but probably will be in thefuture. It has taken CCA on the building, and there is a large unrealized capital gain. The son and the daughter have different cash needs due to their different lifestyles. Theirequal remuneration package has created friction in an otherwise harmonious relationshipbecause the son resents paying taxes on income larger than his cash needs.
GPL has a substantial loan from the bank, the interest on which accounts for a largeportion of its losses.GPL is also a partner in a partnership. It reports its income from this partnership, which hasa December 31 year-end, as it receives its draws from the partnership. It then claims itsproportionate share of the partnership's CCA against its income. As a result of the drawsit has received from the partnership, the adjusted cost base of its partnership interest has
become negative.Mr Anders has come to you for advice about the present situation in MBL and GPL. He asksyou to write him a report informing him about the tax implications of the currentcircumstances and advising him on tax planning matters related to those circumstances, with aview to minimizing tax for the three members of the Anders family and the companies.

Required: Prepare the report