Question 2

On January 1^st 2022, Diana sold all of her shares in Sigma Inc., a CCPC that she has owned and operated since she started the corporation back in 2016. Her initial investment in the shares were $250,000. The purchaser, Phi Inc., is a public corporation. The closing price for all her shares were $400,000. At the time of sale, Sigma Inc. had a capital dividend account balance of $25,000.

On January 1^st 2022, Sigma Inc.s assets (in terms of fair market value) contained $50,000 of inventory, $40,000 of marketable securities held passively, and $110,000 of property, plant and equipment. The companys assets have remained stable over the past two years.

After selling her shares of the corporation, Diana began operating a convenience store in her hometown in Ontario as a sole proprietorship. For the year 2022, the convenience store prepared their income statement as follows, with all items net of HST:

Revenue:
	Sales Revenue Snacks, Soft Drinks etc.	$390,000
	Sales Revenue Grocery Foods	$60,000
Expenses:
	Cost of Goods Sold	$200,000
	Selling & Administrative Expenses	$160,000
	Depreciation Expense	$40,000
Net Income	(Before HST & Income Tax)	$50,000

Additional Information:

1. In April 2022, the store made a large $30,000 bulk shipment of snack foods to a corporate customer in Nova Scotia. All other revenue was earned in Ontario.
2. All inventory sold during the year were purchased in the year. In addition, the convenience store purchased $18,000 of inventory that have not yet been sold at year-end. Assume 13% HST was charged on all inventory purchases.
3. Capital cost allowance during the year is correctly calculated to be $43,000.
4. The breakdown of selling & administrative expenses are as follows:
   1. $100,000 on salaries paid to employees
   2. $33,000 on repair costs for equipment used in the convenience store
   3. $7,000 on meals & entertainment costs, paid to attract corporate customers.
   4. $20,000 on charitable donations made by the store to various registered charities.
5. On December 31^st 2022, Diana purchased a $21,000 vehicle that she will drive to pick up inventory from suppliers. However, she estimates that she will also drive the vehicle for personal use approximately 25% of the time.

Relevant HST rates are 13% in Ontario and 15% in the Maritime provinces. Assume that the convenience store files HST returns on an annual basis. Also assume that all purchases were made in Ontario.

In 2022, Diana inherited some public company shares from her recently deceased grandfather. The shares were valued at $70,000 on his date of death, and his cost basis in the shares were $45,000. After the inheritance was received, Diana settled the shares into a trust for her younger sister (who is the sole beneficiary). The shares were valued at $82,000 when settled into the trust.

REQUIRED

1. Calculate Dianas taxable income for the year 2022. You do not need to calculate tax payable or tax credits.
2. Calculate the HST payable or receivable for Dianas convenience store in the 2022 taxation year.
3. With respect to Dianas sale of Sigma Inc. shares, was the transaction optimal from a tax perspective? What actions could she have taken prior to the sale in order to reduce her tax payable or increase her after-tax income? (You should be able to list two actions here).