Question 3 (40 marks) Kowloon Express Airlines Limited (KEAL) carried on the passenger carriage in Hong...

  

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Question 3 (40 marks) Kowloon Express Airlines Limited ("KEAL") carried on the passenger carriage in Hong Kong. In recent years, it incurred substantial losses due to the loss of its investment in Brent Crude oil futures. Silvercord Airlines Limited (SAL), its competitor, proposes to acquire all the issued shares in KEAL and inject additional working into KEAL to finance the expansion of its carriage business into West Europe. Required (a) Explain the anti-avoidance provision in the Inland Revenue Ordinance to the transfer of shares in a loss company. (20 marks) (b) Discuss the tax implication in respect of the above proposal. (20 marks) Question 3 (40 marks) Kowloon Express Airlines Limited ("KEAL") carried on the passenger carriage in Hong Kong. In recent years, it incurred substantial losses due to the loss of its investment in Brent Crude oil futures. Silvercord Airlines Limited (SAL), its competitor, proposes to acquire all the issued shares in KEAL and inject additional working into KEAL to finance the expansion of its carriage business into West Europe. Required (a) Explain the anti-avoidance provision in the Inland Revenue Ordinance to the transfer of shares in a loss company. (20 marks) (b) Discuss the tax implication in respect of the above proposal. (20 marks)