Y'shtola owns all the common shares of Night's Blessed Inc. which was incorporated in 2000 to...

 

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Y'shtola owns all the common shares of Night's Blessed Inc. which was incorporated in 2000 to hold her 90% interest in Scions of the Seventh Dawn ("SSD"). SSD distributes computer equipment and games to retail stores in southern Ontario. Both corporations are CCPCs. The following is a balance sheet prepared as at December 31, 2021: Assets Cash $ 4,500 400,000 800,000 Marketable securities (FMV $900,000) Accounts receivable (FMV $750,000) Inventory (FMV $920,000) Prepaid expenses (FMV $1,000) Fixed assets (FMV $210,000) 920,000 1,000 140,000 $2,265,500 Liabilities and Shareholders' Equity Accounts payable and accrued liabilities $ 600,000 Loans payable 400,000 Future income taxes 100,000 Share capital 1,000 Retained earnings 1,164,500 $2,265,500 The relative values of SSD's assets have remained stable over the past three years. The marketable securities comprise SSD's investment portfolio which is not held as part of the corporation's business activities. The estimated value of the goodwill of the business is $150,000. Night's Blessed Inc. was recently offered $2,500,000 for the 90% interest in SSD. However, Y'shtola has talked the prospective purchaser into buying the shares of Night's Blessed Inc. instead of the shares of SSD, as she understands that by selling the shares of Night's Blessed Inc. she is able to receive a tax-free capital gain. Night's sed Inc.'s assets consist solely of term deposits wit an FMV $100,000 in addition to the shares of SSD. Required Y'shtola would like your advice on the following: 1) Are the shares of Night's Blessed Inc. qualified small business corporation ("QSBC") shares? Show your calculations used in arriving at this answer. Y'shtola owns all the common shares of Night's Blessed Inc. which was incorporated in 2000 to hold her 90% interest in Scions of the Seventh Dawn ("SSD"). SSD distributes computer equipment and games to retail stores in southern Ontario. Both corporations are CCPCs. The following is a balance sheet prepared as at December 31, 2021: Assets Cash $ 4,500 400,000 800,000 Marketable securities (FMV $900,000) Accounts receivable (FMV $750,000) Inventory (FMV $920,000) Prepaid expenses (FMV $1,000) Fixed assets (FMV $210,000) 920,000 1,000 140,000 $2,265,500 Liabilities and Shareholders' Equity Accounts payable and accrued liabilities $ 600,000 Loans payable 400,000 Future income taxes 100,000 Share capital 1,000 Retained earnings 1,164,500 $2,265,500 The relative values of SSD's assets have remained stable over the past three years. The marketable securities comprise SSD's investment portfolio which is not held as part of the corporation's business activities. The estimated value of the goodwill of the business is $150,000. Night's Blessed Inc. was recently offered $2,500,000 for the 90% interest in SSD. However, Y'shtola has talked the prospective purchaser into buying the shares of Night's Blessed Inc. instead of the shares of SSD, as she understands that by selling the shares of Night's Blessed Inc. she is able to receive a tax-free capital gain. Night's sed Inc.'s assets consist solely of term deposits wit an FMV $100,000 in addition to the shares of SSD. Required Y'shtola would like your advice on the following: 1) Are the shares of Night's Blessed Inc. qualified small business corporation ("QSBC") shares? Show your calculations used in arriving at this answer.

Answer rating: 100% (QA)

ANSWER Yes the shares of Nights Blessed Inc are qualified small business corporation Q... View the full answer