CHAPTER 15:

General Rate Income Pool (GRIP) is comprised of:

CCPC balance at the end of the preceding year (can be nil or negative)
After-tax earnings on which the Corporation has not benefited from the Small Business Deduction (SBD) and not
considered aggregate investment income eligible for refundable tax (i.e. high rate business income) and
Eligible dividends received from other corporations
* Designation of an eligible dividend in excess of GRIP balance results in a 20% tax on the excessive eligible div.
Dividends in Kind: Corp. is considered to have paid & S/E are considered to have received dividend equal to FMV of
distributed assets (same effect as if corp. had sold the assets and paid a cash dividend)
Deemed Dividend:
Capital Dividend
PUC Relevant when Corp. deals with its own shares
Redemption Amount :
Deemed Dividend 84(3)
Less: Paid Up Capital (PUC)
Less: Capital Dividend Elected
Deemed Dividend 84(3)
Deemed Taxable Dividend
Proceeds of disposition:
Less: Deemed Dividend
Adjusted Proceeds
Less: Adjusted Cost Base (ACB)
Capital Gain/Loss

Capital Dividends can be paid out tax free but MUST

file a joint election by corp. and recipient of dividend
and applies ONLY to private corps.
Accumulates 5 components:
- Untaxed portion of net capital gains plus
- Untaxed portion of net gains on disposition of ECP plus
NOTE: Any distribution made by Corp. to S/E in excess of
- Net life insurance proceeds arising on death plus
PUC and not elected as capital dividend or declared as
- Capital dividends received from other corps. Less
taxable dividend is deemed to be taxable dividend
- Capital dividends paid out to S/E
Corporate Wind-ups: 1. Assets could be liquidated on open market, liabilities paid off and balance distributed to S/E
2. Alternatively assets and liabilities could be distributed directly to S/E
BUT either way there will be deemed dividend and capital gain/losses on disposition of assets
Steps required on Wind up:
Step # 1: Disposition - determine income, loss & net taxable capital gains for each asset
of all assets at FMV
- calculate capital dividend account component on any capital asset component included above
Step # 2: Calculate
- determine taxable income resulting from disposition
the resultant tax liab. - separate active income and investment income
Step # 3: Determine - Accumulate proceeds on sale of assets
funds available after - Reduce total by taxes payable as determined under Step # 2 and liabilities of company
payment of tax &
- Increase total by available RDTOH available (check against deemed dividends)
liability
- Result is funds available to distribute out of corporation
Step # 4:Distribution - Total funds available less PUC = Deemed Dividend less capital dividend (election required) =
of net funds
deemed taxable dividend (subject to gross-up and tax credit at S/E)
Step # 5: Determine - 1.25 (or 1.45) * deemed taxable dividend plus taxable gain on disposition of shares less any
S/E tax liability
QSBC capital gain deduction that may be applicable/available = taxable income for S/E
NOTE: Dividend Tax Credit: Based on tax rate paid by corporation on active business income
Proceeds
ABI
AII
CDA
RDTOH
Opening Balance
Cash
A/R
Inventory
Marketable Securities
Land
Building
Equipment
Goodwill *
Current Liabilities
Bonus, if any
Taxes Payable
RDTOH (AII x 26.6667%)
Funds Avail for Distrib
If greater than the limit for ABI at the lower tax rate (ex. 20%) then advisable to pay out as bonus to S/E

* Goodwill: CEC Balance

Less: Proceeds x 3/4
Negative Balance
Add: Prev CECA (3/4xcost - CEC bal)

$XXX 15-5 NOTES:

($XXX) Sellers Minimum: P 0.46 (1/2 [P ACB of Shares])
($XXX) Share Price (J)
= Net Proceeds
$XXX Net Proceeds = Funds Avail. For Distribution + Bonus
Bal** minus [((Taxable Div. *1.25 +TCG+ Bonus ) * 0.46)
*** Income Inclusion: 2/3 x Bal + Recap (= Prev CECA)
minus Div. Tax Credit]
Sellers Min Share Price: A more tax effective plan would be to have a tax-free dividend paid from CDA balance as part
of proceeds of disposition and therefore Tax Free Dividend Amt + P 0.46 [1/2 (P ACB of shares)] = Net Proceeds
Funds available for distribution
Proceeds on winding up
Less: PUC
Less: deemed dividend
Deemed Dividend on winding up
Proceeds of disposition
Less: Cap dividend elected
Cost
Deemed taxable dividend (sufficient to clear RDTOH)
Cap Gain
Net cash retained = Funds distributed + Bonus (46% x incremental Inc* LESS div tax credit which is gross-up)
*Deemed tax dividend + gross-up + bonus + TCT (nil)
Purchasers Maximum Share Price: Comparative Analysis of Purchasing Asset Vs. Purchasing Share
Asset Purchase (PV of CCA Tax Shield):
Purchase of Shares (PV of CCA Tax Shield):
c x d x t x 1 + r/2 = (E) NOTE: CCA CLASS 1-NRB: 6% c x d x t = (F) NOTE: CCA CLASS 1: 4% (Most Buildings)
d+r
1+r
(Non-residential building)
d+r
Where: c= capital cost ( FMV of asset = Purchase price)
Where: c = UCC balance of previous corporation
d= CCA rate t = tax rate r= after tax discount rate Incremental tax saved on same asset purchase = (E) (F)
PV CCA Tax Shield on previous unrecorded goodwill:
c x d x t = (G) Where: d = CCA rate of 7%
d+r
c = capital cost ( FMV of asset x 3/4)
NOTE: Assets are deemed purchased at FMV and
there is HALF YEAR RULE unlike purchase of shares

Inventory: Purchaser assumes income (i.e. FMV Actual

CHAPTER 16:
Section 22: Purchaser must include in income the difference between the face amount and the amounts paid
(FMV < Cost; vendor includes bus. loss & FMV > Cost; purchaser includes bus. income)
(FMV < Amt Paid; purchaser includes bus. loss & FMV > Amt Paid; purchaser includes bus. income)
- Purchaser can deduct a reasonable reserve & any bad debts for doubtful debts on A/R purchased
- Vendor (regardless of S.22) must add reserve to income; S.22 causes it to be a business loss instead of capital loss
- Joint Election, to be eligible must dispose (substantially) all assets to purchaser who carries on the business
NO Section 22: A/R considered capital property & any loss on sale is a capital loss; denied if sold to affiliated corp.
(FMV < Cost; vendor includes capital loss & FMV > Cost; purchaser includes capital gain)
(FMV < Amt Paid; purchaser includes capital loss & FMV > Amt Paid; purchaser includes capital gain)
- Purchaser NOT eligible to claim a reserve or AFDA on acquired A/R since previously not included
Without Section 85: Transfer of property to corp. will give rise to a disposition with proceed = FMV resulting in Inc. & CG
NO Benefit to Transferring under S.85: Property with terminal loss and capital loss because no income to defer
Recommended: Sell the property at FMV and take back debt as consideration for the sale
NOTE: Transferring property with terminal loss & capital loss to affiliated corp. is denied
If transferor corp., trust or partnership: Terminal loss kept in UCC class of transferor until transferee sells to third party
Capital loss retained by transferor & recognized when sold to third party
If transferor individual: Terminal loss kept in UCC class of transferor until transferee sells to third party (same as corp.)
Capital loss added to the ACB of the property held by the transferee
Affiliated: Corporation affiliated with individual transferor if the corp. controlled by individual or individuals spouse
Corp. Affiliated with three types of persons: 1) person by whom the corp. is controlled
2) each member of affiliated group by which corp. is controlled
3) spouse of a person in either of the first two categories
----------------------------------------------------------------------------------------------------------------------------------------------------------------Section 85 Rollover: -Tax-free rollover of property to a corporation but MUST accept shares as part of the consideration
- Taxpayer (person, corp., trust and a partnership) can elect to rollover eligible property to taxable CND corp.
-Transferor will be S/E of the corp. after the transfer & same economic position as before transfer
- ACB of the shares should be equal to the ACB of the property transferred
- Cost of property transferred would be equal to the Elected Amount, NO half year rule & remains in same class
If non-arms length; restricts step-up of original capital cost of depreciable property to the taxable capital gain
- Joint Election between transferor and transferee that must be filed with earlier tax return of either transferor/transferee

Eligible Capital Property for S.85 rollover:

Capital property (both depreciable & non-depreciable)
other than real property owned by a non resident
Real property: Immovable property (ex. Building,
land)
Canadian or Foreign resource property
Inventory (other than real property)
Eligible Capital Property (ex. Goodwill, customer
lists)
- CEC = 0 then nominal election of $1Inc. Incl. = $0.50
- Nominal election of $1 cannot be received through BOOT
- If non-arms length; purchaser only claim CECA on $0.50
- Prepaid NOT eligible property because not capital property
- A/R: if loss should use S.22 to avoid the loss being CL
Situation # 1: Property transferred at elected price equal to its
tax value (i.e. ACB or UCC) with C/S as only consideration
where FMV of C/S must equal FMV of transferred property
Situation # 2: Elected transfer price other than the tax value
but elected amt. between cost & FMV triggering CG or inc.

Situation # 3:Accepting non-share consideration (i.e.

BOOT) as part of the consideration along with shares
BOOT: CANNOT exceed the elected amount
If BOOT > Elected Amount: Elected amount
automatically bumped up by excess BOOT
If BOOT = Elected Amount: PUC should be NIL
If BOOT < Elected Amount: PUC reduction
Elected transfer price*:
Less: BOOT**
ACB of the new shares (A):
*Allocation of elected Price in following order:
1) BOOT up to FMV of assets
2) P/S up to FMV
3) C/S up to FMV
**BOOT: non-share consideration

QSBC: CCPC in which all or substantially all (90%) of the FMV of assets (incl. un recorded goodwill) were
a) Used principally in an active business carried on (more than 50%) in Canada by the corp. or related corp.
b) Shares or debt of a connected small business corporation (SBC) (c) Any combination of (a) & (b)
Situation # 4i: Property transferred in is less
- result in benefit/income inclusion to the transferor
than the consideration received by the transferor
- Common reason: BOOT > FMV
(FMV in < FMV out)
Elected transfer price must equal to the FMV of asset
The cost of property transferred. in cannot exceed FMV of asset
Situation # 4ii: Property transferred in is greater
than the consideration received by the transferor
(FMV in > FMV out)

BOOT Less: FMV of property transferred in= income/benefit inclusion

- elected amount is increased by the benefit/the amount of gift
which will cause income on the transfer
(Elected amount + Benefit) ACB of asset = Capital Gain
- cost of property transferred in is increased by benefit (i.e. new
elected amount) because ACB = Elected Amount (incl. Benefit)
- BUT cost of shares received as consideration for transfer NOT
Increased because ACB = Elected Amount BOOT but elected
price used here does NOT include the benefit
additionally FMV of C/S held by other S/E (related person) will
increase by the benefit without offsetting increase in ACB of
shares of other S/E (excludes corp. owned 100% by transferor)

This is similar to the benefit rule where there is

an arms length transfer between related
individuals. In this case, a non-arms length
rule evokes a one-sided adjustment and as a
result the capital gains taxed twice
a) Assets that shouldnt be transferred to corp:
Shares b/c cap loss would be denied (considered superficial loss); shares should be held personally so cap loss
can be realized on disposition to third party
Land inventory cant be transferred on tax-free basis (transfer at FMV) = income incl (therefore hold personally)
b) Assets that should be transferred but cant or shouldnt under subsection 85(1) election:
Cash or Prepaids not eligible since not cap property
A/R should be elected under sec22 corp can take reserve and write off bad debt
Inventory/Equipment with terminal loss losses denied and stay with transferor (individual can claim CCA on
denied loss and will be able to deduct remaining loss when company sells property to third party)
c)
FMV of BOOT (D)
Share Consideration (E)
Tax Value
Inventory
Land
Building
Acura 90
Goodwill

Cost
ACB
UCC
UCC
Nil

FMV

Elected
Amount

Assumed
Debt

New Debt

Preferred
Shared

(F)

(D)BOOT can only be up to elected price of assets less the CEC nominal election
(E) Share consideration will cover remaining FMV of asset
(F) Land Elected Price = Tax Value + (Capital Loss Available x 2)

Common
Shares

Income

(G) = (D) + (E); if (G) < (D) + (E) then Situation #4i treatment; if (G) > (D) + (E) then Situation #4ii treatment
d) Elected amount LESS Boot = ACB of shares
Increase in LSC of all shares LESS (Elected amt less Boot) = PUC Reduction PUC after reduction
e) FMV in > FMV out excess amt is considered benefit spouse
Elected amt increased by benefit to trigger income on transfer (only taxable) redo part (d) with same boot
Deemed dividend = elected amt + benefit LESS PUC
Cap gain/loss = elected amt + benefit LESS deemed dividend = POD LESS ACB
f) Max debt* that can be received without realizing any income under s86 is amt of PUC of old share
Reduced PUC = LSC increase for new shares LESS (PUC of old shares less Boot*) = PUC reduction
ACB of new shares: ACB of old shares LESS FMV of Boot
Deemed dividends = FMV of Boot LESS Reduced PUC = Proceeds on redemption LESS PUC of old shares
Cap Gain/Loss = Boot + ACB of new/all shares LESS deemed dividends = POD LESS ACB of old shares
Section 84.1 (Dividend Stripping): 4 main criteria to apply
PUC Reduction:
* Shares being transferred here instead of property
Increase in LSC of purchaser corp.
1. Disposition must be made by a taxpayer resident in
Less:
Canada other than a corporation
Greater of PUC & ACB of transferred shares 2. The subject shares (i.e. shares being transferred) must
Less: FMV of BOOT
be shares of a corp. resident in CND and must be capital
Excess, if any:
property to the taxpayer
Total PUC reduction of all shares
3. Disposition of shares are to a corp. which the taxpayer
Deemed Dividend Calculation:
does not deal at arms length (i.e. non-arms length) AND Sum of:
4. The subject corp.(i.e. transferor) must be connected (H)
- Increase in LSC of purchaser corp.
with the purchaser after the disposition
- FMV of BOOT
Connected Corporation (H): REFER TO CHP. 15 NOTES
x
Less sum of 1+2
* If all 4 criteria are met then this section would reclassify a
1) Greater of PUC & ACB of transferred shares capital gain into a deemed dividend which is taxed differently
2) PUC Reduction
Equals Deemed Dividend
NOTE: If all 4 criteria are met BUT the FMV of BOOT is not
greater than the greater of PUC & ACB of transferred shares NOTE: ACB of new shares = Elected Amt - BOOT
then Section 84.1 will NOT apply in triggering a deemed
dividend BUT it would still be in effect S 84.1 PUC
NOTE: S.85 PUC reduction formula will NOT apply at
the same time as the S.84.1 PUC reduction formula
reduction formula would apply and NOT S.85 formula
Section 55(2) (Capital Gains Stripping which is opposite of Dividend Stripping by Section 84.1:
Prevent a S/E from converting a capital gain on the disposition of shares into a intercompany tax-free
dividend
Will apply to ANY dividend received by a corp. as part of a series of transaction that resulted in a disposition
of ANY property to an unrelated person
Also applies where unrelated person gained significant increase in ownership interest in the corp. receiving
div.
Key Signals: dividend has occurred / dividend part of series of transaction / main purpose was to effect a significant
reduction in the potential capital gain / dividend is followed by the disposition of shares to arms length party
Chapter 17:
Section 85.1: Exchange shares of one corp. for shares of another; tax deferred (no election required)
Used in a business combination or take-over; S/E of one corp. exchanges his/her share of purchasing corp.
Conditions: - transferred shares of the vendor to the purchaser must be capital property (NOT inventory)
- purchaser MUST be Canadian corp. and dealing with vendor at arms length immediately prior to exchange
- ONLY consideration given by the purchaser for exchanged shares; MUST be previously unissued shares
- after exchange; vendor along with non-arms length persons, MUST not control or own > 50% of FMV of purchaser
- no S.85 filed & vendor cannot have realized any portion of potential CG of exchanged shares through other provision
Result: Vendor disposed of shares at ACB and reacquired the purchaser shares for the same amount
PUC of shares acquired is limited to the PUC of the shares given up
NOTE: S.85 (1) election can be made as an alternative and collect boot up to elected amt. (i.e. PUC) but this
alternative may not be feasible when exchange involves widely disposed share holding held by many diverse S/E
Section 86 (Internal Reorganization): Involves issuance
1) Issuance of new shares:
of new shares and redemption or cancellation of old shares
I) PUC (new shares) = PUC* (old shares) - BOOT
Conditions: May involve non-share consideration (BOOT)
II) ACB (new shares) = ACB* (old shares) BOOT
- Redemption of shares with requirement of new shares
*Treat PUC & ACB as elected amounts under S.85
- shares are capital property to the S/E
2) Redemption of old shares:

- ALL shares of particular class owned by S/E are exchanged I) 84 (3) Deemed Div.:
- property received by S/E on exchange includes shares
Proceed = BOOT + PUC (new shares)
Result: Deferral of any accrued gains on shares held
Proceed PUC (old shares) = Deemed Dividend
before reorganization as long as:
II)Capital Gain
Boot FMV + PUC of new shares PUC of old shares
Adj. Proceed = FMV of Boot + ACB (new shares)
(A): Cap Loss denied and added to ANY shares owned
Adj. Proceed Deem Div. ACB (old shares) = CG/ CL (A)
by that person immediately after the transaction
----------------------------------------------------------------------------- ------------------------------------------------------------------------------Benefit= FMV (old shares) in excess of (BOOT + FMV
3i) Issuance of new shares:
of new shares)
a) PUC (new shares) = PUC* (old shares) - BOOT
b) ACB (new shares) = ACB* (old shares) BOOT - GIFT
*Treat PUC & ACB as elected amounts under S.85
NOTE: Similar to S.85, the capital gains would be
3ii) Redemption of old shares:
double taxed because there would be an increase in
a) 84 (3) Deemed Div.:
FMV of the C/S held by the other S/E without an
Proceed = BOOT + PUC (new shares)
increase in its ACB resulting in the capitals gains
Proceed PUC (old shares) = Deemed Dividend
being taxed again
b) Capital Gain
Adj. Proceeds: Lesser of: FMV of boot + gift and
Benefit rule to reduce effect of deferral where reorg is
FMV of old shares
Adj. Proceeds ACB (old shares) = capital gain/loss(B)
used to confer benefit on related person
(B): Any capital loss created will be NIL
Section 87
- statutory amalgamation conditions: predecessor corps must be taxable cdn corps, all of the property/liabilities of
predecessor corps must belong to new corps, all shareholders of predecessor corps must receive shares of new corp,
transfer of property cannot occur as result of normal purchase of such property/distribution on winding up a corp
- rollover
- transfer of capital property from predecessor to successor permit deferral of accrued CG at corp level
- exchange of shares of predecessor comp by shareholders for shares of successor corp permit deferral of CG at
shareholder level
Major Rollover provisions of s87
Item
Rollover effect
Assets and Reserves
Inventory
At cost amt
Depreciable cap property At UCC
Non-depreciable cap
At ACB
property
At 4/3 of CEC
Eligible cap property
balance
Reserves
Flowed thru
Availability of a bump on vertical amalgamation when parent and subs amalgamate vertical amalgamation new
corp formed can increase its cost on certain cap property acquired by it on the amalgamation
- Increase permitted without triggering any unrealized gain on property
- Places new corp in position to recover more cost on tax-free basis on ultimate sale of assets
Winding up Sub s88
(1) - transfer of property to parent sub deemed to have disposed of assets for proceeds = :
(a) nil, in case of resource property and (b) cost amount to sub, in case of any other property
- availability of bump can be allocated to any non depreciable cap. Property owned by sub continuously from time when
parent acquired control of sub to date of winding up bump or step up in ACB calculated as:
Parents ACB of subs shares MINUS sum of (a) cost amount of subs assets + cash net of liabilities and certain reserved
(b) dividends (taxable and capital) paid to parent on its shares of the sub
- sub wound up into parent deductibility by parent of subs non-cap losses and net cap losses:
(a) losses that havent been deducted by sub are first deductible by parent in tax yr following tax yr winding up began
(b) losses only deductible by parent to extent deductible to sub in any tax yr following that in which winding up began
(2) disposition of shares by parent on winding up parent deemed to dispose subs shares for proceeds = to greater of:
(a) lesser of: (i) PUC of subs shares and (ii) aggregate of cost amts of assets of sub received, net of any liabilities and
certain tax reserves assumed and
(b) ACB of shares of sub held b parent immediately before winding up

Chapter 18:
- required to provide info return to each partner as follows:
(a) where all partners are corps 5 months from end of fiscal period
(b) where all partners are individs Mar31 in calendar yr following yr in which fiscal period of partnership ended
(c) every other case earlier of the two above options
Partnership Inc:
Basic Fed Tax
Share of other items:
Less: Gain on sale
Payable
Cap Dividends
Capital Dividends
Nature of Inc:
Donations
CCA
TCG
Untaxed fraction of cap gain
Add: Depreciation
Dividends
Taxable Inc
Charitable Donations
Less: Donations credit
Business Inc
= 15%x200 + .46(* - 200)
Meals and Entertainment (1/2)
Div B Inc
*lesser of actual donations & .75 x Div B
TCG (1/2 of gain above)
Less: Div Tax Credit (= div gross up)
+ Gross-up div
Memberships
cap
loss
50% meals and ent.
Taxable Inc
Summary of Partners ACB in a Partnership
Add
Deduct
Income
Add
Deduct
Add
Deduct
Add
Deduct
Add
Add
Deduct
Add

Capital contributions
Capital withdrawals
Partners share of partnerships inc
Partners share of partnerships losses
Partners contribution to finance partnership losses
Partners drawings from partnership inc
Untaxed portion of any cap gain (TCG is included in inc that has been added above to ACB)
Untaxed portion of any cap losses
Partners share of cap dividends (these dividends are in the partnership, not in the inc, so they need to
increase ACB withdrawal wont cause negative ACB since these funds should be received tax-free)
Partners share of life ins proceeds received by partnership (these proceeds are in partnership, but not in
inc, need to increase ACB withdrawal wont cause negative ACB
Partners share of charitable donations or political contributions (since partnerships dont pay tax, its the
partners who use the donations recognizes these undeductible funds have been paid out of partnership
Partners share of any ITC earned by partnership

Proceeds of disposition
Less: ACB
Cap Gain
TCG add to taxable income!

Income of trust: Income from dividends amount paid to beneficiary = net dividend income + gross up (45%) = TI
Income of beneficiary: Income (designated) + gross up (45%) = TI
Attribution A/B x C where A = income of designated person from trust, B = income of all designated persons from
trust, C = income from loaned property
TCG attributed to beneficiary is lesser of (1) amt designated by trust & (2) net TCG for yr from property disposition by trust
Computation of Tax
Fiscal yrs
o Fiscal yr end of inter vivos trust is December 31
o Tax yr of testamentary trust need not be Dec31, but cant exceed 12 months
o Tax returns must be filed within 90 days of end of trusts fiscal period
o Beneficiary includes inc paid/payable in calendar yr in which trusts tax yr ends
Tax rate
o Trusts taxed as individuals inter vivos trusts taxed at federal rate of 29%
o Testamentary trusts subject to same marginal rates of tax as individuals
o Special tax on SIFT trust
Rate of tax on distributed non-portfolio or business inc of a SIFT trust will be the basic federal
corporate rate net of federal abatement, plus a rate of 13% to proxy a provincial corp tax rate
This type of inc wont be deducted by trust and after-tax distribution will be taxed in hands of
investors as dividend
Tax credits

No deductions may be made for personal credits in computing tax payable by trust for a tax yr still
entitled to claim dividend tax credit and FTC
Minimum tax
o Wrt to inc thats not paid/payable to beneficiaries
o $40K exemption from min tax is avail to only testamentary trust
o

Sale of Shares
Proceeds
ACB
Capital Gain
TCG
Tax thereon (46%)
Net Proceeds (a b)

XXX a
XXX
XXX
XXX
XXX b
XXX

Net cash retained

Total cash distributed
Less: income tax
Grossed-up dividend (1.25 $taxable div)
Taxable capital gain ( cap gain)
Income
Tax @ 46% (combined)
Less: dividend tax credit (combined)
[(13.33% + 6.67%) of grossed up div]
Net cash

XXX
XXX
XXX
XXX
XXX
XXX

(XXX)
XXX

Partnership income:

Partners ACB of partnership interest:

Net income per financial statements

Add:
donations
depreciation
meals and entertainment
TCG
Deduct:
CCA
book gain
capital dividend
Partners share of partnership income
Add: dividend gross-up (.45 div )
Partners income from partnership

Capital contribution
Add:

prior years partnership income

current years partnership income
prior years taxable capital gains ( )
untaxed portion of TCG in prior years
untaxed portion of TCG in current year ( )
capital dividends ( )

Deduct:

prior years partnership loss ()

prior years donations ( (prior years (last2))
current years donations ()
prior years drawings
current years drawings

ACB

Taxable capital gain on disposition of partnership interest:

Proceeds of disposition
Less: ACB
Capital gain
TCG

Partners basic federal tax payable for the year:

Income from partnership
TCG on disposition of partnership interest

Personal dividends grossed up (x1.45)

Division B income
Less: net capital losses
Taxable income
Federal tax (x + .29 ()
Less: personal tax credit
donations tax credit ((xx .15) + (( curr year ) .29)
dividend tax credit (assumed equal to gross-up)
Basic federal tax

ACB of common shares:

Elected amount
Allocated to debt consideration:
Assumed debt
New debt
ACB of common shares
PUC of common shares:
LSC before reduction
s. 85(2.1) reduction:
(1) Increase in LSC
(2) elected amount
less: boot
excess, if any
Tax PUC
Issuance of new shares:
(1) Reduced PUC [s. 86(2.1)(a)]
LSC of preferred shares
Less: PUC of old common
Less: boot
PUC reduction
Tax PUC
(2) Cost of preferred shares
ACB of old common
Less: FMV of non-share consideration
Cost of preferred shares
Redemption of old shares:
(1) Deemed dividend
Proceeds on redemption of old shares
FMV of boot
Reduced PUC of preferred shares
Less: PUC of old common
Deemed dividend
(2 )Capital gain (capital loss)
Proceeds on redemption of old shares
Cost of preferred shares
Add: FMV of boot
Proceeds of redemption
Less: deemed dividend
Adjusted P of D
ACB

Capital gain (loss)

PUC of New Shares
LSC
XXX
PUC reduction:
LSC
XXX
Elec amount XXX
Less:boot
(XXX)
Excess
(XXX)
Total PUC reduction
(XXX)
TAX PUC
XXX

Benefit to husband
FMV of prop. Transfer
Less: greater of
(i) FMV of consol. XXX
(ii) elected amt
XXX
Greater amt
Benefit

XXX

XXX
XXX