J Ltd. a Canadian private corporation. In year 1, J Ltd. issued 10,000 common shares...
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J Ltd. a Canadian private corporation. In year 1, J Ltd. issued 10,000 common shares to Joseph, an individual, for 100,000. No shares were issued by J Ltd. prior to this. In Year 5, the shares are worth $140,000. Income tax reference: ITA 54 (definition of proceeds), 84(3)
Required: Answer the following 3 independent questions. The facts provided in the question are applicable to that question only.
a) Determine the tax implications for Joseph, if all the shares are sold to Amanda, an individual and an arms-length party, for $140,000;
b) Determine the tax implications for Joseph, if all the shares are redeemed by the corporation for $140,000.
c) In Year-5, J Ltd. Issued 5,000 common shares to Cindy, an individual, for $70,000. Would this have an impact on PUC of total 10,000 shares owned by Joseph, at the end of Year-5. Explain and show calculation, if any required.
d) Explain, what factors could influence the value of the common shares for small corporations such as J Ltd.
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