Reference no: EM132459227

Question 1. Each of the following is an independent Case involving the ownership of voting shares of Canadian controlled private corporations. All of the corporations have taxation years that end on December 31 and have only (one) class of shares.

Problem A. John Brody owns 65 percent of the shares of Heresy Inc. His spouse, Jessica Brody, owns 85 percent of the shares of Porter Inc. John and Jessica each own 35 percent of Lason Ltd.

Problem B. Ms. Martineau and Ms. Olson each own 50 percent of the shares of Kisler Inc. Ms. Martineau owns 70 percent of the shares of Pardo Ltd. Ms. Olson owns the remaining 30 percent of the shares of Pardo Ltd. Ms. Martineau and Ms. Olson are not related.

Required: For each of the preceding Cases, determine whether the corporations are associated. Support your conclusions with references to specific provisions of ITA 256. In order to assist you in answering this question, we have provided you with the content of ITA 256(1).

ITA 256(1) Associated corporations - For the purposes of this Act, one corporation is associated with another in a taxation year if, at any time in the year,

Problem (a) one of the corporations controlled, directly or indirectly in any manner whatever, the other;

Problem (b) both of the corporations were controlled, directly or indirectly in any manner whatever, by the same person or group of persons;

Problem (c) each of the corporations was controlled, directly or indirectly in any manner whatever, by a person and the person who so controlled one of the corporations was related to the person who so controlled the other, and either of those persons owned, in respect of each corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof;

Problem (d) one of the corporations was controlled, directly or indirectly in any manner whatever, by a person and that person was related to each member of a group of persons that so controlled the other corporation, and that person owned, in respect of the other corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof;