QuestionEach of the following is an independent Case involving the ownership of voting shares ofCanadian controlled private corporations. All of the corporations have taxation years that end onDecember 31 and have only one class of shares.A. Mr. Bond owns. 55 percent of Sarnen Inc. Sarnen Inc. owns 40 percent of Barxo Ltd.Mr. Bond also owns 14 percent of Hax Ltd., which in turn owns 54 percent of the shares ofBarxo Ltd. Mr. Bond’s 10 year old daughter owns 6 percent of the shares of Barxo Ltd.B. Mr. Jones, Mr. Knight, and Mr. Long are three unrelated individuals Mr. Jones owns 50 percent of the shares of Anix Inc. and 25 percent of the sharesof Brex Ltd. Mr. Knight owns 50 percent of the shares of Brex Ltd. Mr. Long owns fif percent of the shares of Anix Inc. and 25 percent of the sharesof Brex Ltd.C. Sam Scully owns 60 percent of Scully Inc. His sister, Susan Wilson, owns 80 percent ofWilson Ltd. and 30 percent of Scully Inc. Sam Scully also owns 10 percent of Wilson Ltd.D.Joan and Sarah-Lartch are sisters. Joan owns 100 percent of the shares of JL Inc. and31 percent of the shares of Meadow Ltd. Her sister Sarah owns 60 percent of the shares ofSL Inc., with the remaining 40 percent of the shares held by her mother. Sarah also owns39 percent of the shares of Meadow Ltd. The remaining shares of Meadow Ltd. are held byan unrelated party.E.John and May Carp each own 30 percent of the shares of Jomay inc. Serge and Beth Carpeach own 45 percent of the shares of Besa Ltd. John and Serge Carp are brothers. Beth Carpowns 40 percent of the shares of Jomay Inc. and May Corp owns 10 percent of theshares of Besa Ltd.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 youin answering this question, we have provided you with the content of ITA 256/1).ITA256(1) Associated corporations – For the purposes of this Act, one corporation isassociated with another in a taxation year if, at any time in the year,(a) one of the corporations controlled, directly or indirectly in any manner whatever theother;(b) both of the corporations were controlled, directly or indirectly in any manner whatever,by the same person or group of persons;(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 theperson who so controlled the other, and either of those persons owned, in respect ofeach corporation, not less than 25 percent of the issued shares of any class, other thana specified class, of the capital stock thereof;(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 thatso controlled the other corporation, and that person owned, in respect of the othercorporation, not less than 25 percent of the issued shares of any class, other than aspecified class, of the capital stock thereof; or(e) each of the corporations was controlled, directly or indirectly in any manner whatever,by a related group and each of the members of one of the related groups was relatedto all of the members of the other related group, and one or more persons who weremembers of both related groups, either alone or together, owned, in respect of eachcorporation, not less than 25 percent of the issued shares of any class, other than aspecified class, of the capital stock thereof.LawSocial ScienceTax law ACCT 3009
