Acc 673 Final Exam
Concordia University
John Molson School of Business
ACCO 673
Specialized Topics in Taxation
FINAL EXAMINATION
Date: August 6, 2011 Time: 9:00am – 12:00pm
Instructions:
- This is a closed book exam.
- You are allowed dictionaries.
- Use of regular calculators are allowed. Calculators which store text are NOT allowed
- This exam consists of 7 questions.
- Total number of pages including cover sheet: 11
- Answer all questions in your exam booklet.
THIS EXAMINATION MUST BE RETURNED
Question 1 (12 marks – 22 minutes)
The Baloney Co. is a Canadian controlled private corporation. The company reports the following information for its December 31, 2010 fiscal year-end: …show more content…
Required:
a) Compute the amount of Federal income tax savings (he’s in the top marginal rate of tax) Arthur would realize from the incorporation of the business. (3 marks)
b) Which of the above assets should not be transferred to the corporation under S85? Your answer should address which assets should not be transferred at all, which should be transferred (but not under S85) and the consideration that Arthur should receive for the transferred assets. Note: Any assumed debt is to be 1st used for the transfer of assets outside of S85. (4 marks)
c) Prepare a table showing the assets that should be transferred under S85 to the corporation. Your table should make reference to the elected transfer price and any consideration that Arthur would be entitled to receive under S85. Arthur wishes to do this in a most tax-effective manner. (8 …show more content…
Question 7 (16 marks – 29 minutes)
Mr. Song is the VP of Manufacturing of Tune Ltd., a taxable Canadian public corporation. He provides you with the following information and asks you to help him with his 2010 tax return:
1. Gross salary $210,000
2. On March 1, 2010 he was provided with an automobile which is available for his personal usage. He drove a total of 16,000 kms., 70% of which is personal. The automobile is leased at a monthly rate of $700 which includes all taxes. As well, the company paid $6,000 in automobile operating expenses for 2010.
3. On April 1, 2010, he purchased 500 shares through the company stock option plan. He sold 300 shares on December 1, 2010. Details are as follows:
a) Fair market value at date the option was granted: $15/share
b) Exercise price : $17/share
c) Fair market value at date of exercise: $25/share
d) Sale price (December 1) of shares: $34/share
4. Since Mr. Song did not have the funds to acquire the above shares, the company loaned him the required funds (interest-free) on the date
John Molson School of Business
ACCO 673
Specialized Topics in Taxation
FINAL EXAMINATION
Date: August 6, 2011 Time: 9:00am – 12:00pm
Instructions:
- This is a closed book exam.
- You are allowed dictionaries.
- Use of regular calculators are allowed. Calculators which store text are NOT allowed
- This exam consists of 7 questions.
- Total number of pages including cover sheet: 11
- Answer all questions in your exam booklet.
THIS EXAMINATION MUST BE RETURNED
Question 1 (12 marks – 22 minutes)
The Baloney Co. is a Canadian controlled private corporation. The company reports the following information for its December 31, 2010 fiscal year-end: …show more content…
Required:
a) Compute the amount of Federal income tax savings (he’s in the top marginal rate of tax) Arthur would realize from the incorporation of the business. (3 marks)
b) Which of the above assets should not be transferred to the corporation under S85? Your answer should address which assets should not be transferred at all, which should be transferred (but not under S85) and the consideration that Arthur should receive for the transferred assets. Note: Any assumed debt is to be 1st used for the transfer of assets outside of S85. (4 marks)
c) Prepare a table showing the assets that should be transferred under S85 to the corporation. Your table should make reference to the elected transfer price and any consideration that Arthur would be entitled to receive under S85. Arthur wishes to do this in a most tax-effective manner. (8 …show more content…
Question 7 (16 marks – 29 minutes)
Mr. Song is the VP of Manufacturing of Tune Ltd., a taxable Canadian public corporation. He provides you with the following information and asks you to help him with his 2010 tax return:
1. Gross salary $210,000
2. On March 1, 2010 he was provided with an automobile which is available for his personal usage. He drove a total of 16,000 kms., 70% of which is personal. The automobile is leased at a monthly rate of $700 which includes all taxes. As well, the company paid $6,000 in automobile operating expenses for 2010.
3. On April 1, 2010, he purchased 500 shares through the company stock option plan. He sold 300 shares on December 1, 2010. Details are as follows:
a) Fair market value at date the option was granted: $15/share
b) Exercise price : $17/share
c) Fair market value at date of exercise: $25/share
d) Sale price (December 1) of shares: $34/share
4. Since Mr. Song did not have the funds to acquire the above shares, the company loaned him the required funds (interest-free) on the date