Reference no: EM132466213

The amalgamation of Loser Lid. and Perfect Lid. took place on September 1, 20X6. The corporation, formed on amalgamation, chose December 31 as its year end. Income for 206 and 20X7 was as follows:

                                          Income from steel recycling                   Income from sportswear distribution                 Total

20X6                                          $500,000                                            $30,000                                            $530,000

20X7                                           400,000                                               60,000                                            460,000

Income for the period September 1 through December 31, 20X6

Required:

Question 1. Using the assumption that Loser Lid. does NOT use any elections to minimize the unused net capital loss balance, calculate the amount of non-capital and net capital losses that would remain after the acquisition of the shares by Perfect Lid. on September 1, 20X6.

Question 2. If Loser Lid. makes the election(s) necessary to utilize those losses which would expire at the acquisition of control, indicate the asset(s) on which the election should be made and the amount that should be elected.

Question 3. Indicate the September 1, 20X6, adjusted cost base (ACB) and undepreciated capital cost (UCC), where applicable, for each of the assets listed, assuming the election(s) in Question 2 above is(are) made.

Question 4. What conditions must be met in order to deduct the non-capital loss balance at September 1, 20X6, in a future taxation year? Are these conditions met? Indicate the maximum amount of non-capital loss carry-forward that can be used at December 31, 20X6, and December 31, 20X7, respectively. Give a brief explanation for your answer.

Question 5. Assume the management of Perfect Lid. decided that the sportswear distribution business would not be continued after September 1, 20X6. Discuss the tax implications for Loser Lid.