Stan Is the Sole Shareholder of Hardware Ltd

question 5

Essay

Stan is the sole shareholder of Hardware Ltd. Hardware purchased all of the shares of Tools Inc. in 20X4 for $500,000. Tools incurred a non-capital loss of
$25,000 in the year ended December 31, 20X3. Stan has decided to initiate a
Section 88 wind-up of Tools Inc. into Hardware Ltd. on June 23, 20X7. Due to the seasonal nature of his sales, Stan would like to maintain the April 30th year end that he has used since beginning his business.
Stan's accountant has prepared the following balance sheet for Tools Inc. as of
June 22, 20X7. The fair market value of the assets on both June 22, 20X7 and the date of acquisition in 20X4 are presented in the following table:
Tools paid dividends of $8,000 to Hardware in 20X7. Required:
Answer the following questions (filling in the charts where provided):
1) Immediately following the windup, Hardware will report the following assets at what values?

2) Calculate the value of the "bump" available on the ACB for the non-depreciable capital property.
3) Identify the assets which may use the bump, and the amount of the bump available for each asset identified. Identify any unusable bump amount.
4) Explain when Hardware will be able to use the non-capital loss from Tools.

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Definitions:

Narcissistic Personality Disorder

A mental condition characterized by a long-term pattern of exaggerated self-importance, need for excessive attention and admiration, and lack of empathy for others.

Antisocial Personality Disorder

A mental condition in which a person consistently shows no regard for right and wrong and ignores the rights and feelings of others.

Disregard For Rights

A pattern of behavior that shows a lack of respect or concern for the rights and feelings of others, often seen in antisocial personality disorder.

Histrionic Personality Disorder

A personality disorder in which an individual displays a pattern of excessive emotionality and attention seeking. Once called hysterical personality disorder.