The Following Diagram Depicts the Ownership Structure of Two CCPCs

question 6

Essay

The following diagram depicts the ownership structure of two CCPCs. Bob Light is Lisa Light's son.
Sarah Paint and Alan Canvas are not related to Bob and Lisa in any manner, whatsoever, or to one another. All of the shares held are common.
Required:
A)Determine if the two companies are associated, referring to the applicable section of the Income Tax Act.
B)Briefly explain what the most significant tax implication is when two or more corporations are associated.

• A)Determine if the two companies are associated, referring to the applicable section of the Income Tax Act.
• B)Briefly explain what the most significant tax implication is when two or more corporations are associated.

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Definitions:

Fidelity Bond

An employer’s insurance against an employee’s wrongful conduct.

Employer

An individual or organization that hires and pays for the services of workers.

Life Insurance

A contract between an insurer and an insured that guarantees payment to named beneficiaries upon the death of the insured.

Pay-outs

Pay-outs refer to amounts of money paid to someone, often as part of a settlement, as earnings or as a distribution from investments.