Which of the following transactions will NOT result in a deemed dividend?

Question

Quizplus · Accepted Answer

Option A would result in a deemed dividend because shares are issued in excess of the fair market value of the debt being paid off, which is prohibited by the Income Tax Act. Option C would result in a deemed dividend because reducing PUC has the effect of increasing the amount of any subsequent dividends, which would be treated as a deemed dividend. Option D would result in a deemed dividend to the extent that any part of the $800,000 paid in excess of the PUC is treated as a deemed dividend. Option B, however, does not result in a deemed dividend because the redemption price is equal to or less than the PUC of the shares being redeemed.

Which of the Following Transactions Will NOT Result in a Deemed