ABC Inc.(a CCPC)is for sale,and Jane,the sole shareholder would like to know if the company is currently a small business corporation.Jane has provided you with the following information:
All of the business activities of ABC Inc.have taken place in Canada.
The following amounts represent fair market values.

Question

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The Answer is

All of the business activities of XYZ Ltd.have taken place in Canada.

The shares have not changed hands since the companies began operations four years ago.The asset values have remained constant for the past three and a half years.
Required:
Determine if ABC Inc.is a 'small business corporation'.Show calculations to support your answer.
List three reasons from a tax perspective as to why the status of 'small business corporation' may be significant.
ABC Inc.is not a small business corporation.
ABC cannot meet the 90% test based solely on its assets in active business: 50,000 + 300,000 = 350,000/875,000 = 40%
The rule that 90% or more of the fair market value of ABC's assets are a combination of 1)assets used in active business in Canada,and 2)the shares of a connected SBC has not been met,either.While '90%* or more of the fair market value of its assets' are a combination of 1)assets used in active business in Canada,and 2)the shares of XYZ Ltd.(a connected corporation),XYZ Ltd.is not a small business corporation since only 50%** of its assets are used in active business.

50,000 + 300,000 + 450,000 = 800,000/875,000 = 91.4%

300,000/600,000 = 50%
b)If a CCPC is a small business corporation,the following may be applied in situations where applicable:
1)Capital gains deduction may apply if QSBC test is also met
2)Allowable business investment loss
3)Corporate attribution rules on transfer and loans to corporations

ABC Inc(a CCPC)is for Sale,and Jane,the Sole Shareholder Would Like to to Know