It is the end of 20x8,and ABC Inc.(a CCPC)is for sale.Jane,the sole shareholder would like to know if the company is currently a qualified 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 of the company's assets:
*ABC owns 35% of the shares of XYZ,which is a small business corporation with 100% of the fair market value of its assets consistently used in active business in Canada.
Additional information:
The shares have not changed hands since the company began operations four years ago.
The land was acquired at the beginning of 20x8 with a five-year mortgage.
All of the other asset values have remained constant over the past three years.
Required:
Determine the following for ABC Inc.:

Question

It is the end of 20x8,and ABC Inc.(a CCPC)is for sale.Jane,the sole shareholder would like to know if the company is currently a qualified 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 of the company's assets:
  *ABC owns 35% of the shares of XYZ,which is a small business corporation with 100% of the fair market value of its assets consistently used in active business in Canada.
Additional information:
The shares have not changed hands since the company began operations four years ago.
The land was acquired at the beginning of 20x8 with a five-year mortgage.
All of the other asset values have remained constant over the past three years.
Required:
Determine the following for ABC Inc.:

Quizplus · Accepted Answer

The Answer is ABC Inc.is both a small business corporation and a qualified small business corporation.
A)At the point of sale,>91% of ABC's assets were a combination of assets used in active business and shares in a connected small business corporation,thus meeting the 90% FMV of assets test required for a 'small business corporation'.

ABC Inc.is both a small business corporation and a qualified small business corporation. A)At the point of sale,>91% of ABC's assets were a combination of assets used in active business and shares in a connected small business corporation,thus meeting the 90% FMV of assets test required for a 'small business corporation'. B)During the previous 24 months (prior to the purchase of the land),>87% of ABC's assets were a combination of assets used in active business and shares in a connected corporation.(While the active assets in ABC alone do not meet the 50% test,the combination of the active assets and the shares in XYZ Ltd.meets the 50% test since XYZ Ltd.has more than 90% of the fair market value of its assets used in active business in Canada.) ABC is a qualified small business corporation (QSBC)since: a)it is a small business corporation at the time of sale, b)the shares have not been held by an unrelated person during the past 24 months,and c)ABC meets the 24 month > 50% FMV of assets test since XYZ (which is required to meet the >50% test)meets the > 90% FMV test.

B)During the previous 24 months (prior to the purchase of the land),>87% of ABC's assets were a combination of assets used in active business and shares in a connected corporation.(While the active assets in ABC alone do not meet the 50% test,the combination of the active assets and the shares in XYZ Ltd.meets the 50% test since XYZ Ltd.has more than 90% of the fair market value of its assets used in active business in Canada.)

ABC is a qualified small business corporation (QSBC)since:
a)it is a small business corporation at the time of sale,
b)the shares have not been held by an unrelated person during the past 24 months,and
c)ABC meets the 24 month > 50% FMV of assets test since XYZ (which is required to meet the >50% test)meets the > 90% FMV test.

It Is the End of 20x8,and ABC Inc