Question

Consider the asset mix, based on fair market values, of each of the following three independent Canadian-controlled private corporations:

Corporation 1:

Land and buildings used in an active business carried on in Canada                                  80%

Shares (45% of issued shares) of Janna Ltd., a small business corporation                       20%

Corporation 2:

Equipment used in an active business carried on in Canada                                                85%

Shares (< 1% of issued shares) of Jonathan Ltd., a public corporation                              15%

Corporation 3:

Term deposits                                                                                                                          40%

Shares of Ethan Ltd., a wholly owned small business corporation                                     60%

Indicate which of the above three corporations satisfy or do not satisfy all of the conditions in the definition of a “small business corporation”, supporting your conclusions with the facts given above.

Answer 1