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 Zayne 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 Isabella Ltd., a public corporation        15%

Corporation 3:

Term deposits                                                                                             40%

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

Required:

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