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Final

Chapter 15 summary notes Summary of Chapter 15: Corporate distributions, Windups and Sales. Really useful to look through before the exam


Department
Accounting & Financial Management
Course Code
AFM 461
Professor
Stanley Laiken
Study Guide
Final

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Retained earnings:
Capital dividend account non taxed portion of net capial gains
Undistributed surplus
Chapter 15: Corporate Distributions, Winding Ups and Sales
Paid up capital the amount which the corporation can return to the shareholder without it
being reported as a dividend to the shareholder
Definition 89(1)
PUC per share is an average of issue prices over time for a particular class
High-low shares shares with a lower PUC and high redemtion amount
PUC in a redemption of shares
Is computed at a corporate level
o ACB is computed at an individual shareholder level
Averaged among all shareholders of that clas based on shares held
When a share is disposed in SH perspective or redeemed in corporation perspective,
you must account for the deemed dividend that is subject to tax and is NOT part of
POD
o Proceeds PUC = deemed dividend
o Proceeds deemed dividend = adjusted POD
o Then take the adjusted POD ACB = capital gain
Capital Dividend account completes integration of corporat and personal income tax on
capital gains, is to be distributed tax free to corportion share holders
Only for PRIATE CORPORATIONS
Includes 5 components: 89(1)
o Add: Non-taxed portion of net capital gains (gains-losses) the OTHER half
of the tcg
o Add: Capital dividends received from another corporation
o Add: Non-taxable portion of the economic gain on disposition of eligible
capital property
o Add: Proceeds arising on death from certain life insurance policies received
by corporate net of cost basis of policies
o LESS: capital dividends paid
Private companies will have a nil balance on the first day they are a private company
o However: if the company was once public and then changes to private, it may
have a balance on the first day
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