Ontario Barrister and Solicitor Practice Exam

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What is deemed dividend calculated as?

Redemption proceeds - corporation PUC
Stated capital / # of shares paid
Redemption proceeds - deemed dividend - ACB
ACB greater than PUC

The correct answer is: Redemption proceeds - corporation PUC

A deemed dividend is calculated as redemption proceeds minus corporation PUC, or stated value. This is because deemed dividends are a reduction in the paid-up capital of the corporation, and therefore the amount of the deemed dividend is equal to the decrease in PUC. This means that options B, C, and D are incorrect because they do not include the corporation's PUC in the calculation. Option B divides stated capital by the number of shares paid, which does not take into account the corporation's PUC. Option C subtracts the deemed dividend amount, which is incorrect since the deemed dividend is equal to the decrease in PUC. Option D mentions the adjusted cost base (ACB) being greater than PUC, which is not relevant when calculating deemed dividends. Therefore, the correct answer is A, as it includes the correct elements in the calculation.