Ontario Barrister and Solicitor Practice Exam

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What is the formula for capital gain calculation?

PUC greater than ACB
Redemption proceeds - corporation PUC
Redemption proceeds - deemed dividend - ACB
ACB greater than PUC

The correct answer is: Redemption proceeds - deemed dividend - ACB

The formula for capital gain calculation is redemption proceeds minus the deemed dividend minus the adjusted cost base (ACB). The other options listed are incorrect because they do not take into account the deemed dividend amount or ACB, which are important factors in determining capital gain. Option A suggests using the PUC (paid-up capital) amount as the basis for calculation, but this does not take into account any changes in the ACB. Option B only considers the PUC amount, while option D suggests using the ACB alone, which does not fully account for tax implications and possible adjustments. Therefore, option C is the correct formula as it considers all necessary elements for an accurate capital gain calculation.