Ontario Barrister and Solicitor Practice Exam

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Under what condition is a capital gain realized?

  1. ACB greater than PUC

  2. PUC greater than ACB

  3. Redemption proceeds - corporation PUC

  4. Stated capital / # of shares paid

The correct answer is: PUC greater than ACB

A capital gain is realized when the proceeds from the sale or disposition of an asset is higher than its adjusted cost base (ACB). Therefore, option A, which states that the ACB is greater than the paid-up capital (PUC), cannot be the correct answer. Option C, which refers to redemption proceeds and corporation PUC, is not necessarily a condition for a capital gain to be realized. Likewise, option D, which mentions stated capital and number of shares paid, is also not a condition for a capital gain to be realized. This leaves option B, where the PUC is greater than the ACB, as the correct answer for when a capital gain is realized.

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