Ontario Barrister and Solicitor Practice Exam

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What does the redemption calculation involve?

# shares corporation redeems from shareholder
PUC greater than ACB
ACB greater than PUC
Stated capital / # of shares paid

The correct answer is: # shares corporation redeems from shareholder

In order to answer this question, it is important to understand that redemption involves a corporation buying back shares from its shareholders. Thus, the most accurate answer would be option A, which mentions the shares being redeemed. Options B and C refer to the Paid-Up Capital (PUC) and Adjusted Cost Base (ACB) of the shares, which are accounting terms used to determine the tax consequences of share redemption. However, they are not directly related to the calculation of redemption itself, making them incorrect choices. Option D involves a calculation of stated capital and number of shares paid, which is not a part of the redemption calculation. Hence, option A is the best answer.