Brian Snow owns all of the common shares of Treeline Boots Ltd., a Canadian-controlled private corporation. The shares have a fair market value of $150,000, an ACB of $30,000, and a PUC of
$5,000. Brian would like to retire soon, so he has offered the company to his son, Walter. Walter is young and does not have a lot of disposable income, and as such, a Section 86(1) reorganization of share capital has been recommended to Brian. Brian's common shares will be converted to preferred shares, which are redeemable for $150,000. Brian will not receive any non-share consideration in the transaction. Walter will then purchase a new class of common shares at a nominal value. Required:
Discuss the immediate tax consequences of the reorganization of share capital for Brian, indicating the ACB and the PUC of the new preferred shares.

Question

Brian Snow owns all of the common shares of Treeline Boots Ltd., a Canadian-controlled private corporation. The shares have a fair market value of $150,000, an ACB of $30,000, and a PUC of
$5,000. Brian would like to retire soon, so he has offered the company to his son, Walter. Walter is young and does not have a lot of disposable income, and as such, a Section 86(1) reorganization of share capital has been recommended to Brian. Brian's common shares will be converted to preferred shares, which are redeemable for $150,000. Brian will not receive any non-share consideration in the transaction. Walter will then purchase a new class of common shares at a nominal value. Required:
Discuss the immediate tax consequences of the reorganization of share capital for Brian, indicating   the ACB and the PUC of the new preferred shares.

Quizplus · Accepted Answer

The Answer of Brian Snow owns all of the common shares of Treeline Boots Ltd., a Canadian-controlled private corporation. The shares have a fair market value of $150,000, an ACB of $30,000, and a PUC of
$5,000. Brian would like to retire soon, so he has offered the company to his son, Walter. Walter is young and does not have a lot of disposable income, and as such, a Section 86(1) reorganization of share capital has been recommended to Brian. Brian's common shares will be converted to preferred shares, which are redeemable for $150,000. Brian will not receive any non-share consideration in the transaction. Walter will then purchase a new class of common shares at a nominal value. Required:
Discuss the immediate tax consequences of the reorganization of share capital for Brian, indicating   the ACB and the PUC of the new preferred shares.

Brian Snow Owns All of the Common Shares of Treeline