Tiffany owns shares in the public corporation, Zoom Inc. She has received an offer from the public corporation Mooz Inc. to exchange all of her shares in Zoom Inc. Her adjusted cost base for these shares is $28,000. They have a fair market value of $39,000 and a PUC of $10,000. Her Zoom shares would be exchanged for shares of Mooz Inc. with a fair market value of $39,000 and a legal stated capital of $39,000. What is the adjusted cost base of the Mooz Inc. shares received by Tiffany under the provisions of Section 85.1, "Share For Share Exchanges"?

Question

Quizplus · Accepted Answer

Under Section 85.1, which deals with share-for-share exchanges, the adjusted cost base of the new shares received (in this case, Mooz Inc. shares) is generally the same as the adjusted cost base of the old shares exchanged (Zoom Inc. shares). Therefore, the adjusted cost base of the Mooz Inc. shares received by Tiffany would be $28,000, the same as her adjusted cost base for the Zoom Inc. shares.

Tiffany Owns Shares in the Public Corporation, Zoom Inc