Nancy recently received an offer for the shares of her corporation, Eager Beaver Consultants Ltd. Nancy's shares have an adjusted cost base of $600,000. The Company is not a qualified small business corporation for purposes of the lifetime capital gains deduction. Although Nancy would like to sell her shares and retire, she will only sell her shares if her after tax retention from the sale totals at least $2 million. Assuming that Nancy's combined federal and provincial marginal tax rate is 50 percent, what is the minimum price Nancy should accept for her shares?

Question

Quizplus · Accepted Answer

To achieve an after-tax retention of $2 million with a 50% tax rate, Nancy needs a pre-tax gain of $4 million. Adding the adjusted cost base of $600,000, the minimum price she should accept is $4,600,000.

Nancy Recently Received an Offer for the Shares of Her