Farnum Ltd. is a Canadian controlled private corporation that was established by Freddy Farnum with an original investment of $400,000. Farnum Ltd. is not a qualified small business corporation. In 2019, Freddy sold all of the shares to John Gage for $700,000. In early, 2020, John is approached by a large public company, Gross Enterprises, that offers him 200,000 of their shares in return for all of John's shares. The offer is accepted by John and, at this time, the shares of Gross Enterprises are trading at $6 per share. Indicate the tax consequences of this transaction to both John and Gross Enterprises.

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The Answer of Farnum Ltd. is a Canadian controlled private corporation that was established by Freddy Farnum with an original investment of $400,000. Farnum Ltd. is not a qualified small business corporation. In 2019, Freddy sold all of the shares to John Gage for $700,000. In early, 2020, John is approached by a large public company, Gross Enterprises, that offers him 200,000 of their shares in return for all of John's shares. The offer is accepted by John and, at this time, the shares of Gross Enterprises are trading at $6 per share. Indicate the tax consequences of this transaction to both John and Gross Enterprises.