Margaret Hutch owns 60 percent of the shares of MH Inc., a Canadian controlled private company. Her shares have an adjusted cost base (ACB)of $300,000. Her common-law partner, Jane Evans, owns the remaining 40 percent and her shares have an ACB of $200,000. The shares of the Company have a fair market value of $2,300,000 and a PUC of $500,000. During 2020, Ms. Hutch exchanges all of her MH Inc. shares for cash of $350,000 and preferred shares that are redeemable for $830,000. MH Inc. does not have a balance in its GRIP account.
Determine the ACB and the PUC of the redeemable preferred shares. Indicate the amount, and type, of any income that will result from this transaction. Show your calculations.

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The Answer of Margaret Hutch owns 60 percent of the shares of MH Inc., a Canadian controlled private company. Her shares have an adjusted cost base (ACB)of $300,000. Her common-law partner, Jane Evans, owns the remaining 40 percent and her shares have an ACB of $200,000. The shares of the Company have a fair market value of $2,300,000 and a PUC of $500,000. During 2020, Ms. Hutch exchanges all of her MH Inc. shares for cash of $350,000 and preferred shares that are redeemable for $830,000. MH Inc. does not have a balance in its GRIP account.
Determine the ACB and the PUC of the redeemable preferred shares. Indicate the amount, and type, of any income that will result from this transaction. Show your calculations.

Margaret Hutch Owns 60 Percent of the Shares of MH