Bill owns all of the shares of B Ltd., a Canadian-controlled private corporation carrying on a home design business. The shares of B Ltd. are currently worth $1,000,000 and have a PUC and ACB of $150,000. In order to crystallize his entitlement to the capital gains deduction, Bill has decided to set up a new corporation, H Ltd., and transfer his shares of B Ltd. to H Ltd. Bill and H Ltd. will file a joint election under section 85 of the Income Tax Act, electing proceeds of $950,000. As consideration for the transfer, Bill will receive a note for $950,000 and preferred shares of H Ltd. worth $50,000. Income tax reference: ITA 84.1, 85(1).
Determine the tax consequences for Bill.