Jaime owns 100% of the issued shares of Big Ltd. which in turn owns 100% of the issued shares of Small Ltd. Big paid $1,000,000 for the shares of Small in 20X3. Small carries on an electronics repair business and has incurred non-capital losses in its years ended December 31, 20X4 and December 31, 20X5 of $20,000 and $30,000 respectively. Jaime plans to merge the two companies by a windup on August 31, 20X6 or an amalgamation on September 1, 20X6. Jaime wants a March 31 year end for the business going forward. Big Ltd. currently has a March 31 year end.
The table below contains the anticipated balance sheet of Small at August 31, 20X6 with the fair market value of the assets both at August 31, 20X6 and at the time Big acquired Small in 20X3.

* UCC of building
Small paid dividends of $12,000 to Big in both 20X4 and 20X5.
Required:
Explain the tax consequences for Big Ltd. and Small Ltd. if the merger is accomplished by:
1) A windup, or
2) An amalgamation.

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FMV FMV Aug 31 20X6 $60,000 75,000 in 20X3 $40,000 Cost Shares of Public companies Accounts Receivable Allowance for doubtful accounts Goodwill Land Building lotal assets Bank Loan Common shares Retained earning Total liabilities $10,000 80,000 (5,000) 120,000 250,000 $455,000 $100,000 200,000 445,000 400,000 200,000 300,000 350,000 5,000 350,000 $455,000