Marie Hobbins owns all of the issued shares of H Ltd. She acquired the shares for $100,000 from a stranger in 20X0. The shares of H Ltd. have a PUC of $100. A widely-held Canadian public company, P Corp, is interested in acquiring H Ltd. Marie is considering a proposal to sell her shares to P Corp in exchange for common shares of P Corp of the same value, $900,000.
Required:
1. Describe the tax consequences for Marie and P Corp if the transaction takes place as described above.
2. Marie is certain that the shares of H Ltd. are QSBC shares. She would like to use the capital gains deduction to shelter her gain on the sale of her H Ltd. shares. Is this possible?