$4.)$ Section $86$ Capital Re$-$organization

Mr$.$ Fred Bakerson is sixty years old and the manager and sole shareholder of Bean Town Inc., a Canadian$-$controlled private corporation that operates a chain of successful coffee shops located on or near university and college campuses across Eastem Canada. Fred incorporated the coffee shop business twenty years ago and acquired all of the common shares of the corporation for $$100$ at that time. Fred has always involved his family in the operations of the business, but now Fred is looking to step back from the business to allow his adult son and daughter to take over operations. As such, he would like to transfer his shares in Bean Town Inc. to his children while minimizing the tax consequences of such a transfer. In addition, Fred is concerned that his children$-$will have to acquire a significantloan from the bank in order to purchase the shares of Bean Town Inc., as the fair market value of his shares has increased over the last twenty years to $$850,000.$

Required:

Based on your understanding of the purpose of the corporate reorganizations under Sections $85$ and $86$ of the Income Tax Act, provide a recommendation on which corporate reorganization would be best suited for Fred Bakerson.

Justify your recommendation to your clent, Fred, by explaining the general tax implications of the chosen corporate reorganization for himself, Bean Town Inc. and his children. In addition, briefly describe to Fred any applicable tax planning opportunities related to your recommended corporate reorganization.