A shareholder sells public securities to a corporation and files a section 85 election to have a transfer/sale price of $60,000. The fair market value (FMV) and adjusted cost base (ACB) of the securities are $220,000 and $60,000 respectively. As consideration for the transfer, the corporation issues a $50,000 note, preference shares worth $150,000, and common shares worth $20,000. What are the tax costs of the various assets to the shareholder?

• The note - $50,000, the preference shares - $nil, and the common shares $10,000.

• The note - $50,000, the preference shares - $132,353 ($150,000/$170,000 total share value issued), and the common shares $37,647 ($2,000/$170,000 total share value issued).

• The note - $60,000, the preference shares - $150,000, and the common shares $10,000.

• The note - $50,000, the preference shares - $10,000, and the common shares $nil.

Answer rating: 100% (QA)

C The note 60000 the preference shares 150000 and the common shares 10000 Cost basis is the original ... View the full answer