Mr. Alexander owns all of the common shares of Bakers Dozen Food Products Inc. The ACB and
Question:
Mr. Alexander owns all of the common shares of Baker’s Dozen Food Products Inc. The ACB and PUC of his shares are $15,000 and $25,001 respectively. The total value of the shares is now $325,000. Since Mr. Alexander has fully utilized his $750,000 capital gains exemption on other shares, he wants to partially freeze the value of his investment in the corporation using a capital reorganization under section 86. The corporation will exchange the common shares for the following package of consideration:
Cash $ 9,900
Preferred shares (at FMV) 315,000
New Common shares (at FMV) 100
Total $325,000
REQUIRED
Based on the above package of consideration, what is the adjusted cost base, and paid-up capital of the new common shares and preferred shares that Mr. Alexander will receive under section 86?
Canadian Income Taxation planning and decision making
ISBN: 9781259094330
17th edition 2014-2015 version
Authors: Joan Kitunen, William Buckwold