Question $91(13$ minutes$)[$Chapter $17]$

Mr$.$ Alexander owns all of the common shares of Baker$$s Dozen Food Products Inc. The ACB

and PUC of his shares are $$25,001,$ resulting from their issue to him thirteen years ago on the

incorporation of the business and a later issue of common shares for a $$25,000$ cash

contribution. 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 freeze the value of

his investment in the corporation using a capital reorganization under section $86$ in which he

receives debt of the corporation, if possible, and preferred shares.

Required:

What is the maximum amount of debt $($to the nearest $$100)$ that he can receive without

realizing any income, using section $86?$ What are the fair market value, adjusted cost base, and

paid$-$up capital of the preferred shares that she will receive under section $86?$