M Ltd., a Canadian corporation, owns 100% of the shares of P Ltd. The P shares have an ACB of $40,000 and are now worth $100,000. P’s only asset is land having a cost of $25,000 and a current value of $100,000.The land was worth $40,000 when M purchased P’s shares. Both corporations have December 31 year ends.
Determine the tax implications for M Ltd. and P Ltd. from winding up P Ltd. into M Ltd. on April 1, 20X8. Income tax reference: ITA 88(1), (1.1), (1.2).