As he anticipated a large loss in the first year is other employments not to incord. the business in order to use this loss against his other employment income.

By January 1, 2015, the business had grown sulostagany and showed a large annual profit. At this time, the business had tax values of $629, 000. It was estimated that the tar market value of the business was $1,650,000. Given the profitablity of the busines, Pauly decided to incorporate. He transferred all of the business assets to a new corporation, Pauly Industries Inc. Using the provisions of ITA 85(1), he elected a transier value of $629,000. He took back a note for $15,000 payable to himself from the company.

The only other consideration he received was 18,000 Pauly Industries Inc. common shares with a fair market value and legal stated capital of $1,635,000. No other shares of Pauly Industries Inc. have been issued.

On January 1, 2022, Pauly received an offer from Jersey Holdings Ltd. to acquire all of the shares of Pauly Industries Inc. Jersey Holdings Ltd. will provide Pauly with 100,000 of their shares as the total consideration for 100% of his shares. These shares have a total fair market value of $1,950,000.

Pauly Industries Inc. is not a qualified small business corporation. Pauly has a net capital loss carryforward of $450,000 due to his unsuccessful stock market efforts.

Required:

Advise Pauly with respect to the tax consequences that would arise for him from accepting the Jersey holdings Ltd. offer. Your answer should consider the application of ITA 85.1 and opting out of this provision. Show all calculations of PUG and ACB used in the calculations. 16.5 marks].

Indicate the ACB of the Pauly Industries Inc. shares in the hands of Jersey Holdings

Ltd. assuming ITA 85.1 is applied by default to the entire transaction. [1 mark.

Advise Pauly on two alternative approaches that might simultaneously make use of his net capital loss carrytorward and minimize his current payment of taxes. You do not need to calculate the exact amounts applicable; simply describe ways this could be done and the ITA sections used.