Jack and Jill incorporated JJ Inc. 4 years ago. JJ Inc. specializes in cleaning and maintaining wells through Quebec and Ontario. Since Jill had more disposable funds at the time, she invested $70,000 for 70% of the total common shares outstanding while Jack invested $30,000 for the remaining 30%. On December 20th 2017, Jack and Jill received an unsolicited offer to purchase JJ for $2,500,000. Jack has grown rather tired of working with his arrogant sister Jill and has decided to freeze the value of his shares at their current value. Subsequent to the reorganization Jack’s son will own the 30% of the common shares as he has been working for the company since its incorporation. To accomplish the freeze, Jack will receive preferred shares equal to $620,000 and a bank loan equal to his initial investment. His son will invest $20,000 of his own funds into the company. The reorganization will occur on December 31st 2017. The Balance sheet (in tax values) of JJ is as follows:: Cash = $15,000, A/R=$85,000, Inventory $385,000, PPE $2,250,000, Total Assets= $2,735,000, bank loan $350,000, Common shares $100,000, Retained Earnings $2,285,000, Total Debt and Equity = $2,735,000

Required:

1. Determine the value of goodwill in the company (if any)

2. Determine the tax consequences for the reorganization

1. The gift (if any)

2. PUC of the new preferred shares

3. ACB of the new preferred shares

4. Deemed dividend resulting from the transaction

5. Taxable capital gain resulting from the transaction

3. Create the balance sheet after the transaction (January 1st 2018)

4. On January 2nd 2018, Jack redeems his shares at FMV, what are the tax consequences of this transaction