Karen, a resident of White Rock B.C., owns all the common shares of Cyber Corp. which was incorporated in 2003. Karen
invested S1.000 into the share capital of Cyber Corp.
Cyber Corp is located in White Rock and distributes computer equipment and games to retail stores in southern B.C. The
following is the balance sheet.
Cyber Corp.
Balance Sheet as at December 31, 2020
Assets
Cash
Marketable securities
Accounts receivable
Inventory
Prepaid expenses
Investment in Cyber Sub Inc
Fixed assets
Goodwill- Class 14.1
$ 4.500
300.000
800 000
920,000
1.000
1.000
140.000
$2.166,500
FMV
$ 4.500
700,000
780.000
920.000
1.000
100.000
150,000
200,000
$2,855,500
Liabilities & Shareholders' Equity
Accounts payable and accrued liabilities
Loans payable
Future income taxes
Share capital
Retained earnings
$ 600.000
400,000
100.000
1.000
1,065,500
$2,166,500
The investment in Cyber Sub. Inc., a CCPC, was made two years ago to distribute a new line of games. It is 25% owned by
Cyber Corp and uses all of its assets in a Canadian active business.
The relative values of Cyber Corp's assets have remained stable over the past three years. The marketable securities
comprise Cyber Corp's investment portfolio which is not held as part of the corporation's business activities. The estimated
value of the goodwill of the business is $200,000.
Karen was recently offered $1,800,000 for the shares of Cyber Corp.
Karen would like to know whether, if she sold her shares of Cyber Corp, she would be able to claim the capital gains
exemption on the sale. If they do not qualify for the CGE then she wants to know if there is anything that can be done to qualify.

Prepare a two page memo to Karen outlining if she sold her shares in Cyber Corp., would be able to claim the capital gains exemption.

•If not, what are her options.

•Provide all calculations in the exhibits.

•Reference your exhibits in the memo.

•Submit your memo and exhibits as PDF file