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