Mr. Martin owns 80% of the Common Shares of Maple Ltd., a CCPC. The other 20% is owned by his daughter, Alannah, aged 42. She works full time in the business located in Elmira, Ontario for the past 22 years. Mr. Martin is ready to retire and wants Alannah to take over the business completely. When the company was incorporated and capitalized, the 1,000 common shares were issued to Mr. Martin and his daughter for $75,000. They now have a fair market value of $750,000. Mr. Martin proposes a capital reorganization in which he would give up his common shares in return for $100,000 in cash and $500,000 in retractable voting preferred shared with a redemption value of $500,000 which he could redeem at his convenience. As a result, Alannah could own all of the outstanding common shares. Mr. Martin plans to use his $100,000 cash to use up remaining TFSA room and purchase a new vehicle. Mr. Martin plans to redeem the preferred shares over time to provide him with retirement income. Mr. Martin is wondering if there will be any tax on the exchange of his common shares and would like to minimize tax if possible. Required: Please determine the following: A) Are the conditions of Section 86 are met? B) What are the tax consequences of this transaction? (i.e., cost of shares, deemed dividend, capital gain, net economic effect, etc.) C) What is the optimal value of cash/shares for Mr. Martin to minimize taxes? Mr. Martin owns 80% of the Common Shares of Maple Ltd., a CCPC. The other 20% is owned by his daughter, Alannah, aged 42. She works full time in the business located in Elmira, Ontario for the past 22 years. Mr. Martin is ready to retire and wants Alannah to take over the business completely. When the company was incorporated and capitalized, the 1,000 common shares were issued to Mr. Martin and his daughter for $75,000. They now have a fair market value of $750,000. Mr. Martin proposes a capital reorganization in which he would give up his common shares in return for $100,000 in cash and $500,000 in retractable voting preferred shared with a redemption value of $500,000 which he could redeem at his convenience. As a result, Alannah could own all of the outstanding common shares. Mr. Martin plans to use his $100,000 cash to use up remaining TFSA room and purchase a new vehicle. Mr. Martin plans to redeem the preferred shares over time to provide him with retirement income. Mr. Martin is wondering if there will be any tax on the exchange of his common shares and would like to minimize tax if possible. Required: Please determine the following: A) Are the conditions of Section 86 are met? B) What are the tax consequences of this transaction? (i.e., cost of shares, deemed dividend, capital gain, net economic effect, etc.) C) What is the optimal value of cash/shares for Mr. Martin to minimize taxes