Question
Ms. Takase is the sole shareholder of Takase Ltd. She owns 2,500 shares with a PUC and adjusted cost base of $400,000, and a fair
Ms. Takase is the sole shareholder of Takase Ltd. She owns 2,500 shares with a PUC and adjusted cost base of $400,000, and a fair market value of $1,000,000. Giant Holdings Ltd. acquires these shares in return for 10,000 of its common shares, which are currently trading for $100 per share. The rollover is completed using ITA 85.1. The results of the transaction will be:
| Ms. Takase will report a capital gain of $600,000 as a result of her deemed disposition. The adjusted cost base of her new shares in Giant Holdings Ltd. will be nil. | ||
| Ms. Takase will be deemed to have disposed of her Takase Ltd. shares for an amount equal to their adjusted cost base. There will not be a capital gain to report on this disposition. | ||
| The shares of Giant Holdings Ltd. that Ms. Takase acquires will have a deemed adjusted cost base of $1,000,000, the greater of the fair market value and the PUC of the Takase Ltd. shares. There will not be a capital gain to report on this disposition. | ||
| The shares of Giant Holdings Ltd. that Ms. Takase acquires will have a deemed PUC of $1,000,000. She will report a capital gain on the disposition of $600,000. |
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