Please answer the following question using Canadian Tax rules
Mr. B owns a sole proprietorship (he is single, and just turned 22) that sells major "human companion" droids-R2-D2, C-3PO and BB-8 -to local housekeeping agencies, which program the droids to babysit as human babysitters are no longer available during an on-going COVID pandemic. On December 31, 2020, the business has the following assets and liabilities. Tax value FMV Accounts receivable ($4,000 reserve) 60,000 57,000 Inventory of droids 825,000 840,000 Land 680,000 1,000,000 Class 1 asset 4,600,000 6,700,000 Liabilities 2,335,000 2,335,000 UCC of the Class 1 asset (single asset) $ 2,000,000 Mr.B would like to transfer these assets to a new CCPC. Since Liam learned something about ITA 85 roll over in corporate taxation class, he has approached his tax advisor, Mark , to provide the tax consequences of ITA 85 election. MrB proposes the following breakdown of how the company will pay him for the assets transfer. Assumption of liabilities 2,335,000 Note 4,000,000 Preferred shares 2,317,000 Common shares 2,280,000 Total 10,932,000 MrR also proposes to transfer the land for $680,000 and the building for 5,655,000. For the rest of the assets, he wants to elect the lowest possible amount (assume there shall be no boot for non-real properties). Mr B has $100,000 capital losses carry over from previous years. The new corporation does not have a balance in its GRIP account in 2020.Instructions: Please provide the detailed income tax consequences of assets transfer from the sole proprietorship to the new corporation, at the shareholder level as well as the corporate level. Provide supporting calculations. Consider all alternatives (1.e., withOut ITA 85 election, ITA 85 election) and any other recommendations that would minimize taxes (defer taxes) with or without using the lifetime capital gain deductions. Summarize yOur recommendation(s) by assuming the role of Mark. M; B w0uld also like to reserve a seat on SpaceX to visit Mars as Elon Musk recently persuaded him to do so. He expects FMV of his preferred shares of his new company w0uld be $4 million in 2021 and he wants to know whether he should sell preferred shares or let the new company to redeem the preferred with FMV of $4 million in case he would be interested in securing a seat on SpaceX. Since he has unused lifetime capital gains deduction of $866, 000, he would like to use that deduction to receive $866, 000 gain on a mites: basis. Consider giving advice(s) related to the use of lifetime capital gains deduction. Please make sure to explain the term \"qualifying shares / qualied shares\" related to the lifetime capital gain deductions in y0ur discussion. M; B would also like to know whether the transactions he proposed would be subject to dividend stripping rules (i.e., ITA 84.1). Please address M B's concerns
