Question 2 (12 marks)

Cherry Lane Farms (CLF) was incorporated in 2010 by Gina who invested $1,000 into all the common shares of CLF.

As of December 31, 2020, CLF has the following balance sheet amounts:

Assets	Cost	FMV
Cash	4,500	4,500
Marketable Securities	300,000	700,000
Accounts Receivable	800,000	780,000
Inventory	920,000	920,000
Prepaid Expenses	1,000	1,000
Investment in Tree Ripened Peaches Inc.	1,000	100,000
Fixed assets	140,000	150,000
Goodwill (class 14.1	-	200,000
	2,166,500	2,855,500
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities	600,000
Loans payable	400,000
Future income taxes	100,000
Share capital	1,000
Retained earnings	1,065,500
	2,166,500

The investment in Tree Ripened Peaches Inc (TRP), a CCPC, was made two years ago. It is 25% owned by CLF and uses 40% of its assets in a Canadian active business.

The relative values of CLF have been stable over the last three years. The

marketable securities comprise CLFs investment portfolio which is not held as part of the corporations business activities.

Gina was recently offered $1,750,000 for her shares in CLF.

Gina would like to know the following:

1. If she sold her shares of CLF, would her shares qualify as QSBC shares so that she can claim the capital gains exemption? For each requirement, make sure you use case facts or provide analysis to support your conclusions. (8 marks)
2. If they do not qualify as QSBC shares, she wants to know what steps and the minimum amount she would need to consider to have them qualify. Provide two suggestions that will minimize the tax impact to her and CLF. Do not calculate any taxes. (4 marks)