Seahawks Ltd. (SL) owns and operates a rental apartment building, and has been profitable over the past 10 years since the company was incorporated. The building owned by SL has a current FMV of $1.5M, ACB of $100,000 and UCC of $60,000. SL has a June 30^th year-end.

Patriots Inc. (PI) owns 100% of the Common shares of SL. The SL shares have a current FMV of $2M and an ACB/PUC of $100,000. PI acts as a pure holding company, such that its only source of income is dividends paid to it by SL. PI has no other revenues or expenses of any kind. PI has a December 31^st year-end.

Bob owns 100% of the Common shares of PI. The FMV of these shares is $3,000,000 and the ACB/PUC is $1,000.

Bob wants to simplify the corporate structure by amalgamating SL and PI into Amalco on April 22, 2021. He read somewhere that a wind-up is a very long and expensive legal procedure, and hence he is not interested in doing a wind-up.

Required:

Explain to Bob what the income tax implications will be to all relevant parties as a result of the proposed amalgamation. If applicable, provide any suggestions that may improve the outcome.