Slow Inc. designs, manufactures and distributes high-end commercial packaging. Slow Inc. operates out of two manufacturing facilities, one in Ottawa specializing in paper-based products and one in Montreal that specializes in packing peanuts and plastics.

With consumers becoming more environmentally conscious, the demand for single use plastics has been decreasing. In response, Slow Inc. has started making preparations to sell off its plastics division. The plan is to transfer all the assets relating to the plastics business to a new corporation, Green Holdings (GH), until a buyer can be found for the division.

The chart below summarizes the relevant tax information for the various assets of the plastics division.

	FMV	ACB	UCC
Inventory	$ 270,000	$ 230,000	$ -
Accounts receivable	$ 40,000	$ 70,000	$ -
Land #1	$ 1,200,000	$ 600,000	$ -
Land #2 (Held for resale)	$ 1,300,000	$ 900,000	$ -
Manufacturing equipment (class 53)	$ 1,000,000	$ 800,000	$ 300,000
Building (class 1)	$ 800,000	$ 1,200,000	$ 900,000
Goodwill (class 14.1)	$ 300,000	$ -	$ -

REQUIRED:

1. Explain which account(s) SHOULD NOT or CANNOT be transferred to GH using Section 85 election and why? If a particular asset(s) should be transferred under another section of the Act, please provide which Section, and explain the rationale for relying on that other section?
2. Slow Inc. intends to transfer all assets except for the accounts receivable, Land #2 and Building to GH using Section 85. Determine:

1) The elected amount for each asset as well as the maximum non-share consideration (i.e. note receivable) and share consideration Slow Inc. should take back on the transfer

2) The adjusted cost base and paid-up capital of the preferred shares received by Slow Inc. on the transfer

3) The ACB, Capital Cost and UCC if applicable of Goodwill to GH following the transfer.

Note:

Youare requiredto showthe full calculation (including the applicable components).

Youare not requiredto reference legislation in Income Tax Act